Monday, March 12, 2012

SaaS v cloud, its a licensing thing

One of the things I get asked quite a bit is what is the difference between SaaS and cloud solutions and while there are lots of options for me it comes down to a simple question:
How are you licensing it?  
Your SaaS vendors license via users or other capacity metrics.  Things go up, things go down but you license based on those 'things'.   So for SFDC its the connected users for instance, same with GoogleApps.  Critically the thing that you are licensing is a business outcome that works out of the box.  So you can log into SFDC or Google Apps straight away and get working, sure you can extend and customise if you want but fundamentally you license based on a real-world outcome and are delivered a service to deliver that outcome.

With Cloud providers you license based on capacity over time so bandwidth/hrs, CPU/hrs, storage/hrs but this is just the raw capacity.  Same really when you are looking at PaaS, again its really just about the capacity, you are buying a slightly higher order 'box' but its still dumb until you do things to it.  So you are licensing an IT asset in a utility way.

So with Cloud providers you are licensing a capacity and on its own it does nothing.

So now we come to the final question on the cloud, what if you aren't using PaaS or if you are you need some extra software.  This is where a cloud can quickly turn from a cloud into just a virtual data centre.  If your additional software on that cloud is licensed based on CPUs rather than CPU usage then you aren't doing 'cloud' anymore you've just turned your cloud hardware into a virtual data centre where you are back to paying for licenses based on physical sockets (an odd idea in a virtual data centre where contention might be high) and not based on utility.

So in conclusion:

If you are paying for an outcome and paying for it based on a physical world business metric (number of trades, shipments, users, etc) then its SaaS, its about the service not the software.

If you are paying for an IT asset based on an IT metric and paying based on usage related to time... the you are doing cloud.  BUT you cease to be doing cloud once you add software onto that environment which is licensed based on a physical IT metric unrelated to time (e.g. sockets/CPUs/cores).

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