Archive for the ‘SOA’ Category

When Applications Talk To Each Other Via SOA, What Happens To User-Based Pricing

June 16, 2008

Alphabet soup of evolving application design patterns: SOA, EDA, BPM

It’s clear that SaaS doesn’t represent a threat to client/server pricing.  Consider what SOA might represent. In case the terminology is new, here are the definitions first. Bear with the abstractions. To be technically correct, we have to include Event-Driven Architecture (EDA) and Business Process Management (BPM) technologies as well for customers to get the full value out of autonomous services communicating with each other with few users involved.

  • In the case of enterprise applications, SOA means functionality in the form of business processes that are made up of services that communicate with each other’s interfaces by exchanging data. These interfaces might be implemented as Web services. The supplier electronically submitting an invoice to a customer is the relevant example here. 
  • EDA allows services in an SOA to be more loosely coupled. They can communicate by publishing and subscribing to events without either side talking directly to the other. A retailer tracking delivery of goods to its distribution center via RFID would be an example here.
  • BPM orchestrates services and includes users in a workflow where necessary to manage a complete process. A BPM agent for a supplier may be managing the order to cash process when a customer places an order that goes beyond their credit limit. The BPM agent may escalate this exception to the finance department as well as the sales account manager for resolution.

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Why SaaS Isn’t The Real Threat To Enterprise Application Pricing

June 16, 2008

Whether subscriptions or perpetual licenses, it’s still about user-based pricing

Imagine for a moment that you are at IBM and a small supplier of components from the Far East has just submitted an invoice. It just shipped an order of printed circuit boards to IBM’s networking equipment division in upstate New York. IBM receives it and a clerk in its invoice processing department enters the invoice into its ERP system. Whether IBM bought a client/server or software-as-a-service (SaaS) ERP system doesn’t matter. The clerk has to fill out and navigate as many as 20 screens to enter the invoice so the purchase to payment process can move to the next step.

But go back to the distinction between client/server and SaaS applications. Conventional wisdom says that SaaS applications such as SalesForce.com and their subscription licenses represent a threat to the perpetual licenses and the business models of traditional client-server companies such as Oracle or SAP. Stretching payments out over multiple years, as SaaS does, makes it harder to show the profitability and growth that comes from the upfront payments of perpetual licenses. The reality is somewhat different. As many know, SaaS actually takes in significantly more revenue over the product’s lifecycle. But the pricing models have much more in common than their differences. They both charge based on the number of users accessing the application.

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