What SaaS Means to the Future of the IT Department

As software-as-a-service offerings expand, IT jobs will change. Here's what the shift may mean to IT departments

This story was updated to include additional reporting. To read the original story, click here.

Tom Clement has reinvented his career before. In 1984, he realized that working in technology would suit him better than his job as a litigator in Texas. "I came home one day from work, and I was used to being really tense," he says. "But that day, my secretary's recorder had broken. I'd taken it apart, put it back together and somehow, it worked. I was whistling and in a good mood because of it, and my girlfriend heard me and said, 'Tom, maybe you were made for a different line of work.'"

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After moving to California and taking a night class at the University of California, Berkeley, in C-programming, he put his law ambitions aside and took a job at a C-compiler company, taking pieces of code and translating it into a language that could work on Motorola hardware.

Today, Clement, a senior developer at Serena Software, might be facing a bigger career test: software as a service (SaaS), the movement of software to the Web. SaaS, one flavor of today's hot buzzword, cloud computing, refers to applications that users access over the Web and which live on physical servers hosted by the software vendors or a third party, not servers owned and cared for by an in-house IT department.

Today, most large companies use a mix of both traditional apps that they run on premise and some that are hosted offsite, such as Salesforce.com's sales and CRM-related apps. Enterprise adoption of SaaS applications has been aggressive. According to a CIO.com survey on cloud computing, 84 percent of respondents are currently running SaaS-type applications. Meanwhile, a survey published earlier this year by Kelton research found that 73 percent of large companies have already or plan to adopt SaaS technology in the next 18 months.

A shift away from on-premise apps has implications for how companies staff their IT departments in the future, according to CIOs and IT industry executives. Change is afoot for developers as well as the thousands of IT support and maintenance professionals taking care of traditional software at companies of all sizes, in all industries.

Case in point: Tim Davis, CIO of Popeyes Louisiana Kitchen, a national fast food chain based in Atlanta, only has six IT people on staff and not one production server on premise. With no production servers or apps to run, says Davis, "Three [people] are dedicated to making sure the restaurants have whatever technology they need. The rest are project managers and manage our relationships with vendors."

Vendors See a Radical Shift

In the future, say vendors, more IT professionals will be working for them, not for CIOs at end-user companies. And they'll all need new skills. That goes for developers as well as support staff.

Developers have been through big transitions in computing before (remember the move from mainframe computers to the PC?). Within the IT industry, vendors are preparing for a new round of upheaval as CIOs roll out offerings from the likes of Google (with its Google Apps) and Salesforce.com that let users run applications via the Internet. Zoho, a SaaS vendor that does most of its development work in India, offers a plethora of applications, including word processing, spreadsheet and presentation software.

Along with the consumerization of IT—the idea that people expect applications at work to look like the Web technologies they use at home (such as Facebook and Google)—the SaaS trend will force many IT professionals to rethink their skills and the value they bring to their companies, says Jeffrey Kaplan, president of THINKstrategies, a consultancy that helps companies adopt SaaS applications.

"Unfortunately, most developers have built enterprise applications to meet their current systems environment and the end user was very secondary," Kaplan says. "Now, the end-user experience is the driving factor, because end users determine whether or not the application is considered successful."

In addition, maintenance veterans who handle the plumbing of IT could see their job options start to recede as maintenance responsibility shifts to the vendors who supply the applications. That reality can be both a challenge and an opportunity for the IT industry, says Peter Coffee, director of platform research at Salesforce.com.

"If you're in the ecosystem of working on staple, on-premise software, you can take care of feeding and watering those systems," Coffee says. But in a SaaS-based world, "those low-value tasks no longer need to be done [onsite]," he continues. Instead, he adds, you'll want your IT staff "to be the IT equivalent of special forces."

Ken Venner, senior VP and corporate services CIO at communications semiconductor company Broadcom, says such IT special forces might build new features that fit a company's specific needs on top of SaaS apps, or manage the relationships between two or more SaaS vendors who each provide technology to the same company, making sure their systems talk well with one another. "Working with vendors will really become ever more critical," Venner says. "One of the skills that will start to reduce is core infrastructure skills."

The Post-Modern IT Department

At Popeyes, the idea of a SaaS-driven, plug-and-play IT department is more than a dream. Today, says Davis, not all of his apps are SaaS-based. A SaaS vendor, by his definition, is a company that provides the software over the Web, hosts it and charges a subscription fee (generally per user per month). Popeyes owns the licenses for some of its software, and worked out a contract with IBM to host and support the servers for those apps. The contract includes IBM's hosting of Popeyes' Microsoft Exchange e-mail system along with its Lawson ERP system, although the ERP app is managed by a business process outsourcing vendor, Convergys, which performs Popeyes' accounting.

The three developers on Davis's team who work on restaurant technology support the company's point-of-sale system and are currently leading the search for standard POS systems to be implemented by franchisees. (See "Who You Gonna Hire?" for more on currently hot IT roles.)

Davis notes that his contract with IBM will expire in 2009. When that happens, Davis admits he could pursue more SaaS options, as these would likely cost him less money than outsourcing to Big Blue. Microsoft recently released a SaaS version of Exchange for a mere $10 per user per year. Other SaaS applications Davis is eyeing include ERP, an intranet and extranet, and CRM.

But how quickly SaaS might change the staffing landscape for many companies is another story. A recent report by Gartner, for example, throws cold water on the concept of ERP as a hosted application.

"Because of the complexity of ERP suites, SaaS offerings for administrative and operational functions typically have provided functionality that is confined to one domain, such as sales-force automation or one business process, such as payroll," writes Gartner analyst Denise Ganly. She says it will be five years before SaaS ERP suites are viable options for large enterprises. (For more about vendor migration to the SaaS model, see, "How Fast is the Road to SaaS?")

When it comes to SaaS ERP, Ganly continues, a big driver is the IT staff constraints faced by many organizations. The SaaS model "appeals to organizations because it can free up staff to concentrate on more-strategic, value-adding processes." Part of the appeal is a belief that SaaS ERP is "instant on," which means that it can be implemented with little or no intervention. "However," she writes, "the business still must be reengineered, processes redefined, integration points defined and so on. The instant-on perception that drives adoption also makes it an inhibitor."

Nevertheless, IT staff are starting to adapt to the new environment. Developers, for instance, will have to embrace new programming languages and open Web standards when creating enterprise software. "I've got some learning to do in my 50s," says Serena Software's Clement. In some ways, he's already started, as his company has begun building SaaS applications along side its traditional software development tools.

Clement say he has to learn more about Web 2.0 and Java programming, but feels ready for the challenge. "My experience has always been that programming is programming," he says. "The language is sort of a detail. The environment is changing, and while I have fears, there's nothing more thrilling than working on something that will be relevant for the future." Meanwhile, for IT support people who handle enterprise infrastructure and back-end support, future roles might include working in the data center of a SaaS vendor, or helping to ensure that a company can integrate various SaaS apps, says Fred Luddy, president and CEO of Service-Now, an IT service management company that runs on a SaaS model.

"Integration will be the main challenge," he says. "IT will be at a higher level."

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