I was very pleased by the extremely bullish outlook on cloud computing voiced at SaaSCon, especially by representatives from some of the larger companies. More than one speaker indicated that the market has reached a tipping point, where the maturity of services and software offered, combined with the current economic climate, are making the cloud much more attractive to large companies. Some, like Bob Sala, CEO of Distribution Marketing Advantage, stressed that moving to the cloud is now a strategic imperative.

Sala delivered a compelling presentation about his company’s SaaS journey. DMA is a $3 billion, privately-held company with 85 warehouses that is an alliance of North American regionally-owned and operated food service distributors. DMA members serve multi-unit restaurant and institutional operators in the United States and Canada. Chain operators like P.F. Chang’s, Hyatt, The Melting Pot and about a dozen others are served by DMA’s food distributors. [Full disclosure: DMA is a PivotLink customer and partner]

“We distribute food products to chain restaurants in the 50-250 store space,” Sala said. “The chains require standard distribution services, standard pricing, centralized reporting and a central point of contact. DMA exists because we are able to replicate a national distributor with 12 of the best regional distributors in the business, a portfolio of national accounts management tools, and talented people.”

Sala stressed that DMA is a supply chain logistics company, not a technology company.

DMA's SaaS ecosystem is Cloud-to-Cloud and uses PivotLink for real-time business insight.

That said, DMA began operating its business in the cloud when it implemented its order entry system in 2001, long before SaaS was even known as SaaS. Since then DMA has implemented all its systems in the cloud, including data warehousing, custom hosted applications, business analytics, CRM, expense reporting and network services. Their ecosystem of more than 13 integrated SaaS applications contrasts the BI integration woes in Doug Henschen’s article in Information Week that cites findings from Howard Dresner’s Wisdom of the Crowds study.

“We have been able to out-maneuver our larger, less nimble competitors using SaaS technology,” Sala said. “Moving to SaaS has become more of a strategic decision and less a capital decision for DMA.”

With pre-tax margins of 2 percent, DMA does not have much room for error. “SaaS gets us up and running faster than our competitors,” Sala said. “With PivotLink, a Chili’s store manager can see the results of particular shrimp promotion in 13,000 restaurants, by store, by units, over-time, and get it in a graphical report.”

With nearly a decade’s experience working with SaaS, Sala offered his philosophy on how to choose the right SaaS vendors and partners.

7 Guiding Principles for Selecting
Integration Friendly Application Partners

1. Commitment to products, services innovation aligned with our technology vision: Fit is first and foremost, according to Sala.
2. Commitment to protect data confidentiality and respect for data ownership: Confidentiality is extremely important, because it provides DMA, and other businesses, with competitive advantage. Sala does not want his vendors to use or re-purpose any of DMA’s data.
3. Provides cost effective, scalable solutions: DMA intends to keep growing, and its technology infrastructure needs to scale.
4. Financially viable and have experience hosting: Sala asks to see every vendor’s financials if they are a private company, and isn’t inclined to work with inexperienced SaaS vendors.
5. Provides high service levels (up-time) backed by service-level agreements: Systems downtime kills profits and service-level agreements assure that outages will be kept to a minimum.
6. Flexibility approach to customized/ professional services with exclusivity: DMA insists on exclusivity agreements on custom solutions built by systems integrators because they don’t want the solution to be re-packaged and sold to its competitors.
7. SaaS 70 Type II Certification: Only the highest security certification will do for DMA’s solutions.

Have a question about DMA’s approach? Let us know. We’d like to hear your take.

Read about DMA in Robert Mitchell’s Computerworld article “SaaS Takes on Business Intelligence” or learn more in the case study or DMA’s website.

The New BI is in the cloud and benefits from the inherent advantages of this computing model (affordable, agile, quickly deployable, high bandwidth, “always on”, extend more kinds of data to more users). Most importantly, the New BI isn’t shackled behind the four walls of an organization. It goes well beyond and helps individuals extend their network far and fast enough to get timely insights and answers to their operational and strategic questions. The New BI goes beyond analysis and reporting and ventures into the realm of true collaborative decision making. Web 2.0 social tools wrapped around the New BI have the ability to quickly collect and spread knowledge, connect people who would otherwise have remained unaware of each other, harness their collective intelligence and enhance individual decision making.

Three key forces are driving the trend towards the New BI: 1) the explosion of  more and various types of information in our day-to-day work lives, 2) a new generation of digitally savvy employees and 3) a blurring of the distinction between technology used in our personal and our work lives. With dynamic flows of information coming at them each day, users need new ways to access and analyze it and then relate it to their decisions and actions. Secondly, those who grew up with personal technology – Millenials, Gen Y – are changing the culture of the workforce. The emerging workforce prefers information in multimedia to words, the collective intelligence of individuals and they rely upon online resources such as social networks, expert communities and bloggers for strategic information. As people become increasingly used to sharing and collaborating outside the office (e.g. Facebook, iPhone, LinkedIn, Twitter, YouTube) they are coming to expect their work places to become more open and collaborative as well. Many companies today are organized into separate regional product-line and functional “silos”, making it hard for people to share information beyond their immediate colleagues. As a result valuable information and insight ends up being siloed or simply not shared. Even worse, opportunities for innovation don’t surface.

The New BI enables organizations to leverage information in valuable new ways including connecting employees who need information with the experts who have it, enabling the best ideas to emerge organically and using those ideas to catalyze innovation. As the New BI gains traction, it will transform the way companies organize and manage their information assets and ultimately empower individuals to re-design their decision making processes to make not only more timely decisions, but more confident and creative ones.

At PivotLink we give business people tools that allow them to access, aggregate and analyze the information they need to improve understanding and decision making and ultimately do their jobs better – without burdening IT.  PivotLink customers such as the North Face, DMA and OrderMotion have already had success with the New BI to speed up knowledge-sharing both internally and across the extended supply chain, in turn breaking down silos. The New BI is a more efficient and effective business intelligence paradigm. It is positioned to help users know more, do better and thrive. Stay tuned, it’s about to get really interesting !

“In the economic downturn, interest in SaaS solutions has increased in the past year, although it is still a small fraction of the overall market.” It continues “…. Moving BI off-premises may not suit all organizations and all use cases, especially those dealing with highly sensitive data. Many firms are evaluating hybrid options for deployments leveraging both private and public clouds, as well as a combination of on-premises and off-premises solutions. But firms that find the SaaS value proposition of more rapid, lower-cost deployments attractive should evaluate SaaS as an option.”

Let us look at a few of Gartner’s points that deserve a close look:

1. Moving BI off-premises may not suit all organizations and all use cases, especially those dealing with highly sensitive data

The above is true but it has less to do with security than with functional use cases. A SAS-70 Type II certified service – very different from and much more than a SAS 70 certified data center is widely accepted as a standard for sensitive data. PivotLink customers that are public companies and companies that are covered by HIPAA have guided PivotLink into achieving SAS 70 Type II certification. They feel comfortable using PivotLink with highly sensitive data because the entire service – data center, procedures and personnel are covered by an external audit.

2. Impact of  the economic downturn

There was an economic downturn during 2001-2003 and there have been many before.On-premise deployments is how IT has been delivered since the early 80s. During all the previous downturns, CEOs were supported by each department on scaling down – shutting down stores, cutting product lines, expenses. IT however was a problem child. This was for two reasons: One, data always grows, be it good economy or bad, so IT cannot really cut infrastructure. Two, during all the previous downturns CIOs did not have SaaS options. Due to a significant CAPEX in IT, IT can severely limit a CEOs option to free up cash during downturns. CIOs did not have many options in all previous downturns. There is only so much that can be outsourced.

Today, CIOs have plenty of options in almost every category of enterprise application software from Email to ERP.

With frequent ups and downs in business cycles, more CIOs will choose SaaS to support their CEOs to be more agile. CIOs know that the technology is there – Cisco has carpeted the earth with Mbps networks and will soon move to Gbps. Encryption technology, RSA Tokens, SAS 70 Audits all can make security adequately tight. SaaS companies now routinely provide over 99% availability. SaaS is a fundamental shift in how information technology will be delivered in this decade.

3. Firms that find rapid, lower cost deployment attractive should evaluate SaaS as an option.

Are there firms that don’t want rapid and lower cost deployments? What Gartner seems to be implying is that there are risks in going with SaaS.

These risks can easily cause anxiety in organizations evaluating SaaS BI, if not put in context. SaaS is not a new model. Every category of application source is moving to the cloud. CRM (Sales, Service and Marketing) has already moved, except in a few verticals. ERP, Finance, Expense Management, Talent Management. SaaS is designed to address the pain points of slow and high cost deployments. As many data sources move to the cloud a tipping point will reach when cloud BI will be the preferred option. SaaS is not new – Online Banking, Trading, e-Commerce are examples of SaaS. We all use them and trust the way they work.

The risks that are unique to SaaS are functionality fit and vendor viability. These risks can be mitigated via understanding the outcomes of the technology purchase and by evaluating the integration capabilities and financial health of the vendor.

Where does SaaS BI fit and where it doesn’t?

• Requirements around Large Data Volumes

If you have a data volume in the few hundred terabytes or petabytes range, there may not be a SaaS vendor today to handle such volume, if the expectation is to get ad-hoc reporting. For example, moving the enterprise data warehouses at companies like Safeway, Sears etc.  to SaaS is not feasible. However it might be feasible to give a sub-set of data to a SaaS vendor so that merchandisers in a specific division can do ad-hoc reporting.

• Requirements around Frequency of Data Updates

If your daily updates are in terabytes of data, the network and refresh latency may not meet your data availability needs. For example, if you are a company that is even 1/3rd the scale of an Amazon.com and want to collect click through data and want to share the results with suppliers multiple times daily, then although SaaS is a fit from a sharing model, it may not be a fit when it comes to transferring terabytes, multiple times a day to SaaS vendor.

• Functionality fit

If your company needs an MDM solution, a DW solution and a Data Mining solution all integrated into one, then the SaaS choices are limited to none. There are SaaS choices emerging in individual areas like MDM and Data Mining and DW but not under the same roof or integrated enough. Companies should think of BI not in terms of the suite definition imposed by self-serving large vendors like Oracle and SAP but in terms of the problem at hand the cost / benefit of the SaaS solution.

In summary, although security should be evaluated, it is no longer an unsolved problem. Organizations today must look at business agility, speed and empowering the business users for self-service when looking at SaaS vs. On-premise choices.