Before I get started, I need to point out that I’m using the word “cloud” as a synonym for software as a service (SaaS) and/or on demand, rather than jumping from one term to another

Uh, oh. The author had good reasons for doing this (SAP’s on-demand software is different from their on-premise software), but the idea of internal and external clouds should be maintained. SaaS and on-demand software runs on external clouds by definition. Licensed software can be deployed on an internal or external cloud.

In this blog we separate cloud and SaaS categories – maybe we have to merge them?

SaaS scales applications. In the SaaS world, companies can scale applications. Because SaaS implies outsourcing, this means that the SaaS provider can easily scale application(s) that they manage for customers. Savings are obtained by aggregating computing patterns across multiple customers.

Clouds scale computing resources. In the cloud computing world, companies can scale computing resources. Unlike SaaS, clouds can be managed internally (private clouds), externally (outsourced clouds), or using a combination of internal and external clouds. Savings are obtained in two ways – first by aggregating computing patterns across applications and second by aggregating computing patterns across customers (external clouds).

Relating this to Accounting, ERP, and CRM

When looking at accounting, ERP, and CRM applications, we agree with Larry Augustin, CEO of SugarCRM, who in a recent blog post in SFGate says “the need for data ownership, control, customization, and integration with core systems will drive the need for private clouds.” He goes on to predict that “Cloud computing is obsoleting SaaS as defined by Salesforce, NetSuite, and single-vendor solutions.”

Recommendation

For applications such as ERP which may require customization and compliance with regulations, select an application that is built to be run on internal and external clouds. SaaS is a great option, but make sure that you do not get locked into a single vendor which will limit your options in the long run.

Saving money is a key component of cloud computing.

Cloud computing can be implemented internally or externally. As mentioned in several articles, cloud computing can benefit businesses through rapid scaling, paying for only the services that you use, reducing hardware purchases, and dynamically allocating computing loads.

Running applications on a cloud computing service can save you money – but your needs change over time.  As mentioned by Dennis Quan (Director of Business Development, IBM Software Group) in ITBusinessEdge, it’s critical that you manage and control your applications and deployment so you can balance loads and move them between internal and external clouds.

The Lessons:

Enterprises need to be careful not to purchase applications from a vendor which offers only an external cloud locks. This locks you into a single architecture and prevents you from reaping the benefits of managing your applications across both internal and external networks.  In this scenario, the external-cloud-only vendor saves money, but they are not likely to pass all the savings on to you. Also, if you try to “scale down” your application, you may not be allowed to do it until your 1 year contract is over.