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SaaS heads drive toward new approach for application sourcing software

Companies are approaching application sourcing differently and the force behind the change is cloud computing.

LAS VEGAS -- The way companies approach application sourcing is undergoing a serious overhaul, according to Richard Watson, research director at Gartner Inc. Driving the change is cloud computing, which is at times a form of IT outsourcing.

Often now, cloud outsourcing can come by way of Software as a Service (SaaS). For many, it is at the forefront of means to field new applications.

Every sourcing decision requires consideration of some type of brokering, Watson said. That means companies must shift their view of application sourcing to remain competent.

What is meant by "brokering?" It rests on the idea that IT departments will come to resemble brokerages, acting as intermediaries, and sourcing business applications in different ways to meet different objectives. Often, a prominent choice among outsourcing means is SaaS.

Watson said a recent Gartner survey showed that SaaS usage has been steadily increasing since 2009 for a wide variety of enterprise applications. In fact, 73% of U.S. respondents and 71% of European respondents of the Gartner survey said they intended to increase spending on SaaS in the next two years. Watson discussed these findings in a session this week at the Gartner Application Architecture, Development & Integration (AADI) Summit.

Added evidence shows SaaS gaining as a factor in the modern IT mix. Gartner research projected that the revenue for SaaS in enterprise software markets will jump $5 billion dollars in the next three years, from $16 billion today, to $21 billion in 2015. Worldwide, a shift is seen in SaaS adoption from primarily being extensions to existing applications, to being new deployments or replacements of existing on-premises applications.

The trend of changing options for software sourcing, and the growing inevitability of outsourcing is happening whether we're ready for it or not, said Gartner's Watson. To adapt, he said, companies should back away from traditional "build versus buy" approaches to application sourcing.

"No one policy can cover every individual sourcing decision," he continued. "Each of these decisions is a very granular decision. The idea that you're going to build or buy or borrow or rent is really an outdated way of looking at things."

Instead, organizations may frequently combine bits of four sourcing methods together: combining custom-developed, open source, off-the-shelf and SaaS-based software in their portfolios.

He predicted that sourcing a software capability will soon entail assembling a collection of elements you build yourself, things you buy, things you borrow and things you rent. "Providing an IT service-based on that assembly is the new way to think about sourcing software," Watson asserted.

Pace makes the race

To prepare for shift in application integration and assembly, Watson advised his audience to take a pace-layered view of sourcing applications. That translates to segmenting application portfolios into different "pace layers." These different layers of IT systems can be divided into systems of innovation, systems of differentiation and systems of record, according to how risk-averse the business is to making changes.

The layered approach is meant to bring clarity to application development choices. "You have apps and systems that have different requirements, and there's a constant movement of apps in your portfolio," explained Gartner Research Vice President Benoit Lheureux in an earlier conference session. "There should be movement logically and movement physically -- for example, to the cloud and back [on-premises]. A pace-layered strategy helps you do that."

In the context of application sourcing, the pace layering helps to determine how quickly and in what form an application should be sourced. For example, an application that fits into the system of innovation might be a new idea that needs to reach users quickly. As a result, SaaS might be the best option in that case.

These changes may betoken more sweeping shifts in IT architecture and decision making. In this new era of cloud application sourcing, successful IT organizations must transform to act as providers, brokers and service management buffers between SaaS providers and customers, Watson concluded.

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