Why my customer decided to migrate its main production system to SaaS

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Background

In May 2011, my customer announced that its main production system is migrating to software as a service (SaaS). Currently, this system is running on the mainframe computers of the customer’s data center. The customer has had huge annual investments on its 24×7 operation for 20 years. Why did my customer decide to migrate the production system to the SaaS?

Business strategy and customer expectation

CxOs (CEO, COO, CFO, CIO, CTO, and so on) want to improve their business processes and to have more profitable operations. Their expectations for cloud computing are:

• Business process standardization, which is matured at the global level
• Total cost of ownership (TCO) reduction (effect of standardization, sharing and automation)
• Risk mitigation of entrance of new markets

CxOs want to increase their revenue from the international business area. In this case, the SaaS vendors have already been able to service the global area, and have standardized the business processes within the industry of their target business area. Furthermore, their industry frequently increases alliances with many companies. The international industry standards become complex business processes because alliances increase. Customers cannot modify the IT system themselves without the help from the SaaS vendor.  Also, they expect the TCO reduction by third-party IT management. Customers want to both minimize the risk of entrance into new markets, with agility, and also have easy withdrawal.

SaaS strategy

In a highly standardized business process, there is business differentiation on the quotient materials and not on business processes. The success factor is how to invest into highly profitable markets that are faster than their competitors.

For the rapid entry into the new market, the customer needs a capital strategy (for example, capital of IT: servers, storage, networks, and human resources for operation and so on).

Our customer has decided that the SaaS is the best option for the business direction because of the following reasons:

• Business process improvement strategy
• Capital strategy
• Architecture strategy

The following figure shows an overview of the strategy, and the core business processes in SaaS.

For the connection with enterprise internal system, IT vendors construct an authentication system and SOA infrastructure. Enterprise internal systems have core data and differential business processes with the SaaS standardized business processes (for example, data warehouse system, a .com website, and so on).

The new generation system architecture has:

• New devices (for example, smart phone, smart pad, and so on)
• Core data model in the enterprise internal systems (for example, data warehouse, decision-support system, and so on)
• Modified differential business model for profit system

When enterprises decide to migrate to cloud computing, the IT departments have to create a strategy, and have to seek consensus with CxOs, because cloud computing not only affects their IT strategies but also has implications to capital and business operations strategies of the enterprise.