11-02-10 | Blog Post

SaaS Value Added and Risk Management

Blog Posts

There is an interesting trade-off in value add and risk management as you move up the SaaS Delivery Stack.  The higher layers represent the majority of the value add for most SaaS providers.

The SaaS user experience is driven by the application code and database engines underlying that code.  Users have an intimate interaction with the application as it’s presented to their screen and how their data is organized and maintained.  While the user experience also includes the availability and speed of the application, the users generally have no idea about the underlying operating system, hardware or data center that the SaaS application is tied to.  Unless, of course, the operating system gets a virus, the hardware is too slow, or the data center experiences an outage.

The application code and database also contain higher degrees of risk and fewer opportunities to outsource those portions of the SaaS delivery. For example, there may be 100’s of electricians in most 10 square mile areas who can help with electrical problems.  There are fewer experts that can help with Internet connectivity and networking issues.  Generally speaking, there are very few people who really understand the application code and data based layers of the delivery stack.  Quite often, there may be only 3 to 5 will be the only real experts on the source code or database design for any particular application.

The application and database layers of the Delivery Stack are the crown jewels for a SaaS provider.  They deliver the greatest value add for the provider and the highest level of differentiation.  They also represent the layers of the stack which need to be controlled and managed closely, as they represent the highest level of risk and are the most difficult to outsource.

Internet Delivery Stack: SaaS Value Added

On the other hand, the lower portion of the delivery stack, from the operating system down, is easier to outsource and can actually lower the risk when managed by a trusted data center partner.

Fortunately for most SaaS providers, their core strengths are in the application code and database development.  Managing the server and storage infrastructure, networking architecture, or the data center details is mired with issues that most SaaS companies don’t deal with on a day-to-day basis.  Just as fortunately, there are a number of well respected, well trusted hosting providers in the market that can managed the stack from the operating system down.  These hosting solutions include colocation, managed servers and cloud computing.

Online Tech is a premier managed data center operator focusing on the needs of SaaS providers.  Our solutions include fully managed colocation, managed servers and private cloud computing. A number of SaaS leaders trust Online Tech’s HIPAA Compliant, SAS 70 certified data centers to ensure their servers are always on, always online, and always safe.

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