Could SaaS Kill the Appliance?

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When SaaS first came on the scene as a viable and growing business option, appliances vendors jumped at the opportunity, repositioning their offerings as a safe and simple on-ramp to cloud services.


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The cloud, it seems, is not returning the love. In fact, cloud services options are targeting the very issues and areas where appliances excel.


Cast Iron, which was recently acquired by IBM, is a perfect example. The company specializes in integration appliances, a decidely earth-bound solution. As SaaS became a legitimate venue for businesses, Cast Iron recast its appliance for connecting to the cloud, then evolving a virtual appliance option and finally this spring, a cloud-services platform called OmniConnect.


IBM bought Cast Iron because of its SaaS integration capabilities - and this is not conjecture, this is straight from IBM's FAQ on the acquisition. That's been a point of interest to competitors, because, as they've pointed out to me this week, OmniConnect was announced so recently, it never really got off the ground (so to speak). That's one reason why Amish Jani, a venture capitalist with FirstMark Capital, believes the deal will have little impact on SaaS customers, other than to help condense what he called a crowded SaaS integration market.


"It does not affect the market at all for customers that have already decided that SaaS is a better approach to deploying technology due to the many fold benefits of single instance, multi tenancy, customer-vendor value alignment, etc.," Jani said via e-mail. "For those customers, they will want SaaS based integration as well, rather than licensing software or buying an appliance." (SaaS integration provider Boomi is part of FirstMark Capital's portfolio.)


Ron Papas, the general manager of Informatica's On Demand Business Unit, says appliances are being replaced by both virtual appliances and integration as a service.

"Appliances represent a first generation solution toward simplifying the SaaS integration problem, but they have been leapfrogged by true SaaS Integration offerings like the Informatica Cloud or Boomi Atomsphere," Papas told me. "Our strategy is the right one for our customers today and in the future, which has been demonstrated by our continued growth quarter over quarter. Informatica will remain singularly focused on our customer success and looks forward to seeing how long it will take for IBM to deliver a true cloud integration service."


Appliances simplify integration by eliminating the need to provision a box and cutting out the software and configuration steps, Papas said. But integration via the cloud or SaaS also eliminates those steps, plus three additional benefits, according to Papas:


  1. It provides self-service, immediate provisioning over the Internet.
  2. It's easier to manage and administer by non-IT personnel.
  3. It provides automatic upgrades and frequent enhancements (just like SaaS apps).

But proponents say appliances fill a specific business need: Appliances keep data on-site, an important issue for enterprises concerned about data security and compliance issue.


"If I'm Siemens, I like the fact that my integration solution sits right next to SAP on premise because it's a security requirement for me," said Chandar Pattabhiram, Cast Iron's vice president of Channel and Product Marketing. "In that case, I like an appliance because it's self-contained."


While the security of an integration appliance may appeal to more skittish companies, here's an interesting, tangential data point: SaaS security is actually gaining, prompting Trend Micro to ponder the demise of security appliances. Recent research shows security as a service is a growing market, with Infonetics Research reporting a record growth of 70 percent in 2009 and IDC predicting it will reach $2 billion this year, according to the Trend Micro blog post.


Cloud security standards would also go a long way to easing woes about SaaS/cloud security: Sue Marquette Poremba on Network Security Edge reports 93 percent of survey respondents say the need for cloud computing security standards is important; 82 percent say the need is urgent.


Still, I'm hesitant to toll the death bell for appliances. Internally, appliances are still an attractive option for some, particularly when it comes to data warehouses and XML appliances. And as Arthur Cole's recent interview with Lawson Software shows, internal clouds may provide a new growth opportunity for appliance vendors.