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Adopting Cloud Applications: Evaluating TCO

Last week I sat down with Scott Geffre, IT Director at Informatica, to learn more about our internal implementation of salesforce.com and our approach to cloud integration. It’s a topic that will also be featured in a number of Informatica World 2010 sessions in November, but as part of this cloud integration best practices interview series, I wanted to share the discussion here. Scott is focused on managing CRM applications at Informatica and has been with the company for over five years. Here is part one of our discussion: evaluating SaaS/Cloud TCO.

When I spoke to Eric Johnson about enterprise applications, he was very bullish on the SaaS/Cloud model. What do you see as some of the benefits?
First and foremost, I’m an application-focused guy. While I appreciate the upfront operational cost benefits that SaaS provides, my primary concern is with supporting the business and ensuring we’re able to support an application through all phases of its lifecycle. Working with on-premise applications typically requires more development headcount, and the turnaround times are much slower when compared to a SaaS model. For example, with our previous CRM system we had this concept of “builds”, where we would bundle up new features and march towards a release date, typically six to eight weeks out. A problem with one feature could slow the whole build down and delay our production release – it was an all or nothing situation. With Salesforce CRM, we’ve introduced the concept of “sprints”, where we’re now doing a build or two a week because there isn’t a lot of heavy lifting or downtime required to push these changes into production. We can turn things around quickly and we have much more flexibility in terms of what we deploy and what we don’t.

How do you evaluate the TCO of a SaaS/Cloud-based solution?
We go through a TCO evaluation with every purchase, whether it’s a cloud or on-premise solution. The TCO model for on-premise software typically starts with the upfront license costs, and then looks at the annual expenses for on-going maintenance, hardware, and of course, headcount. What we realized is that when comparing an on-premise to a SaaS solution, you have to take a longer-term view to truly appreciate all the costs involved. On-premise software applications generally require upgrades every two-three years, which involves planning for a very large project requiring consulting assistance. These projects typically have significant business impact as well, because they tie up a lot of internal resources. With the right cloud-based solution, the cost of upgrades virtually go away as the vendor provides that service. Additionally, vendor upgrade cycles and feature releases are much more frequent, often two or three times a year. Finally, a key benefit for me is the role the vendor now plays in terms of operational support. The onus is on the vendor to maintain uptime and meet their SLAs, which is why I think a service such as trust.informaticacloud.com is so important in terms of system status visibility and overall transparency.

Part two of my interview with Informatica’s Scott Geffre will focus on the importance of cloud data integration and MDM. Stay tuned.

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One Response to Adopting Cloud Applications: Evaluating TCO

  1. Pingback: Integration’s Role in Software Selection for Cloud/SaaS « In(tegrate) the Clouds

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