By Maria Azada, SaaS Portfolio Management and Strategy Director at Nokia

As communication service providers (CSPs) and enterprises begin to make the important pivot to the world of Software-as-a-Service (SaaS), one question looms large: "What is the difference between a hosted private cloud and SaaS?" That may seem academic but addressing it the right way can yield distinctly positive outcomes for CSPs, as they transform themselves in order to fully tap the opportunities presented by 5G and the adoption of cloud-based technologies at scale.

Before answering that question, let me first unpack the differences between a hosted private cloud and a public cloud. 

Public clouds are hosted in a data center on server space that may share resources with other clouds. They aren't restricted by a firewall, so the server space isn't walled off. Think Amazon, Microsoft, Google, Oracle. 

A hosted private cloud is just the opposite. It provides a specific set of hardware and software services to a specific customer, protected behind a firewall. Generally, private clouds are hosted on private networks, off-premise and managed by a third party. Private cloud providers build and maintain everything, such as the physical servers, networking, data storage, cooling, and virtualization environment. Think IBM, Red Hat, Dell, Cisco.

Differences between SaaS and hosted private clouds

Now, the fundamental difference between a hosted private cloud and SaaS is anchored in the implementation of the business model. 

Based on a single-tenant business model, a hosted private cloud focuses on one (and only one) customer. Private cloud customers tend to expect a degree of uniqueness in their deployment and each distinct feature often means additional cost. While there are opportunities for standardization based on common implementation patterns, from hands-on management to customized solutions, private clouds often rely on a higher investment of human capital with a potentially longer time-to-value.​​​​​​​

SaaS provides companies with software they use over the cloud. Benefits include configuration rather than customization, worry-free maintenance, automatic upgrades, and built-in security. With a multi-tenant business model like SaaS, all customers receive a highly similar experience with the exception of configurable variations like the scale of the service.

While the SaaS and hosted private cloud business models are different, that's not to say that one is better than the other. Customers who want or need customization and hands-on management for their software services take advantage of hosted private clouds.

Customers who opt for lower cost, want a quick response to their software needs through immediate deployment and automated upgrades, trade customization for time to value and choose a SaaS solution. Depending on the degree of customization required by the customer, both business models add value when used in the appropriate context. ​​​​​ Let's look at the evolution of Microsoft Office as an example here. 

Microsoft: The poster child for evolution from in-house to SaaS

Back in 1990, the care and keeping of MS Office was the job of the IT department. Each app was installed separately using a DOS-based interface and managed independently by each user. In 1996, Microsoft moved to a comprehensive outsourcing policy driven by the need to maximize computing resources and budgets, minimize administrative overhead, and focus on the company's core competencies. 

In 2011, Microsoft released Office 365 expanding from desktop apps into a platform for servers, apps and services. Today, installing Office is a "set it and forget it" SaaS process. Just go to your portal and choose your platform. Simple. Easy. User-friendly. And those updates? Provided automatically in accordance with Microsoft's schedule, not yours.

What started as traditional software purchased for a one-time fee and manually updated for an additional fee, grew into a SaaS offering. When your applications run on over one billion devices worldwide for a fee, with no customization or on-premises work needed, that's a success.

How SaaS adds value, and what's in it for the customer?

Easy

Software-as-a-Service makes it easy for customers to quickly adopt and use services, shortening the time to value while providing outcome-based solutions and services. It's a perfect way to quickly engage ecosystem partners and customers in co-creating value. 

Agile

Automatic scaling and on-demand access to resources based on the needs of the customer make SaaS a very agile business model. Customers can access software and updates within minutes or hours, avoiding the loss of time often associated with customized applications.

Affordable

SaaS requires limited upfront investment and eliminates the financial risk for maintenance and upgrades. No additional hardware or physical space needed! With improved cost management, lower Total Cost of Ownership (TCO), captivating economies of scale, and lower entry barriers to market evaluation, the benefits of moving to a SaaS platform are undeniable and significant.

As we sit on the threshold of a new era for the telecoms industry, our journey to SaaS has only just begun. Now is the time for CSPs to get on board and begin implementing a cloud-native SaaS strategy so that they can reap the benefits earlier.

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ABOUT THE AUTHOR

Maria Azada leads the SaaS Portfolio Management and Strategy within Nokia Cloud and Network Services group.  With more than 30 years of experience in the telecom industry, Maria seeks to drive Innovation and Transformation to the telecommunication services industry.  She holds a master’s degree in computer science and held various positions in portfolio strategy, product management and business development.