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On the other hand, the relatively nascent Software-as-a-Service (SaaS) model provides both the economies of scale and delivery model that's a natural match for the telecom industry. While the SaaS model is an obvious underpinning for telecom and software convergence, what is not so obvious is the makeup of the enabling technologies and the exact role a telecom provider has to assume to promote a value chain that can scale to tens of billions in new annual revenue.

The first-mover telecom provider that correctly identifies a) the key enabling technologies, b) the required value chain and c) its role in the value chain will be among the top beneficiaries of the convergence. Before discussing the enabling technologies and the make up of the value chain, let's see what it takes for the customers of business applications to endorse the pay-as-you-go convergence with their wallets.

Customers Need the Power of IT in the Hands of Business
There are four major problems with traditional business applications that have made it impossible to align IT and business: a) the high total cost of ownership (TCO) diverts well over 60% of IT budgets to application maintenance and upgrades instead of business innovation, b) the difficulty of integrating across application silos hinders business automation and efficiency, c) the lack of flexibility in the often over-provisioned underlying hardware and software infrastructure increases both exposure to risk and project costs, and d) the lack of agility in responding to new business requirements disconnects IT from the real-time realities of business.

The enterprise customer simply needs the power of responsive IT in the hands of its business leaders.

The SaaS model combined with Service Oriented Architecture (SOA) and platform innovations on top of SOA has the potential to address all the shortcomings of the traditional software model. However, so far the SaaS model has proven effective mostly for small and medium-size enterprises (SMBs) and non-core applications such as customer relation management (CRM) and human resources (HR).

There are two barriers that have prevented mainstream adoption of SaaS by large enterprises:

1.  Limited ability to customize. The SaaS platform used by existing vendors brings multi-tenancy. While this innovation maximizes the operational efficiency of the SaaS vendor, it currently limits the customer's ability to customize the application business logic; large enterprises require customization to address changing business requirements and gain competitive advantage especially in the area of core business functions.

2.  Difficulty in integrating SaaS solutions with ERP systems inside the firewall. The SaaS platforms used by existing vendors, although Web Service-enabled, provide no innovative inside-out integration capability (i.e., from SaaS platform to other ERP applications inside the firewall).

As you'll see next, the technological convergence of SaaS, SOA, and virtualization can overcome the barriers of SaaS adoption for large enterprises and enable telecom providers to target the SaaS market starting from the Global 1000 end of the market spectrum. (Figure 1)

The Enabling Technologies
Network services such as Internet data centers, global network access, hardware, and OS infrastructure are offered as commodities by telecom providers and some specialized and smaller network service providers. On the other hand, managed services such as security, QoS, and billing expertise are among the valuable assets that telecom providers can bring to the SaaS table from a technology perspective.

To accommodate the creation, customization, integration, and distribution of SaaS applications, some key technologies are required. These technologies go beyond the core competency of telecom providers. These technologies need to provide functions similar to middleware functions. However, they need to be much less complex than middleware to accommodate customer requirements for reduced TCO, ease of integration, and increased agility. Besides, middleware technologies aren't built for multi-tenancy and so do not lend themselves to the SaaS model.

The software platform technologies needed to enable agile SaaS solutions for SMBs through large enterprises are addressed under the four categories below:

1.  GUI Layer: This is also a commoditized layer. A good example here is Adobe Flex. It is a rich Internet client with the ability to consume Web Services out of the box and does most of its processing on the client machine so it provides a good choice for SaaS solutions.
2.  Model-driven Service Composition as a Service. A new model-driven componentization technique called SOP for Service Oriented Programming (http://en.wikipedia.org/wiki/Service_Oriented_Programming) has made it possible to converge SaaS, SOA, and virtualization platforms into a single model-driven platform and so drop the SaaS penetration barriers of large enterprises (http://soa.sys-con.com/read/467329.htm). This model-driven service composition platform is multi-tenant and provides all the functions of SOA middleware without the associated complexity. This is the single most important enabler for the telecom-SaaS technology stack.
3.  Service Management & Governance. In the model-driven telecom-SaaS infrastructure, every exposed and reusable component of a SaaS application is a software service. This means that service management and governance functions must be native to the Service Composition platform.
4.  Service Exchange Infrastructure. Think of this as being something between the eBay and the Yellow Pages of services where SaaS application component vendors can catalog their offerings as a set of software services and be reviewed and rated by customers and the telecom provider.

The Winning Value Chain
To generate revenue worthy of attention in a trillion-dollar industry, telecom providers will have to replace the "SaaS country road" approach promoted by the single SaaS vendor with a value chain that results in a "SaaS superhighway" capable of generating hundreds of billions in revenue. The successful telecom provider views its major role in the SaaS ecosystem as a conduit to enterprise customers and system integrators (SIs). The goal is to create a value chain that turns the telecom provider into the most scalable channel for SaaS offerings in the shortest time possible. This requires a series of key partnerships as opposed to building everything, or acquiring every one-off SaaS application vendor and ending up with a hodge-podge of underlying platforms that are hard to integrate and consolidate.

On the consumer side of the value chain, most SMB and Fortune 2000 customers prefer to acquire end-to-end solutions through a single vendor whenever possible. From this perspective, telecom providers with their vast enterprise customer base are in a unique position to act as distribution channels for SaaS solutions. Also, up to now, SIs had to rely on vendor-specific application platforms to deliver solutions. SIs have been looking for a vendor-neutral platform to capture their domain knowledge and increase reusability across clients. Because of this, SIs are likely to become a conduit for the telecom-SaaS offerings.

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