Posts Tagged Independent Software Vendor
Architecting a Successful SaaS: Understanding Cloud-based SaaS Models
Posted by Gary A. Stafford in AWS, Cloud, Technology Consulting on May 15, 2020
Originally published on the AWS APN Blog.
You’re a startup with an idea for a revolutionary new software product. You quickly build a beta version and deploy it to the cloud. After a successful social-marketing campaign and concerted sales effort, dozens of customers subscribe to your SaaS-based product. You’re ecstatic…until you realize you never architected your product for this level of success. You were so busy coding, raising capital, marketing, and selling, you never planned how you would scale your Sass product. How you would ensure your customer’s security, as well as your own. How you would meet the product reliability, compliance, and performance you promised. And, how you would monitor and meter your customer’s usage, no matter how fast you or they grew.
I’ve often heard budding entrepreneurs jest, if only success was their biggest problem. Certainly, success won’t be their biggest problem. For many, the problems come afterward, when they disappoint their customers by failing to deliver the quality product they promised. Or worse, damaging their customer’s reputation (and their own) by losing or exposing sensitive data. As the old saying goes, ‘you never get a second chance to make a first impression.’ Customer trust is hard-earned and easily lost. Properly architecting a scalable and secure SaaS-based product is just as important as feature development and sales. No one wants to fail on Day 1—you worked too hard to get there.
Architecting a Successful SaaS
In this series of posts, Architecting a Successful SaaS, we will explore how to properly plan and architect a SaaS product offering, designed for hosting on the cloud. We will start by answering basic questions, like, what is SaaS, what are the alternatives to SaaS for software distribution, and what are the most common SaaS product models. We will then examine different high-level SaaS architectures, review tenant isolation strategies, and explore how SaaS vendors securely interact with their customer’s cloud accounts. Finally, we will discuss how SaaS providers can meet established best practices, like those from AWS SaaS Factory and the AWS Well-Architected Framework.
For this post, I have chosen many examples of cloud services from AWS and vendors from AWS Marketplace. However, the principals discussed may be applied to other leading cloud providers, SaaS products, and cloud-based software marketplaces. All information in this post is publicly available.
What is SaaS?
According to AWS Marketplace, ‘SaaS [Software as a Service] is a delivery model for software applications whereby the vendor hosts and operates the application over the Internet. Customers pay for using the software without owning the underlying infrastructure.’ Another definition from AWS, ‘SaaS is a licensing and delivery model whereby software is centrally managed and hosted by a provider and available to customers on a subscription basis.’
A SaaS product, like other forms of software, is produced by what is commonly referred to as an Independent Software Vendor (ISV). According to Wikipedia, an Independent Software Vendor ‘is an organization specializing in making and selling software, as opposed to hardware, designed for mass or niche markets. This is in contrast to in-house software, which is developed by the organization that will use it, or custom software, which is designed or adapted for a single, specific third party. Although ISV-provided software is consumed by end-users, it remains the property of the vendor.’
Although estimates vary greatly, according to The Software as a Service (SaaS) Global Market Report 2020, the global SaaS market was valued at about $134.44B in 2018 and is expected to grow to $220.21B at a compound annual growth rate (CAGR) of 13.1% through 2022. Statista predicts SaaS revenues will grow even faster, forecasting revenues of $266B by 2022, with continued strong positive growth to $346B by 2027.
Cloud-based Usage Models
Let’s start by reviewing the three most common ways that individuals, businesses, academic institutions, the public sector, and government consume services from cloud providers such as Amazon Web Services (AWS), Microsoft Azure, Google Cloud, and IBM Cloud (now includes Red Hat).
Indirect consumers are customers who consume cloud-based SaaS products. Indirect users are often unlikely to know which cloud provider host’s the SaaS products to which they subscribe. Many SaaS products can import and export data, as well as integrate with other SaaS products. Many successful companies run their entire business in the cloud using a combination of SaaS products from multiple vendors.
- An advertising firm that uses Google G Suite for day-to-day communications and collaboration between its employees and clients.
- A large automotive parts manufacturer that runs its business using the Workday cloud-based Enterprise Resource Management (ERP) suite.
- A software security company that uses Zendesk for customer support. They also use the Slack integration for Zendesk to view, create, and take action on support tickets, using Slack channels.
- A recruiting firm that uses Zoom Meetings & Chat to interview remote candidates. They also use the Zoom integration with Lever recruiting software, to schedule interviews.
Direct consumers are customers who use cloud-based Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) services to build and run their software; the DIY (do it yourself) model. The software deployed in the customer’s account may be created by the customer or purchased from a third-party software vendor and deployed within the customer’s cloud account. Direct users may purchase IaaS and PaaS services from multiple cloud providers.
- An advanced hobbyist that uses AWS IoT Core and Amazon QuickSight as part of a custom Smart Home automation application.
- A private equity firm that maintains its own proprietary AI-based investment recommendation engine using a combination of cloud-based services, like AWS Lambda and Amazon SageMaker.
- A mobile payment company that uses Amazon EKS and Amazon DynamoDB to run its own high-volume credit card processing application. To help ensure PCI compliance, they also use Aqua’s customer-deployed product, Aqua Cloud Native Security Platform for EKS (BYOL).
Hybrid consumers are customers who use a combination of IaaS, PaaS, and SaaS services. Customers often connect multiple IaaS, PaaS, and SaaS services as part of larger enterprise software application platforms.
- A payroll company that hosts its proprietary payroll software product, using IaaS products like Amazon EC2 and Elastic Load Balancing. In addition, they use an integrated SaaS-based fraud detection product, like Cequence Security CQ botDefense, to ensure the safety and security of payroll customers.
- An online gaming company that operates its applications using the fully-managed container-based PaaS service, Amazon ECS. To promote their gaming products, they use a SaaS-based marketing product, like Mailchimp Marketing CRM.
Most cloud-based software is sold in one of two ways, Customer-deployed or SaaS. Below, we see a breakdown by the method of product delivery on AWS Marketplace. All items in the chart, except SaaS, represent Customer-deployed products. Serverless applications are available elsewhere on AWS and are not represented in the AWS Marketplace statistics.
An ISV who sells customer-deployed software products to consumers of cloud-based IaaS and PaaS services. Products are installed by the customer, Systems Integrator (SI), or the ISV into the customer’s cloud account. Customer-deployed products are reminiscent of traditional ‘boxed’ software.
Customers typically pay a reoccurring hourly, monthly, or annual subscription fee for the software product, commonly referred to as pay-as-you-go (PAYG). The subscription fee paid to the vendor is in addition to the fees charged to the customer by the cloud service provider for the underlying compute resources on which the customer-deployed product runs in the customer’s cloud account.
Some customer-deployed products may also require a software license. Software licenses are often purchased separately through other channels. Applying a license you already own to a newly purchased product is commonly referred to as bring your own license (BYOL). BYOL is common in larger enterprise customers, who may have entered into an Enterprise License Agreement (ELA) with the ISV.
Customer-deployed cloud-based software products can take a variety of forms. The most common deliverables include some combination of virtual machines (VMs) such as Amazon Machine Images (AMIs), Docker images, Amazon SageMaker models, or Infrastructure as Code such as AWS CloudFormation, HashiCorp Terraform, or Helm Charts. Customers usually pull these deliverables from a vendor’s AWS account or other public or private source code or binary repositories. Below, we see the breakdown of customer-deployed products, by the method of delivery, on AWS Marketplace.
Although historically, AMIs have been the predominant method of customer-deployed software delivery, newer technologies, such as Docker images, serverless, SageMaker models, and AWS Data Exchange datasets will continue to grow in this segment. The AWS Serverless Application Repository (SAR), currently contains over 500 serverless applications, not reflected in this chart. AWS appears to be moving toward making it easier to sell serverless software applications in AWS Marketplace, according to one recent post.
Customer-deployed cloud-based software products may require a connection between the installed product and the ISV for product support, license verification, product upgrades, or security notifications.
- Fortinet provides high-performance, integrated network security solutions for global enterprise businesses. Fortinet sells its customer-deployed AMI-based product, Fortinet FortiGate (BYOL) Next-Generation Firewall, on AWS Marketplace.
- Alluxio is a leader in data orchestration for big data and AI and ML workloads. Alluxio sells its customer-deployed AMI-based product, Alluxio Enterprise Edition – Caching for Data Analytics, on AWS Marketplace.
- Kasten provides cloud-native data management for Amazon EKS (Managed Kubernetes Service). Kasten offers their customer-deployed container-based product for backup and restore, disaster recovery, and mobility of Kubernetes applications, Kasten K10, on AWS Marketplace.
- Deep Vision AI specializes in visual recognition technology for images and videos. Deep Vision offers several API products, including the Deep Vision context recognition API, Deep Vision brand recognition API, and Deep Vision face recognition API, all sold on the AWS Marketplace. The APIs work with Amazon SageMaker, and are priced on an hourly rate for realtime inference and batch transforms. Customer-deployed products, designed for Amazon SageMaker, are a growing category on AWS Marketplace.
An ISV who sells SaaS software products to customers. The SaaS product is deployed, managed, and sold by the ISV and hosted by a cloud provider, such as AWS. A SaaS product may or may not interact with a customer’s cloud account. SaaS products are similar to customer-deployed products with respect to their subscription-based fee structure. Subscriptions may be based on a unit of measure, often a period of time. Subscriptions may also be based on the number of users, requests, hosts, or the volume of data.
A significant difference between SaaS products and customer-deployed products is the lack of direct customer costs from the underlying cloud provider. The underlying costs are bundled into the subscription fee for the SaaS product.
Similar to Customer-deployed products, SaaS products target both consumers and businesses. SaaS products span a wide variety of consumer, business, industry-specific, and technical categories. AWS Marketplace offers products from vendors covering eight major categories and over 70 sub-categories.
SaaS Product Variants
I regularly work with a wide variety of cloud-based software vendors. In my experience, most cloud-based SaaS products fit into one of four categories, based on the primary way a customer interacts with the SaaS product:
- Stand-alone: A SaaS product that has no interaction with the customer’s cloud account;
- Data Access: A SaaS product that connects to the customer’s cloud account to only obtain data;
- Augmentation: A SaaS product that connects to the customer’s cloud account, interacting with and augmenting the customer’s software;
- Discrete Service: A variation of augmentation, a SaaS product that provides a discrete service or function as opposed to a more complete software product;
A stand-alone SaaS product has no interaction with a customer’s cloud account. Customers of stand-alone SaaS products interact with the product through an interface provided by the SaaS vendor. Many stand-alone SaaS products can import and export customer data, as well as integrate with other cloud-based SaaS products. Stand-alone SaaS products may target consumers, known as Business-to-Consumer (B2C SaaS). They may also target businesses, known as Business-to-Business (B2B SaaS).
- A Cloud Guru, the leading online cloud training platform, sells its A Cloud Guru AWS Training & Certification SaaS product on AWS Marketplace.
- Hubspot is a leading provider of marketing, sales, and service B2B SaaS products for businesses. Hubspot, which is hosted on AWS in the US, offers its Marketing Hub All-in-One Inbound Marketing Software, through their website.
- Trello is another example of a B2B SaaS product. Trello, whose Trello product is hosted on AWS, enables users to organize and prioritize their projects.
A SaaS product that connects to a customer’s data sources in their cloud account or on-prem. These SaaS products often fall into the categories of Big Data and Data Analytics, Machine Learning and Artificial Intelligence, and IoT (Internet of Things). Products in these categories work with large quantities of data. Given the sheer quantity of data or real-time nature of the data, importing or manually inputting data directly into the SaaS product, through the SaaS vendor’s user interface is unrealistic. Often, these SaaS products will cache some portion of the customer’s data to reduce customer’s data transfer costs.
Similar to the previous stand-alone SaaS products, customers of these SaaS products interact with the product thought a user interface provided by the SaaS vendor.
- Zepl provides an enterprise data science analytics platform, which enables data exploration, analysis, and collaboration. Zepl sells its Zepl Science and Analytics Platform SaaS product on AWS Marketplace. The Zepl product provides integration to many types of customer data sources including Snowflake, Amazon S3, Amazon Redshift, Amazon Athena, Google BigQuery, Apache Cassandra (Amazon MCS), and other SQL databases.
- Sisense provides an enterprise-grade, cloud-native business intelligence and analytics platform, powered by AI. Sisense offers its Sisense Business Intelligence SaaS product on AWS Marketplace. This product lets customers prepare and analyze disparate big datasets using Sisense’s Data Connectors. The wide array of connectors provide connectivity to dozens of different cloud-based and on-prem data sources.
- Databricks provides a unified data analytics platform, designed for massive-scale data engineering and collaborative data science. Databricks offers its Databricks Unified Analytics Platform SaaS product on AWS Marketplace. Databricks allows customers to interact with data across many different data sources, data storage types, and data types, including batch and streaming.
- DataRobot provides an enterprise AI platform, which enables global enterprises to collaboratively harness the power of AI. DataRobot sells its DataRobot Automated Machine Learning for AWS SaaS product on AWS Marketplace. Using connectors, like Skyvia’s OData connector, customers can connect their data sources to the DataRobot product.
A SaaS product that interacts with, or augments a customer’s application, which is managed by the customer in their own cloud account. These SaaS products often maintain secure, loosely-coupled, unidirectional or bidirectional connections between the vendor’s SaaS product and the customer’s account. Vendors on AWS often use services like Amazon EventBridge, AWS PrivateLink, VPC Peering, Amazon S3, Amazon Kinesis, Amazon SQS, and Amazon SNS to interact with customer’s accounts and exchange data. Often, these SaaS products fall within the categories of Security, Logging and Monitoring, and DevOps.
Customers of these types of SaaS products generally interact with their own software, as well as the SaaS product thought an interface provided by the SaaS vendor.
- CloudCheckr provides solutions that enable clients to optimize costs, security, and compliance on leading cloud providers. CloudCheckr sells its Cloud Management Platform SaaS product on AWS Marketplace. CloudCheckr uses an AWS IAM cross-account role and Amazon S3 to exchange data between the customer’s account and their SaaS product.
- Splunk provides the leading software platform for real-time Operational Intelligence. Splunk sells its Splunk Cloud SaaS product on AWS Marketplace. Splunk Cloud enables rapid application troubleshooting, ensures security and compliance, and provides monitoring of business-critical services in real-time. According to their documentation, Splunk uses a combination of AWS S3, Amazon SQS, and Amazon SNS services to transfer AWS CloudTrail logs from the customer’s accounts to Splunk Cloud.
Discrete SaaS products are a variation of SaaS augmentation products. Discrete SaaS products provide specific, distinct functionality to a customer’s software application. These products may be an API, data source, or machine learning model, which is often accessed completely through a vendor’s API. The products have a limited or no visual user interface. These SaaS products are sometimes referred to as a ‘Service as a Service’. Discrete SaaS products often fall into the categories of Artificial Intelligence and Machine Learning, Financial Services, Reference Data, and Authentication and Authorization.
- Twinword provides a variety of text analysis APIs, including the Sentiment Analysis API, Text Similarity API, Emotion Analysis API, and Text Classification API, all sold on the AWS Marketplace. The APIs are priced, based on the number of requests per month.
- Sensifai offers a comprehensive video recognition system that can be used to tag videos and pictures. Sensifai offers several SaaS-based APIs, including Automatic Video Recognition, Automatic Audio or Sound Classification, and Action Recognition (Trainable Algorithm), all sold on the AWS Marketplace.
AWS Data Exchange
There is a new category of products on AWS Marketplace. Released in November 2019, AWS Data Exchange makes it easy to find, subscribe to, and use third-party data in the cloud. According to AWS, Data Exchange vendors can publish new data, as well as automatically publish revisions to existing data and notify subscribers. Once subscribed to a data product, customers can use the AWS Data Exchange API to load data into Amazon S3 and then analyze it with a wide variety of AWS analytics and machine learning services.
Data Exchange seems to best fit the description of a customer-deployed product. However, given the nature of the vendor-subscriber relationship, where data may be regularly exchanged—revised and published by the vendor and pulled by the subscriber—I would consider Data Exchange a cloud-based hybrid product.
AWS Data Exchange products are available on AWS Marketplace. The list of qualified data providers is growing and includes Reuters, Foursquare, TransUnion, Pitney Bowes, IMDb, Epsilon, ADP, Dun & Bradstreet, and others. As illustrated below, data sets are available in the categories of financial services, public sector, healthcare, media, telecommunications, and more.
- Dun & Bradstreet currently offers over 30 data products on AWS Marketplace, delivered using AWS Data Exchange. Products include Direct Marketing Services – First Research Industry Profile, Insurance Agencies & Brokerages – First Research Industry Profile, and Department Stores (US) – Industry Marketing File. Dun & Bradstreet’s datasets are priced, based on a 12-month subscription.
- Reuters currently has nine data products on AWS Marketplace, delivered using AWS Data Exchange. Products include Reuters News Archive: Automotive (1 Year), Reuters News Archive: Pharmaceutical (1 Year), and Reuters News Archive: Energy (1 Year).
- SafeGraph offers accurate Points-of-Interest (POI) data, business listings, and store visitor insights data for commercial places in the United States. SafeGraph currently offers 23 different products on AWS Marketplace, delivered using AWS Data Exchange, including SafeGraph Core Places – Restaurants, SafeGraph Core Places – Entire US, and SafeGraph Foot Traffic Patterns (2019) – Car Dealerships.
In this first post, we’ve become familiar with the common ways in which customers consume cloud-based IaaS, PaaS, and SaaS products and services. We also explored the different ways in which ISVs sell their software products to customers. In future posts, we will examine different high-level SaaS architectures, review tenant isolation strategies, and explore how SaaS vendors securely interact with their customer’s cloud accounts. Finally, we will discuss how SaaS providers can meet best-practices, like those from AWS SaaS Factory and the AWS Well-Architected Framework.
Here are some great references to learn more about building and managing SaaS products on AWS.
- SaaS on AWS
- SaaS Success Stories
- AWS SaaS Factory
- Simplify SaaS Procurement with AWS Marketplace
- AWS Marketplace: Software-as-a-Service–Based Products
This blog represents my own view points and not of my employer, Amazon Web Services.