Executing a SaaS Strategy: The Role of the Database...

© THINKstrategies, Inc., 2016 www.thinkstrategies.com p.1

A THINKstrategies Whitepaper for SaaS

Companies

ExecutingaSaaSStrategy:

TheRoleoftheDatabase

AwhitepaperpublishedonbehalfofNuoDB

Executing a SaaS Strategy: The Role of the Database


White Paper

ExecutiveSummaryTherapidgrowthof‘on-demand’servicesintheconsumerworldhashelpedtosparktheriseofSoftware-as-a-Service (SaaS) solutions in the business environment, producing a new set of opportunities andchallengesforsoftwarecompanies.

On the positive side, rising interest in web-based alternatives totraditional on-premise, perpetual license software is fueling demandfor a new generation of easy to deploy and more economicalsubscriptionservices.BusinessesareturningtoSaaSsolutionsbecauseoftheircollaborativecapabilities,elasticityandcontinuousinnovations.

However, customer expectations regarding the availability andperformanceoftheirSaaSapplicationsarealsorising.AsusersofSaaSsolutions become more dependent on their web-based applications,theyarealsobecoming lesstolerantofservicefailures,slowresponsetimesandevenscheduleddowntimeforservicemaintenance.

And,withthebarrierstoentry intheSaaSmarketdisappearingandcustomer lock-inathingofthepast,SaaScompaniesare increasinglyat riskofcustomerabandonment if theydon’tcontinuouslysatisfy theirescalatingneeds.

SaaS companies must also build highly scalable service delivery infrastructures to handle their rapidlygrowingcustomerbases.Astheseapplicationsbecomemoredata-driven,buildingtheSaaSsolutionsonahighlyelasticdataarchitecture isessential.Yet,manySaaScompaniescan’taffordtomakemajorcapitalinvestmentsintheirservicedeliverysystemsgiventhenatureofSaaSrevenuestreamsandgrowingpricecompetition.

Traditionaldatabasearchitectureswerenotdesignedtorespondtotoday’sSaaSrequirements.Theydon’tfit in today’s increasingly hybrid world. A new approach to database design is necessary to meet theoperationalandfinancialneedsofSaaScompanies.

Thiswhitepaperwillexplain:

• WhereSaaScompaniesarefailingtodeliveronthepromiseofcloud

• Howtheclouddeliverymodelhascreatednewdatabaseperformancechallenges

• Howanewdatabasearchitecturecanrespondtothesechallenges

Today’s‘On-Demand’MarketRealitiesA confluence of market forces are driving businesses andconsumers to adopt a new generation of ‘on-demand’servicestomeettheirchangingneeds.

The success of e-commerce websites such as Amazon andentertainmentservicessuchasNetflix,have inspiredanewgenerationof‘sharedservices’suchasAirbnbandUber.

“Traditionaldatabasearchitectureswerenotdesignedto

respondtotoday’sSaaSrequirements.

”



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Mobile technology has given consumers and corporate workersimmediate access to on-demand consumer services and businessapplications.

And as the pace of innovation accelerates, corporate and consumercustomersarelessinclinedtopurchasetechnologyandsoftwarethatcouldbecomeobsoletequickly.Instead,theyarechoosingtoacquiretheirapplicationsandcomputepowerona‘pay-as-you-go’basis.

Rather than continue to invest in costly applications and supportsystemsthathaveproventobedifficulttodeploy,costlytoscaleandunabletoquicklyadjusttotheincreasinglydynamicneedsoftoday’smarketplace,organizationsareseekingto leveragemoreflexibleanduser-friendlysoftwareservicesthatcankeeppacewiththeirchangingneeds.

ThesetrendsarefuelingthedemandforanewgenerationofSaaSsolutionsandencouragingorganizationstomoveawayfromtraditional,on-premisesoftwareandsystemsandtowardaclouddeliverymodel.

The migration from on-premise enterprise applications to SaaS is clearly illustrated by IDC’s marketestimatesforthecustomerrelationshipmanagement(CRM)segmentofthesoftwareindustry.1

SaaSsolutionshavegainedbroad-basedcorporateacceptancebecauseoftheireaseofdeploymentandthepay-as-you-go subscription service fees which lower the implementation and financial risks of softwareadoptionwhileacceleratingthereturnoninvestment(ROI).

1 Worldwide SaaS Enterprise Applications 2014–2018 Forecast and 2013 Vendor Shares, IDC.

“Organizationsareseekingtoleveragemoreflexibleand

user-friendlysoftwareservicesthatcankeep

pacewiththeirchangingneeds

”



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Beyond theseupfrontbenefits, SaaS solutions are alsobetter designed to respond to thedynamicsof aturbulentmarketandanincreasinglydispersedworkforce.

The SaaS solutions are not only more elastic, but they provide end-users real-time access to theapplicationsfromanywhereatanytime.Thesebenefitsareparticularlyappealingtoorganizationsthatarefacingunprecedentedchallengesandhavetobemorenimble.

Asaconsequence,IDCrecentlypredicted:

"By2018,mostsoftwarevendorswillhavefullyshiftedtoaSaaS/PaaScodebase.Thismeansthatmanyenterprisesoftwarecustomers,astheyreachtheirnextmajorsoftwareupgradedecisions,willbeofferedSaaSas thepreferredoption.Put together,newsolutionsbornon thecloudandtraditionalsolutionsmigratingtothecloudwillsteadilypullmorecustomersandtheirdatatothecloud."2

TheNewSaaSCompanyRealitiesThe rapid rise of SaaS has created new challenges for the software vendors providing these on-demandsolutions.

Theshift fromon-premiseapplications toa clouddeliverymodelhasnotonlychangedthewayenterprisesoftwareisacquiredandutilized, it has also changed how independent software vendorsoperate to meet their customers’ escalating needs. Now, theapplicationproviderisresponsibleforensuringtheavailabilityandperformanceofthesoftwareapplication–regardlessofwheretheuserislocatedorhowmanyusersareaccessingtheapplicationatthesametime.

Thisisnotaneasytask.Itmeansthatthesoftwareprovidermustnot only continuously improve the quality of its softwarefunctionality,butalsoensure that it candeliver its solutions inareliablefashionaroundtheworld.

The SaaS provider must now assume the costs and complexities of building the service deliveryinfrastructuretosupportitsapplicationsandtheassociatedcustomerdata.Sincesubscriptionrevenueinaservicebusinesscanonlyberecognizedincrementally(comparedtotheupfrontrevenuerecognitioninthetraditional perpetual license model), the operating costs associated with that infrastructure build outplacessignificantfinancialconstraintsontheSaaSprovider.

And yet the quality of the customer experience can’t be compromised. Service latency and availabilityissuescanquicklytranslateintocustomerfrustrationandserviceabandonment.

Customer churn is amajor concern in a SaaSmodel because it can have a severe impact on short-termrevenue streams and long-term profitability and viability. Lost customers not only represent a directfinancialloss,butintoday’snetworkedworld,dissatisfiedcustomerscaneasilyandquicklybroadcasttheirdiscontentviasocialchannelsandseriouslyhurttheSaaSproviders’marketimageandreputation.

2 Reseller News: SaaS Dominates as Public Cloud Services Spending Skyrockets, January 22, 2016, http://www.reseller.co.nz/article/592606/saas-dominates-public-cloud-services-enterprise-spending-skyrockets/



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David Skok, amanaging partner atMatrix Partners, has published an economic analysis of the revenueimpactofchurnonaSaaScompany.Skok’sanalysissuggeststhatifaSaaScompanycutsitschurnrateinhalf,itcandoublecustomerlifetimevalue(CLTV).

For instance,aSaaScompanywithaMonthlyRecurringRevenue(MRR)of$10kinthefirstmonththat isincreasing its salesby$2k/monthcanproduce$180kor60%morerevenue in fiveyearsby reducinga3percentpermonthchurnrate50%!3

In order to prevent customer churn caused by dissatisfaction with the application performance andavailability,SaaScompaniesmustproperlyarchitecttheirservicedeliveryinfrastructureingeneralandthedatabasedesigninparticular.

TheShortcomingsofTraditionalDatabaseArchitectureToday’sSaaSmarketrealitieshaverevealedanumberoffundamentalflawsinthetraditional,monolithic,relationaldatabasemanagementsystems(DBMSs)ofthepast.

Traditionaldatabasearchitectureswereconceivedinanerainwhichsoftwareandsystemsweredeployedin a relatively centralizedand static environment, often in a singledata center. The traditional databasevendorviewedserviceasareactivesupportfunctionratherthanaproactivedeliverymethod.

In today’s world, software users are both increasingly mobile andinternationalandexpecttoaccessapplicationsfromanywhereatanytime.Theyalsoexpectcontinuousenhancementstothesoftwareto improve itsusabilityonaregularbasis.And,theyexpecttheSaaSvendortohelpthemsuccessfullyutilizetheirapplicationstoachievetheirbusinessobjectives.

Traditional database vendors that have historically released updates andupgradesonaperiodicbasisarenotaccustomedtodeliveringnewfeaturesand functionality at today’s pace. Their database architectures also fallshort in today’s cloud delivery environment for a number of reasons,including:

1. Lack of continuous availability which forces SaaS vendors to schedule downtime for routineupdatesandothermaintenancerequirements.

2. Slowfail-overcapabilitiesinanysingle-regionthatcanmaketheSaaSsolutionvulnerabletototal-regionfailures–aparticularlybigissueasdemandgrowsglobally.

3. Mobileandmulti-deviceaccessissettinguserexpectationsthatSaaSapplicationswillbeavailableanywhereatanytime,butcausing“localeverywhere”latencyissues.

4. BurstySaaSdemandcanleadvendorstoover-provisiontheirsystemsforpeakperiodsandincurunnecessarycoststhatfailtotakeadvantageofcloudelasticity.

5. Simple virtualization requires each customer be given their own database, archives and securitycredentials,creatingadditionalcapitalandoperatingcostsfortheSaaSvendor.

AlthoughmanySaaSvendorshavereliedforyearsontraditionalSQLdatabasestomanagetheirdata,theserelational databases are typicallyunable to scale tomeet today’s globalmarket realities. Themonolithicarchitectureswerenotdesignedtoaccommodaterapidlygrowingandgeographicallydistributedworkloads

3 Unlocking the Path to Negative Churn, David Skok, Matrix Partners.

“Traditionaldatabasevendors…fallshortintoday’sclouddelivery

environment

”



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across a heterogeneous environment with multiple Infrastructure-as-a-Service (IaaS), datacenter andgeographicconfigurations.

Thisdemandsascale-outarchitecturetorespondtoorganicgrowthwithoutstep-changeupgradesthatcanbecome costly. The architecture must also be highly elastic to accommodate workload fluctuations. Asdescribedabove,existingon-premiseapplications typicallyhavea richheritage steeped ina transaction-orienteddatabaseandmusttakethatheritageintoaccountwhenmigratingtothecloud.

Bycontrast,manyapplications“borninthecloud”haveexperimentedwithforgoingalotofthetraditionaltransactionlogic.SuchanapproachhastheadvantageofsimplifyingtheAPIandapplicationrequirements,butintroducescomplexityandcosttoadequatelymanageconsistency,handlefailure,orotherwiseensurethe operational flexibility a SaaS application needs to adjust to changing requirements. In incorporatingnecessarylogicintotheapplicationinsteadofthedatabase,upgrades,newfeatures,dynamicsofscale,andgeneraloperationalactivitiesbecomeincreasinglydifficulttoimplementbecauseofthemanyassumptionsbuiltintotheapplication.

In addition, SaaS companies increasingly require a database that can not only handlemore transaction-oriented SQL applications, but also complexdata structuresbeyond relational – suchas table-style, key-valuedocumentstores,orgraphmodels.Wheretodayorganizationsdeploysingle-data-modeldatabasesforeachoftheirneeds(andtheaccompanyingcomplexityofdatamovementtools),SaaScompaniesideallyseekasingle,multi-modeldatabasethatcansupporttwoormoredatamodelsinasingleplatform.

MaximizingtheValueofSaaSDataintheCloudGiven the shortcomings of traditional databases, a new database architecture is necessary to supporttoday’sSaaSrequirements.

Thisnewapproachmust includeSQLandACIDcompliancecapabilitiestohandlethemission-criticalSaaSworkloadsthataretypicallyassignedtorelationaldatabasemanagementsystems(RDBMSs).

Gartnerhaspredictedthat,

“Through2019,70%ofnewprojectsrequiringscale-outelasticity,distributedprocessingandhybridcloudcapabilitiesforrelationalapplications,aswellasmulti-data-centertransactionalconsistency,willpreferanemergingRDBMSoveratraditionalRDBMS.”4

Gartner believes this new RDBMS approach can provide greaterscalability and distributed processing in hybrid on-premises and clouddeployments.Gartnercalls thenewdatabaseapproach,“avant-garde”RDBMS. 451 Research refers to one form of the new avant-gardeRDBMSas“NewSQL”.

This new approach to RDBMS can more flexibly operate in a hybridworldofprivateorpubliccloudsand/orcontainerstosupporttheneedsofan increasinglymobileandglobal customerbasewithout sacrificingavailability andperformance. ThenewgenerationofRDBMScan scaleacrossmultiplecloudandon-premisesenvironmentswithactive-activereplicationanddatasovereigntycontrols.

4 Gartner, "When to Use New RDBMS Offerings in a Dynamic Data Environment," November 18, 2015.



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Considerthatsuchavant-gardedatabasesalsopromisetodeliverthisfunctionalitywithlessusereffortatalowerpricepointcomparedtotraditionalDBMSofferings,and it’snotsurprisingtoseetheoutgrowth ininterestinthismarket.

Thenewapproach reduces thedeploymentchallenges,ongoing support requirementsand financial risksassociatedwithRDBMSmanagement.ThisallowstheSaaSprovidertofocusoncontinuouslyimprovingthequalityoftheirsoftwaresolutionanduserexperienceofutilizingtheirapplications.

By reducing thecostsandcomplexitiesofdatabasemanagement, theSaaSprovidercanbettermeet theneedsoftheircustomersandbettercompeteinthemarketplace.

ATransactionalCloudDatabasewithoutCompromiseAs part of the migration to the cloud delivery model, application vendors have adopted numerousworkaroundsinthehopesofmeetingtheirbusinessrequirements.Fromexpensiveandcomplexreplicationschemes to sacrificing transactional consistency and integrity, these strategies have consistently solvedsome of the issues, but never all, and often at the expense of development delivery timelines, costcontainment,maintenancemanpower,andoverallarchitecturalsimplicity.

Itisinthisenvironmentthattheavant-gardeclassofdatabasesemerges, finally giving cloud-bound application providersanother option. When one appreciates that to achievegeographicscale today,applicationvendorsare in fact relyingonthecomplicatedreplicationtechniquesalludedtoaboveorworse, multiple, discrete databases stitched together at theapplication level (through sharding, for example) to achievegeographic scale today, the promise of a geographicallydistributed database that can maintain strict transactionalconsistency and integrity while minimizing latency is highlycompelling.

One such database, NuoDB, has been built from inception as adistributed database that could operate in a cloud or containerizedenvironment. Part of the new “avant-garde” category of relationaldatabases, NuoDB embraces the standard database requirements –supportforSQL;fullcompliancewithAtomicity,Consistency,Isolation,and Durability (ACID) semantics; and enterprise-class security – onwhich traditional applications rely, while delivering the elasticity,agility,andglobalaccessibilitythataclouddeliverymodelpromises.

Summary&ConclusionsWe’relivinginanon-demandworld.

Mobile devices and social media have made everyone aware of thebenefits of on-demand applications in our personal lives, and set anexample for the ease-of-use and economies we should expect ourbusinessenvironmentalso.

“NuoDBembracesthestandardsupportfor

SQLandsecurity,whiledeliveringtheelasticity,

agility,andglobalaccessibilityaclouddeliverymodel

promises.

”



White Paper

Given the pace of innovation and the growing intensity of the competitive landscape, corporations arebecomingmoreinterestedinleveragingon-demandservicesratherthancontinuingtoinvestinon-premisesoftwareandsystems.Asaresult,theSaaSmarketgrowthisaccelerating.

Yet, rising demand for SaaS solutions is creating a new set of challenges for SaaS companies thatmustadopt database architectures to support the escalating expectations of an increasinglymobile user baseworldwide.

SaaScompaniesmustnotonlydeploymoreelasticRDBMSsolutionstomeetthefunctionalrequirementsof their growing customer base, theymust also deploy database solutions that aremore economical aspricecompetitionintheSaaSmarketintensifies.

ThismeansthatsuccessfulSaaScompaniesmust leverageanewgenerationof flexibleandcost-effectiveRDBMS solutions that can give them the scalability andperformance tomeet theneedsof today’s SaaSuser.

AboutNuoDBNuoDB’s purpose-built SQL database combines the simplicity, rigor, and reliability of a traditionalrelational database with the elasticity, agility, and global accessibility provided by the cloud. Asapplication vendors and enterprises increasingly turn to the hybrid cloud to support their growing,global, and mobile, customer base, they rely on NuoDB as the only database that can maintaintransactionalconsistencyandintegrityatglobalscale.TheseorganizationstrustNuoDBtomeetalltheirneeds–active-activedeployment,elasticscalability,dataresidency,andmore–astheyrunapplicationsin the cloud.NuoDB is headquartered inCambridge,MA,USA,withoffices inDublin andBelfast. Formoreinformation,visitwww.nuodb.com.

AboutTHINKstrategies,Inc.THINKstrategies, Inc. is the only strategic consulting services company focused entirely on helping itsclientscapitalizeon theunprecedentedbusinessopportunitiescreatedby the technologyshift fromaproduct-centrictoaservices-driven“on-demand”businessmodel,suchasCloudComputing,Software-as-a-Service(SaaS),ManagedServicesandtheInternetofThings(IoT).

THINKstrategies’ mission is to help our clients re-THINK their corporate strategies, refocus theirresourcesandre-aligntheiroperationstoachievetheirbusinessobjectives.

THINKstrategies has also created theCloudComputing Showplaceonlinedirectory andbest practicesresource center to help IT and business decision-makers find and fully leverage today’s leading SaaS,Platform-as-a-Service (PaaS) and Infrastructure-as-a-Service (IaaS) solutions. To learnmore about theCloudComputingShowplace,gotowww.cloudshowplace.com.

THINKstrategiesalsohostsaseriesofexecutiveforumsfocusedonthelatestbusinessopportunitiesandtechnological developments in theCloudmarketplace, called theCloud Innovators Summits. To learnmoreabouttheseevents,gotowww.cloudsummits.com.

Formoreinformationregardingouruniquecapabilities,visitwww.thinkstrategies.com,[email protected].

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