Date Posted: July 29th 2021
An Ode to XaaS: Part 2
PART 2: Breaking ground
Picking up where we left off with my last post, I invite you on a brief stroll down XaaS memory lane. For the purposes of this post, we are narrowing the definition of XaaS to include its most popular forms, namely Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS) and Infrastructure-as-a-Service (IaaS).
When most people think about SaaS, they think of Salesforce as the first company to deploy this model and therefore it is often referenced as the first (or among the first, together with NetSuite) XaaS companies. While in practice that may be true, there are those that would argue that IBM was in fact the first XaaS company in the world. You see, in the late 1960’s, a gigabyte of hard drive space cost around $1,000,000 (no I didn’t add any accidental zeroes). And around that time, buying an actual computer (IBM) could set you back as much as $9,000,000. That is around $71,000,000 in today’s terms. Not to mention that each one of these computers required an air-conditioned room the size of 4 tennis courts. Consequently, even the biggest of corporations were really not in any sort of a position to be handing these out to every employee. As such, they time shared, each enterprise developing their own software on the IBM mainframe and paying for their use. So while not falling exactly under the definition of SaaS/PaaS/IaaS, it can be argued that this was the first deployment of a XaaS model… of sorts. And it was prevalent until the beginning of the 80s.
Unfortunately for XaaS enthusiasts, IBM then came up with their PC which was much more cost effective and eliminated the need for time-sharing, therefore sending XaaS on a bit of a hiatus…
The Uncle We Don’t Like To Talk About
Application Service Providers (ASPs) are sort of an infamous SaaS pre-cursor. They came into existence in the 90s and although they shared similarities with SaaS, such as both being hosted and delivering service to multiple customers (multi-tenant) over a network, the two are quite different. ASPs, with the characteristics such as reliance on software (installation still required!), maintaining separate instances and having responsibility for creating login & environments for clients are much closer in nature to legacy/standalone software then they are to SaaS.
In the late 90s, inspired by Amazon.com, Marc Benioff, an Oracle alumnus, is said to have wondered why sales and business applications cannot be as easy and simple to access and use as the Amazon website. So he set off to solve that problem and together with his co-founders built one of the first purely web based business applications and made it available through Salesforce.com. Roughly around the same time (end of 1998), Evan Goldberg, another Oracle alumnus (was there something in the water?), did a very similar thing with accounting software by starting the future SaaS unicorn NetSuite (then known as NetLedger).
This was a truly pivotal moment for business applications. Here were the products which did away with costly (often running in the millions!) and lengthy implementation of software which was difficult (and again, very costly) to upgrade and maintain while at the same time providing previously unseen flexibility, scalability, and agility to businesses. Surely that was the end of legacy software, SaaS was the future?
Well, yes, there is no surprise twist to the story here. Although, it did take a while. As Salesforce and NetSuite paved the way and validated the business model, the SaaS industry did begin to grow with Intuit and Concur taking their products to the cloud in the early 00s but progression wasn’t as rapid as it could have been because it required a shift in the mindset of business executives and also required Cloud computing capabilities to keep improving. Businesses worried about information security & application stability and especially large corporates were slower to take a leap and make the switch (which is something many are guilty of even today - just google the words COBOL + banks together for an illustration).
However, as Cloud computing continued to improve exponentially and more complex applications could be deployed through the web, the largest legacy providers such as Oracle, SAP and others began shifting to the Cloud and the transformation accelerated. By 2010, SaaS was the dominant model for new tech start-ups and by the middle of the last decade SaaS simply became the norm as even the biggest of the giants moved (Microsoft, Adobe etc). With the benefit of rapidly increasing capabilities and cost efficiencies of Cloud computing, we are now able to deploy incredibly complex applications such as AIBODY’s digital physiology platform which carries out millions of calculations every second, directly to your web browser… It is a long way from paying $8,000,000 (in today’s terms) for a gig of hard disk space.
I hope you enjoyed this short exploration of the history of XaaS which sets us up nicely for the next part of the series when I will write about the current state of the industry and the global impact of XaaS.
Thanks for reading!