CADaaS continued (2)

My musings last week (here and here) on CAD-as-a-Service have stimulated some interest, including a SaaSblogs post, and a comment from Rami Hamodah, who, quite rightly, suggests that “offering CAD-as-a-Service is much harder to do than offering business software-as-a-service such as CRM” and wonders how demand might be stimulated.

CADaaS: not if, when

To respond to this, let’s go back ten years. In the late 1990s (pre-broadband days, remember), I expect there were people who doubted that there was sufficient technological know-how and bandwidth to allow any kind of on-demand service to be delivered, let alone to become almost normal. The challenge of sharing documents among members of a distributed construction project team still tended to focus on use of CDs and perhaps email (if the attachments weren’t too big), or – in a few isolated instances – using some kind of electronic document management system over a local or wide area network, with some external users reliant upon expensive ISDN connections to be able to access and download documents or drawings. Many industry people also insisted there was no demand, saying they preferred to use paper, and were sceptical about using web-based services, citing legal, copyright and contractual issues, security, lack of standards, the financial stability of vendors, reliability, inadequate hardware, poor telecoms, and a whole host of other obstacles (both real and imagined) that – eventually – were largely overcome.

As I wrote earlier this week (SaaS – the killer app for CAD?), many of the issues have already been addressed. The AEC collaboration providers overcame legal, professional, cultural and procedural constraints. They were also able to demonstrate that they could deliver Software-as-a-Service despite the infrastructure constraints. They created streamlined applications that were coded specifically for efficient web delivery, being designed to work even over the 14.4 or 28.8kbps dial-up connections then typically used by many firms, particularly on-site and at the SME end of the industry. In the UK at least, the drive by some clients towards ‘partnering’ and other more collaborative approaches to project delivery, also stimulated demand for online collaboration services.

Looking at the CADaaS opportunity, one could say we are in a similar situation to the late 1990s. Yes, some of the technological constraints remain, but at a different order of magnitude. Broadband availability, capacity and reliability continues to improve, investment in new application hosting, data storage and utility computing facilities continues to grow, and market sentiment towards SaaS is increasingly positive (see 2008: SaaS will soar, SaaS will surge), prompting more investment in SaaS-based projects and businesses. Just as software programmers were able to streamline document management systems for SaaS delivery, I expect they will also be able to deliver the core functionality of CAD applications for delivery via a browser. I might even stick my neck out and say that, so far as CADaaS is concerned in the AEC industry, it’s not if, but when.

One reason I say this is down to the projections for growing use, within the AEC sector, of building information modelling (BIM – see Take-up of BIM growing, Collaborative processes help US industry respond to growth pressures), which will, for many design firms, mean fundamental changes to how they manage information and liaise with other members of the project team. The transition to BIM (hopefully, accompanied by a parallel move towards greater interoperability between applications) will also mean major investments in new hardware and software, plus the costs of associated consultancy and training as firms re-engineer their processes for BIM, and it is at times like this, I suspect, that hard-pressed finance directors and IT directors may begin to think about alternative approaches.

For example, I have seen estimates (from Alibre, for example) about the total cost of ownership of owning CAD software that suggest, depending upon the product, the TCO over three years for just one user can range from $2,175 (Alibre, naturally), to $6,145 (AutoCAD), to nearly $10,000/seat (for Solidworks and Autodesk Inventor) and beyond. I suspect the figures for BIM applications are also at the high end. Such figures also ignore the associated hardware and other infrastructure and support costs – “the annual cost to own and manage software applications can be up to four times the cost of the initial purchase,” particularly if you factor in the people resources (see SaaS: the business solution).

CADaaS benefits

CADaaS solutions will be available on a subscription model that significantly undercuts the costs of internally hosted and managed CAD software (reflecting the lower costs of developing, testing, deploying, upgrading and supporting SaaS solutions). But cost isn’t everything; vendors will – as Rami says – also need to demonstrate the advantages and benefits of the SaaS approach.  While some will be financially related, other benefits are more wide-ranging….

• No up-front capital expenditure – CADaaS requires no major investment in new internally-managed hardware or software.
• More predictable expenditure – conventional software tends to be purchased on an up-front ‘pay and pray’ basis, whereas hosted CADaaS solutions would be delivered for an agreed fee for the duration of the contract.
• No depreciation
• No long-term commitment – CADaaS software subscriptions will be negotiable by the month, quarter, year, etc, and – with continued customer loyalty dependent upon quality of service – vendors have a vested interest in maintaining high levels of functionality, availability, security, etc for their customers. This contrasts with the ‘drive-by sales’ approach of traditional software vendors.
• Faster implementation – Hosted CADaaS solutions will involve no installation, and – if we follow the precedent of construction collaboration applications – will be standard but highly configurable applications that require no customisation.
• More uptime and reliability – The CADaaS provider remotely manages and operates its technology, offering its customer measurable availability, reliability and performance based on service level agreements. Customers benefit not only from the high-availability infrastructure, but also from lower IT-related infrastructure, labour and training costs.
• Lower risk – Following on from the last point, with CADaaS, individual design firms free themselves of the risk that they might be liable in the event that their IT infrastructure suffers some kind of interruption or catastrophe, or that they might be blocked from accessing or retrieving information in the event of a dispute with another team member.
• Outside-the-firewall collaborative capacity – Also drawing on the lessons learned from AEC collaboration software, it will be easier to collaborate with partners if information is not held in discrete ‘islands’ spread across different companies, but is centrally, securely shared and constantly available in real time without the need to negotiate company firewalls.
• Flexibility – Like other utilities, CADaaS vendors can deliver as much, or as little, software power as the design companies’ workload requires. The SaaS model allows customers to pay only for the software they actually use, rather than force the customer to anticipate peaks and troughs and budget just for the peaks, leaving unused licenses on the shelf for most of the software’s lifetime.
• Less ‘feature bloat’ –  Too many conventional software vendors promote their solutions by upselling features that are, as yet, unneeded. Indeed, such approaches mean that many such applications turn the Pareto principle on its head, with customers using only about 20% of the software’s capabilities, while continuing to pay implementation, maintenance, upgrade and support costs for the other, unused 80%. SaaS software, by contrast, is designed from the outset to deliver what the user requires (and SaaS providers are almost uniquely placed to constantly monitor which bits of their applications are widely used and which are effectively redundant). Moreover, most SaaS vendors deliver their applications using a modular structure which allows users to add some capabilities as and when they need them (and to remove them once they are no longer required). As some advanced CAD functions may only be needed occasionally, a pay-as-you-go model may well appeal to some firms – no need to buy expensive shelfware that only gets used once in five years (if at all)!
• More customer-focussed – CADaaS will change the support model associated with conventional CAD from a reactive one to a more proactive, service-oriented approach. For a start, customers will expect CADaaS solutions to be easy to deploy and administer; as mentioned, they will expect high application availability and performance; and they will look to their vendors to be proactive in helping them optimise their use of CADaaS and to listen to user feedback and continuously enhance the solutions to make them more useful and easy to use. The SaaS model also means that applications can be upgraded incrementally (consistent miniscule changes that add up over time instead of ‘big bang’ patches or upgrades) so that users always work with the latest version representing the best practice crystallised by the vendor across numerous customer engagements.
• Single version of the truth, blah, blah, etc … – Many of the benefits of CADaaS will reflect the benefits already delivered by construction collaboration providers: a single version of the truth, latest information constantly available 24/7, easier searching for information, fewer interoperability issues (hopefully none!) – and therefore no data translation, reformatting or rekeying, greater transparency, full audit trail showing who did what and when, work anywhere, anytime on any device, etc, etc.

CADaaS could become a viable alternative to conventional, hosted design software – particularly in the AEC sector, renowned for its fragmented and temporary supply chains, wide geographically dispersion and low margins (but there will always be enterprises that prefer to keep things in-house and use internally-hosted applications).

It could also prompt a radical shake-up in the design software market. What we currently understand as design software will come under pressure to prove its value for money. Do we, for example, need large multi-function applications that do everything? Perhaps designers will use a range of CADaaS solutions depending upon their design needs, selecting from one or more vendors depending on the suitability of their applications. Some SaaS businesses might offer high volume services that deliver core CAD functions, leaving advanced functionalities to other specialist SaaS providers from whom they can be bought on a pay-as-you-go basis when needed. As Sinclair Schuller put it in SaaS Blogs last week:

“… can every architecture and design firm afford servers that can perform photorealistic rendering? Probably not, but you can bet that a SaaS provider along with a massive render farm can give that sort of value to anyone on earth.”