SaaS: Aggressive Mid-Market Adoption

A recent Saugatuck Research worldwide survey of enterprise executives finds continued, strong growth in the adoption and deployment of software-as-a-service (SaaS).

According to the latest data, mid-sized firms are the most aggressive, and most satisfied, SaaS users.

Overall, the research indicates that nearly 40 percent of companies across all size categories will have adopted at least one SaaS application by year-end 2008.

Saugatuck believes that the number of firms that are likely to completely avoid SaaS is likely to drop to less than 5 percent within 3 years.

By 2012, 70 percent or more of businesses with greater than 100 employees (worldwide) will have deployed at least one SaaS application.

Interestingly, the largest of firms (with greater than 5,000 employees) appear to have gone through the most significant learning-curve – as they seek to understand how SaaS (as well as Open Source) will become fully interwoven into the fabric of enterprise architecture. In fact, only two years ago, our research indicated significant resistance to SaaS among large-company CIOs – but our most recent research indicates that only 4 percent of companies with greater than 5,000 employees are planning not to deploy SaaS.

This is a significant change – and shows how SaaS will reach into the largest of companies, as well as small-to-mid size enterprises.

Executives at mid-sized firms indicate greater familiarity with SaaS than executives at other sizes of firms. Firms with between 100 and 499 employees showed by far the greatest familiarity with SaaS (86 percent – "familiar", "very familiar", or "extremely familiar") – 5 percent to 20 percent higher than all other company sizes.

A greater percentage of mid-sized firms are using or planning to use SaaS. Forty five (45) percent of firms with between 100 and 499 employees are using or expanding their use of SaaS by year-end 2008.

The next-closest group, "Large" firms with between 1000 and 4999 employees, showed 43 percent either using, planning to use or expanding their SaaS usage by year end 2008. 

While satisfaction with SaaS solutions is very high across all sizes of customer firms, executives at mid-sized firms show higher satisfaction with their current SaaS solutions than do executives at other sized firms.

And that high satisfaction includes more areas of SaaS than with either Small or Large firms. Amazingly, 95 percent of executives at firms that we surveyed with 100 to 499 employees (representing almost 25 percent of our sample) indicated they were "satisfied" with their overall SaaS experience – with the average of all firms registering a whopping 84 percent satisfaction rate.

Saugatek defines "Small" companies as those with less than 100 employees.
Mid-sized firms are those with 100 to 999 employees.

Large firms are those with 1,000 or more employees.

New Zealand Tries to Earmark $252 Million for "Open Access" Broadband

The New Zealand government has proposed creating a Broadband Infrastructure Fund of NZD325 million (USD251.6 million), to be spent over five years. NZD250 million would be earmarked for fiber and other high speed open-access networks in urban areas, and the remaining NZD75 million would help fund broadband infrastructure in rural areas.

Applications would be taken August 2008, with the first decisions on projects made in June 2009.

The urban grants require a match from the applicant. The rural fund would have ‘less onerous’ application criteria.

It normally is perilous to compare countries too closely in the area of what works and why. Loop lengths, density, geographic size, household size, demographics, taxation policies, prices, terms and conditions, government policies and any number of other factors condition the success of particular applications and services.

In the U.K., for example, cable has not emerged as such a powerful competitor in triple play markets for the simple reason that satellite-delivered video is so dominant there. Also, robust wholesale unbundling of copper access loops encourage competitors to lease capacity from BT rather than wasting time and money building facilities.

Still, one wonders how successful the New Zealand plan might be. Open access networks in the sense of robust wholesale have not worked all that well in the U.S. market, though one can point to Western Europe as a place where access to the incumbent access facilities has worked.

And where it has been successful, open access appears to have worked best on incumbent, rather than competitive networks. Sheer payback issues might suggest why. An incumbent almost always has written down the value of the copper assets, so a business can be made on lower-priced wholesale loop rentals.

A brand-new network has to recover the full cost of new construction, again using the lower-priced wholesale revenue model. Huge volume makes a difference, but huge volume is tough to get.

Some executives speculate that wholesale networks sometimes attract competitors with little operational knowledge of voice, data, networking or video. Those contestants often are underfunded and ill-equipped for the long term tasks of providing a high-quality service to mass market customers, with the almost-inevitable result that high initial take rates are followed by high customer churn in a year or two when quality issues have surfaced.

Hopefully, the New Zealand initiative will operate in some like manner to rural telecom subsidizes in the U.S. market, essentially helping defray high capital investment costs. Subsidizing insufficient demand, on the other hand, will doom the projects before they begin.

Half of Legacy Services Scheduled for Replacement

Legacy services (frame relay, leased line, and ATM) still are in use in over half of the U.S. organizations within four vertical segments (professional services, finance, insurance, healthcare, and government) surveyed recently by In-Stat researchers.

Over 50 percent of these current legacy services users are migrating, or plan to migrate, some or all of these services to other services, such as IP/MPLS and Ethernet, In-Stat says.

That's what one calls being "past the tipping point." Ethernet and IP are not the "protocols of tomorrow." Very soon, they will be the "legacy" or "mainstream" protocols.

Euro Telcos: Managed LAN Contracts Up

Looking at 177 major enterprise deals signed by European telcos in the second half of 2007, Forrester Research analyst Phil Sayer finds a dramatic increase was in managed local area network services, from seven percent in the first half of the year up to to 13 percent in the second half.

That doesn't necessarily mean desktops. There was a big drop in the number of deals including desktop services.

The the most unexpected trend, Sayer says, was the reduction in the number of deals including managed audio and video conferencing.

Managed audio and video services were present in only one percent of deals, compared with four percent in the first half of the year.

The percentage of converged deals, those with both telecom and an IT services component, was up from 22 percent to 27 percent.

The number of deals was up significantly from the 120 signed in the first half of the year.

The total contract value fell to €2.1 billion, down from €2.6 billion in the previous half-year, because the average deal size shrank, the number of small contracts increased, and there was a big drop in the number of "megadeals".

Large telcos have more than dabbled in the managed IT services arena for some years, with mixed success. Going forward, though, there is little doubt that they will have to do better in that regard. Volume-wise, more business in the consumer segment is going to be taken by cable companies and other mass market specialists.

In the SME space, small specialist firms will continue to compete effectively based on "local touch" and "local presence." But large tier one providers will continue to have the best position in global deals needed by large trans-national businesses.

As all communications and computing-based applications reach further towards the actual end user devices, more control and management is needed. So tier one providers have no choice but to reach past the traditional points of demarcation and support applications and software running on all sorts of end user devices.

Why Do You Need Linear TV?

"I think the Netflix Player proves all the essential concepts," says New York Times technology writer Saul Hansell. "If a TV, with a handful of extra chips, can provide an experience as satisfying as the Netflix Player can, why do we need any other form of video distribution?"

That indeed is an important question which ultimately will be decided by content owners and users, not distributors, with all due respect. If users decide they want to watch streaming media delivered over broadband and sent to the TV, and if a suitable revenue model can be devised, content providers are going to support the business model.

But don't discount traditional packaging partners. Program networks (packagers) historically have been effective at creating "appointment" TV or "big event" hype to drive audiences to content as a shared experience. They've proven effective brand creators as well.

It remains to be seen if they will continue to be as effective in a world when the while idea of "scheduled" viewing is in greater disfavor. But don't discount their ability to master whatever techniques are required to sustain linear viewing models.

There is a difference between turning on a television or other display to watch a specific piece of content, and turning on a TV just to "watch TV." Linear television isn't so helpful in the former case, but works pretty well in the latter case.

In the latter case, a packaged "channel" offers a fairly clear guide to what sort of content might be on at any given moment. For somebody who is not actively looking for a specfic program, but simply "something to watch," linear video and "brands" are fairly effective shortcuts.

Still, the Netflix Player seems to be simple enough to use, and reasonably enough priced, to get traction at this point in time. The Player is no immediate threat to traditional cable operators, satellite distributors, networks or telco video providers. Changes of this sort always take a while to get going.

So far, though, the simplicity, low cost, ease of porting to a TV display and access to free content arguably are better than any earlier approaches.

Nortel Adds Web 2.0 Software

Nortel's new Adaptive Application Engine software, built around Session Initiation Protocol, allows Nortel customers to create Web 2.0 applications like social networking, blogs, and wikis with IP voice and multimedia.

Operators can choose to run the software on hundreds of Red Hat Enterprise Linux compliant servers.

The Adaptive Application Engine software provides an open programmability environment and web service Application Program Interfaces which allow third-party software developers to easily develop new applications which use call routing, presence and federated IM.

The software is designed to support both smaller service providers as well as tier one providers as well.

The Adaptive Application Engine software can be deployed as a SIP Application Server, as an IMS application server or as advanced capabilities on the Communication Server 2000.

Nortel says the new software will allow service providers to create unified communications services, federated instant messaging and IP communications integrated with Web applications.

The software also supports features such as using TVs to control calls or send instant messages.

The software also will allow service providers to create fixed mobile convergence services such as making mobile phones into office extensions and allowing calls to be moved back and forth across tethered and mobile devices.

Nortel is first among the large traditional switch vendors to make such tools available as a "bolt on" to its existing architecture. Depending on how the software is received, it could be an important step for service providers on the Nortel platform.

Up to this point there has been some skepticism that smaller service providers, in particular, would be able to create these sorts of applications on their own. The software is half the solution. Now Nortel has to pull together a developer community and make those apps available to its customers.

Digital to Analog Conversion: Why Cable Does It

Since most of the world's electronic entertainment and communication is moving from analog to digital, you might wonder why anybody would want to go the other way: take digital content and change it back to analog.

Well, as typically is the case in the networks business, there is a simple business reason for wanting to undertake an operation that might not make so much immediate sense.

Cable executives can save some money on digital converter boxes if they can supply simple tiers of popular programming to analog TVs without the need for a box. That might apply to second and other sets, for example, or to some customers who want basic services.

The other angle is that some percentage of the customer base might prefer simple analog-only service. And if all the other providers require digital decoders, cable might have an advantage.

Thomson has introduced a simple box the company said will cost less than $40 and allow delivery of 20 to perhaps 40 channels of analog service.

At the same time, such decoders will allow cable operators to migrate their networks to all-digital operation, allowing analog tiers to be offered to customers who want them.

Comcast has announced that it will rely on such converters to convert 20 percent of its systems to all-digital operation in the fourth quarter.

Cisco Systems, Motorola and Pace Micro Technology also have versions of the decoder.

It's a good thing to let the business case drive the technology. And this is an example of that.