Platform-as-a-Service Even More Disruptive than SaaS; SMBs Likely to Lead Adoption

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I've often blogged about how SMBs were taking the lead in adopting software-as-a-service, which has been tapped by experts including Timothy Chou, author of "The End of Software," as the most disruptive technology of the last decade.


Yet it's beginning to look as if SaaS is just the tip of the disruptive technology iceberg. And SMBs will likely play a key role in the adoption of hosted software development platforms, dubbed "platform-as-a-service." SMBs are expected to be big customers of such platforms, including Salesforce.com's AppExchange, as well as creators of the applications sold through them, reports News.com.


Such platforms lower the barriers for entry for SMB software developers, since they won't have to purchase servers and a software stack to run their applications. The CEO of Coghead, a new entrant to the platform-as-a-service market, tells News.com that his company's Coghead Gallery service is geared more toward SMBs than AppExchange, which he contends is more appropriate for large independent software vendors.


Coghead's platform is based upon Adobe Systems' Flex and runs on Amazon's Web Services (a pretty disruptive force itself, as I've blogged previously). About 30 Coghead partners are expected to offer apps for sale through the platform at its launch.


Salesforce.com is hardly Coghead's only competition in the platform-as-a-service space. Where there is disruptive technology, Google will inevitably be found. IT Business Edge blogger Carl Weinschenk last week gave a detailed take on its new Apps Engine, calling it one of a growing number of services that "collapse the logical separation between a company's internal structures and the world (or cloud) beyond."


The industry will likely see more entrants soon. Colleen Smith, a VP at application infrastructure software provider Progress Software whom I interviewed earlier this month, told me her company is working with a number of large business service providers interested in offering vertical software applications to smaller service providers. She says:

So they have these business services, and maybe some applications they've acquired. In financial services, for example, they might want to offer loan origination, wealth management, some other types of payment processing capabilities. They are looking at packaging these software offerings -- some of which they might own, some of which they may have built in-house, some of which might come from partners.


If I am the service provider, I can do the integration that's required, bring together these solutions and offer them out to smaller customers that might not have been in my market before. I may have been selling complete BPO services before, but now I am also offering SaaS and giving customers the ability to say, "I will host and manage the app, but you can use it, and you can add and differentiate your own services to offer to customers of your bank."

So in the model that Smith describes, SMB customers (vs. developers) would work with service providers rather than purchasing a hodgepodge of apps themselves through a platform like AppExchange or Coghead Gallery. This approach might be more appealing to SMBs, many of whom now enlist value-added resellers or systems integrators to help them handle any integration or customization chores.


The model is still developing, notes Smith, with questions remaining over branding, revenue sharing and other topics. But when details are sorted out, these vertical service provider networks could emerge as a logical new sales channel for SaaS, something that some experts (like Forrester Research analyst Michael Speyer, whom I interviewed last month) say is sorely needed.


Says Smith:

I think this will take off more in the 2009-2010 timeframe. It's not really there today, but every vendor should be thinking about how they might play into this. The users, as they look at acquiring new applications, might consider whether there is another service provider they might look to for the applications they need.