Platform-as-a-Service Business Model
Platform-as-a-service providers (PaaS) give application developers services to accelerate the deployment of software applications with reduced cost and complexity.
What Platform-as-a-Service is NOT
The PaaS model is a technology concept and does not refer to “platform businesses” – a loosely defined term that can mean complex business ecosystems that generate value for multiple stakeholders and can be observed in Facebook, Uber, Airbnb, Apple’s App Store, and Nintendo, each of which uses different revenue models and value chains. As business modelers, we find the concept of “platform business model” too vague – try to figure out the pricing and value chain driving the business or concept you are describing first.
PaaS also differs from the Platform Cooperative movement which refers to cooperatively owned, democratically governed business that establishes a computing platform or a protocol to facilitate the sale of goods and services. Platform Coops are based on cooperative ownership which can be shared with workers, users, or community members.
PAAS is an Easter Egg coloring company founded in 1880. We’re not referring to that product in this post but they may have more longevity than the PaaS business model.
PaaS vs. IaaS vs. SaaS
PaaS was first spotted in 2006 by Fotango, a London-based company owned by Canon Europe and was known as Zimki and described as a framework-as-a-service, a pay-as-you-go solution designed to reduce time spent on low-level developer tasks.
Later pioneered by Amazon Web Services, PaaS is best understood in the evolution from providing underlying cloud infrastructure (IaaS or Infrastructure-as-a-Service) and also in the context of Saas (Software-as-a-Service) and internally managed and deployed by IT.
The following chart describes the difference – please see IaaS and SaaS models for comparison.
Compared to SaaS, PaaS provides a platform for software creation but does not provide the software, which is SaaS.
Compared to IaaS, PaaS helps you cost optimize development models with best-serviced solutions, whereas IaaS offers complete control over all cloud services but relies on you to install, configure, secure, and maintain software on the cloud-based infrastructure yourself.
Business Models in Use
Apprenda | AWS Elastic Beanstalk | Azure | Cloud Bees | Cloud Foundry | Engine Yard | Google App Engine | Longjump | Microsoft Azure | Pivotal | Red Hat OpenShift | Salesforce Heroku | Siemens Mindsphere | VM-Ware
Platfom-as-a-Service Evaluator
Valuable to Customer
Benefits
- Lower cost and complexity of deploying applications
- Ability to test and deploy and scale applications quickly
- Saves time from repetitive coding tasks
- Significant reduction in the amount of coding needed
- Facilitates knowledge exchange between developers
Challenges
- Overcome benefits of ownership
- Ability to test and deploy and scale applications quickly
- Risk managing security in cloud-based data
- Integration across multiple SaaS and on-prem solutions
Key Performance Indicators
- The breadth of types of business services in use
- Cost of ownership and maintenance vs. usage - priced per # of CPUs and GBs of memory
- Uptime, run time
- Higher ROI as development costs are more aligned to revenue and profit outcomes
Valuable to Business Offering PaaS
Benefits
- Create a space for developers to interact with your core tech offering
- Accelerates customer migration to the cloud
- When combined with IaaS, strengthens its position as the provider of choice
Challenges
- Massive investment is required to stay ahead of development trends
- Challenging unit economics to offer pay-as-you-go pricing
- Competitive dynamics trend to market consolidation
Key Performance Indicators
- Service availability
- Response time
- Scalability - ability to handle volume and surge of users
- Release efficiency - Decrease in number of bugs created in QA or after release
- Reliability - percent decrease in mean time between failures (MTBF) and mean time to repair (MTTR)
When it Works Well
Accelerates Cloud Transition
The overall shift driving uptake for PaaS solutions is the shift from on-site software development with servers, physical storage space, infrastructure, and data center management to the cloud. The customer can rely on a PaaS provider for cloud-based provision which is managed remotely.
Facilitates Collaboration
PaaS provides a unified development platform that allows multiple users to easily collaborate on application projects. It is best for streamlining workflows when multiple developers are working on the same project, especially if you are working with other vendors on the same PaaS.
Speeds Time and Value to Innovation
By moving to a PaaS model, you can scale back investment in non-differentiating IT infrastructure and instead focus on exploring new ideas that lead to better products, services, and business results. PaaS should create conditions for developers and innovators to accelerate the creation of new products and services for customers, employees, and partners.
Yak Shaving Time Reduced
Yak shaving is a delightful term coined in the 90s by Carlin Vieri at MIT meaning all that stuff that you need to do to solve some problem, but not high-value stuff. It’s all of the fiddly little tasks that many developers would like to avoid like provisioning the servers, storage, and backup associated with developing and launching an app.
The PaaS model was designed to save Yak Shaving time and give developers time to develop apps, investing a priority in the development activities that differentiate from competitors. Developers can develop and test apps without having to worry about the underlying infrastructure. They want to write code, test the app, launch the app and be able to continually make changes to it to fix bugs. All the back-end stuff about setting up servers should be done automatically and transparently in the background, and that’s the promise of PaaS: drastically reduced yak shaving.
Challenges to the PaaS Model
Data Security
Data residing in third-party, vendor-controlled cloud servers poses security risks and concerns.
Legacy App Friction
When legacy apps within your organization from onsite data centers to off-premise cloud, there is always complexity is connecting the data. This is especially true for older legacy apps not built for the cloud. The plug-and-play promise of PaaS may be more difficult in these types of environments.
Vendor Lock-In
A choice is made early on whether your organization is an AWS house, Azure house, or Google Cloud house, and it’s a major shift to transition from one to the other. Business and technical requirements that drove adoption decisions for a specific PaaS vendor may not apply in the future, particularly as the market share for PaaS providers shifts and changes.
Key PaaS Mechanisms to Test
Warning. PaaS is now a developed later stage technology funded by three of the most valuable companies of all time. Pricing is in a race to the bottom. If you believe you serve a niche untouched by Amazon AWS, Microsoft Azure, and Google Cloud, then make sure you future-test your assumptions with your customers. Customers need speed, but they also need reliability, typically measured in the percent decrease in mean time between failures (MTBF) and mean time to repair (MTTR)
Before You Consider PaaS
- What are your key time and resource bottlenecks for creating and developing applications?
- How do you currently handle the core infrastructure components of app development?
- What considerations drive the adoption of cloud-based hosting and deployment?
- What are the major barriers to cloud adoption?
Testing the Model
- Is the PaaS solution designed to be developed and managed by IT, or is there a requirement to design for business users with no or low code skills
- What are the primary use cases the company identifies, and how much improvement in time saved, time-to-provision, and cost savings are generated
- Determine the minimal offering that would be compelling enough to have the customer pay for the offering.
More on PaaS
PaaS on Angellist.
The Platform as a Service Business Model and the Race to ZERO, Chrisantos H, LinkedIn, 2019.
The Story Behind Software Delivery Management, Diana Hwang, CloudBees, 2019.
Success-Driving Business Model Characteristics of IaaS and PaaS Providers, Floerecke, Computer Networks and Communications, 2018.
Considering New PaaS Model for Appmod-Digital Transformation, Tom Nolle, Tech Target, 2017.
When to Shave Yaks or Avoid it Altogether, VM Ware Tanzu, 2015.
Cloud Computing – Business Models, Value Creation Dynamics, and Advantages for Customers, Siemens.
PaaS Primer: What is platform as a service and why does it matter? Brandon Butler, Network World.
A Working Definition of Government as a Platform, Richard Pope, Medium 2019.
Business Models of Platform as a Service (PaaS) Providers: Current State and Future Directions, A. Geissmann, Journal of Information Technology Theory and Application, 2013.
Towards a Generic Value Network for Cloud Computing, Böhm et al, Conference: Economics of Grids, Clouds, Systems, and Services, 7th International Workshop, GECON 2010.
