What Is Happening?  Last week, Saugatuck participated in a number of SaaS-focused conference and briefing events in and aroundAmsterdam, Netherlands – as well as meeting with a number of French, German and Benelux clients.

This Research Alert highlights some of the insights and findings gathered from the trip, based on formal and informal discussions, including observations about current market conditions and market demand.

Why Is It Happening?   As a reflection that SaaS is now firmly a global phenomenon, Saugatuck participated in three events in the Netherlands last week. The first event, held in Zeist (near Utrecht) was sponsored by the Netherlands branch of the ASP Forum, and included roughly 60-70 ISVs and hosting providers. The event centered on a presentation by Bill McNee, Saugatuck’s founder and CEO on SaaS market trends and ISV transitioning strategies and best practices, as well as a presentation by senior Microsoft executives around SaaS enablement, with a focus on their emerging Continuous Services Framework (CSF) platform strategy.

Almost a year ago, we wrote that we believe CSF may “serve as the foundation not only for Microsoft’s own service delivery platform, but also for a variety of partner-driven and branded marketplaces” (see Research Alert Microsoft Enters the SaaS Marketplace Fray, RA-366, 18July07). Microsoft appears to be starting to gain some traction with CSF, with sources sharing that four to five Telco / hosting provider deployments have already occurred in Europe, with another half-dozen more in various phases of the pipeline. Further, the BT applications marketplace ( UK only at this time) seems to be gaining some good momentum as an early test case for CSF.

Such activity suggests that Microsoft is getting much more serious about providing infrastructure software and broader enablement services to help support the development of SaaS marketplaces, and to help ISVs transition to SaaS. Like other major platform players, Microsoft is investing heavily with business strategy and technology migration programs and development “sandboxes” to try and retain its ISV network, as it grapples with how to grow a SaaS business.

As we have remarked in the past, we view this “battle of the ISV partner networks” as one of the most important vendor issues over the next five years. The vast majority of ISVs will choose one, not multiple, infrastructure stacks to support their SaaS businesses, given the fact that the infrastructure is largely hidden from the end-user customer.  And the hidden gorilla in the closet in all of these discussions is the role that open source will play, vs. proprietary middleware and database technology from vendors such as Microsoft, Oracle and IBM.

A case in point: At the same time that Bill McNee was speaking in Zeist at the ASP Forum event, Saugatuck’s Frank Sempert spoke at the SIIA On Demand Europe pre-conference kick-off event sponsored by IBM – likewise with a focus around ISV enablement and transition strategies, with 40-50 ISVs in attendance. This was an extension to the “Fast Track to SaaS” briefing series that Saugatuck participated in with IBM last Fall and Winter, in a ten-city tour throughout the US, Western Europe, and Asia (see On the Road in Europe: SaaS Demand Grows, RA-434, 06Feb08, and Notes from the Road: SaaS Market Readiness & Growth in Asia-Pacific, MKT-444, 18Mar08). Late this week, Saugatuck’s Mark Koenig will participate in another Fast Track event with IBM in Brussels , with over 100 ISV partners registered to attend.

On Tuesday, June 10, the SIIA On Demand Europe event was kicked off – which Saugatuck views as an important means of measuring the growth of SaaS in Europe. We estimate that the event had 150 to 175 attendees, up from roughly 100 last year. But more importantly, the conference had a very different tone than the inaugural event in 2007 – a tone that can best be described as “getting down to business,” rather than just being excited about bringing the ecosystem together.

SIIA event highlights included a high-powered presentation by Werner Vogels of Amazon, and a terrific talk by Mani Gill of Business Objects/SAP, who shared some real-life feedback and best practices from their technology and business model transition experience. Attendees also especially appreciated hearing from some merging European players in short 5-minute company “Previews.” Here’s a link to download some of the content from the event: http://www.siia.net/ondemandeurope/2008/presentations.asp.

Saugatuck moderated two panels at the SIIA conference, one focused on integration, the other focused on Data Management: Security and Compliance.  The first panel fleshed out the myriad challenges, and available tools and approaches to providing data and application integration – both SaaS-to-SaaS and SaaS-to-On Premise. Senior executives from Cast Iron, OpSource, BlueWolf, and SaaSpoint all emphasized the situational nature of SaaS integration – emphasizing that users and SaaS vendors need a variety of approaches based on the specific customer requirement.

The panel on security and compliance was much more interactive, and clearly hit a nerve among the European SaaS pure-plays and ISVs in transition to SaaS who were in attendance. A focal point of the panel was how SaaS vendors can best address international business regulatory requirements and support country- and industry-specific data privacy and security mandates on a leveraged basis.

NTRglobal’s CEO Luis Font provided some useful guidelines concerning how SaaS providers can centrally locate their services in one data center, rather than having to have data centers in every country. But he also cautioned that hosting providers must have “Safe Harbor” certification, which bridges the different data privacy mandates and approaches between the US and E.U. While this addresses some of the legal issues, all of the senior execs on the panel (from NTRglobal, The Bunker, ComplyServe and Oracle) emphasized that the issue of where client data is located is often more political and emotional than regulatory.

Joining the conversation from the audience, Martin Vollmer – a senior strategy executive from Cologne, Germany-based GUS Group – shared some of his companies’ preliminary ideas for addressing the international data privacy challenges in the highly-regulated pharmaceutical industry, which mandates the separation of each client’s data to meet GAMP regulations and validation requirements. While this clearly makes a traditional multi-tenant deployment of their SMB-targeted ERP and CRM solutions problematic for all business logic and data, deploying one of the many virtualization technologies from vendors such as VMWare or Parallels may fit the bill – combined with breaking apart their solution into what can be leveraged across all clients (under a multi-tenant architecture) vs. what needs to be managed under GAMP (which may require a separate blade for each client).

Near the end of this very informative session, panelist Milan Thanawala from Oracle suggested that SaaS could be accomplished without multi-tenancy. While Saugatuck firmly believes that there are multiple paths to deploy SaaS, and a one-size-fits-all approach to multi-tenancy is not viable – we also clearly believe that it is very difficult to scale a SaaS business without it, especially given the myriad challenges associated with rolling out schema changes and bug fixes across a large network of clients. SaaS blog guru Phi Wainewright recently highlighted this portion of the discussion from the panel, and the various issues at hand in a piece entitled “Many Degrees of Multi-tenancy,” which we encourage readers to avail themselves of.

The authors invite your comments and inquiries on this Research Alert.  Please contact Bill McNee at bill.mcnee@saugatech.com.  For a PDF Version of this Research Alert please Click Here (Site Registration Required).