The rapid evolution seen in the Platform as a Service (PaaS) marketplace means that enterprises today can build cloud-native applications in a more efficient and less complex way than ever before. This makes the PaaS model a practical option for organizations embarking on their journey to the cloud.

However, based on my client interactions, I can see that these organizations sometimes face a dilemma: do they adopt a Software-as-a-Service (SaaS) or a PaaS cloud model? My response to these clients is simple because this decision should be based on their business strategy. The decision they make will play to their future competitive differentiation.

We’re all aware of common competitive differentiators, such as the ability to offer a superior product, provide an excellent customer experience, or uphold the lowest cost production. In the digital world, however, the roadmap to achieving these factors is changing. For example, real-time sensing of social media activity and monitoring through a business operations center are among the many new ways that digital is modifying the customer experience.

There are some great examples of this digital evolution in both the public and private sectors. For example, one of America’s largest banks worked with Capgemini on a cloud-native project to build its Banking-as-a-Service digital initiative with application programming interfaces.

The project has introduced new ways for the bank to engage with early adopter customers, using automated provisioning, analytics, and early adopter feature requests. Elsewhere, digital manufacturers are using real-time data capture to transform supply chains, making them more adaptive and in tune with customer buying patterns.

Differentiating business services

How does this relate to whether your cloud platform is SaaS, where you’re buying into the service, or PaaS, where you’re building a service capability with cloud native apps? It all boils down to how much competitive differentiation is being delivered by the business service your application is enabling. For a non-differentiated and commoditized process, such as procurement or logistics, a SaaS model locking in these core parts of your business is a sensible choice. SaaS gives you agility, flexibility, and adaptability enabled by cloud, but in a highly cost-effective OPEX model.

However, a high degree of commoditization would not be right for the parts of your business that are critical to your competitive differentiation. That’s where the benefits of cloud-native applications become a compelling reason to adopt the PaaS model. One of these differentiators might be your product innovation platform. Or it could be a unique way in which you engage with your customers, perhaps with a mobile-first strategy that offers a direct interaction between the customer and the brand.

It is by being unique that businesses achieve a competitive advantage. This is not going to happen with a commoditized SaaS model. However, that doesn’t mean the choice is either SaaS or PaaS. There’s a strong business case for striking a balance between the two.

Selecting the right platform

The key is to understand which elements of your IT service are best suited to what platform. We’ve advised a European diversified technology company on such a strategy. The business migrated its standard SAP ERP, HR,, and procurement systems to the cloud with a SaaS model. It then opted to build cloud-native applications with a PaaS model for its product innovation and the intellectual property surrounding it. In other words, the parts of the business that would ensure future market differentiation.

These are the deciding questions for SaaS versus PaaS: what does the business need to compete in our increasingly digital world? What are the key business technology innovations that will enable the company to fulfill its strategic ambition? I urge my clients to think again and again about the way in which IT decisions are made today to ensure business success tomorrow.

It should not be a case of IT interpreting what can and can’t be done in the cloud, but rather about the business saying what it needs for competitive differentiation. IT then has the task of building out from that point with either cloud-native apps in a PaaS model, or a more commoditized SaaS model for core business processes. Or maybe through a combination of both.

(About the author: Richard Bowler is vice president of the Business & Technology Innovation Practice at Capgemini. This post originally appeared on his Capgemini blog, which can be viewed here)

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