Software-as-a-Service and Its Impact on Industrial Software

Learn more about Aveva's plans for its software portfolio.

What stays, what goes

An important thing to note about SaaS, as it applies to automation software at least, is that it is not an either/or situation. As with the determination around use of edge devices or cloud storage for asset and operations data analysis, SaaS can be implemented in a hybrid mode—meaning that some aspects remain on-premises while others are reside in the cloud.

Warren said this is the area in which Aveva is focusing on most. He called this “hybrid SaaS,” where control applications that need a high degree of determinism remain on premises and less time-sensitive applications are handled in the cloud.

“We'll make sure that what's on-prem is connected to what's in the cloud bi-directionally—if the customer’s network philosophy allows it—to take advantage of both environments. So, it's not that we're pushing everything to the cloud; we're doing that where it makes sense. There are a lot of applications that are on-prem today and we will leave them on-prem. But that's not to say the data coming out of those systems can remain in a little silo that nobody else can access. That information is highly valuable, and it needs to be shared throughout the enterprise.”

Subscription model

Aveva Flex is the subscription program used by Aveva to deliver its SaaS applications. Warren pointed out that, when it comes to SaaS models, it’s important not to confuse the commercial model with the deployment model.

“Flex is a commercial model that allows users to purchase credits and move them around” as needed for pure cloud, on-prem, and hybrid use. The deployment model refers to how the software is installed, i.e., on-prem, cloud or hybrid.

“The connection point [between the commercial and deployment model] is how we do the licensing, where the licensing resides, and how we monitor usage through that licensing model,” said Warren.

For example, if you use Aveva’s InTouch HMI (human-machine interface) software to manage several production lines and visualize data from those lines, the license agreement for InTouch is part of Aveva Connect, which is cloud-based. Though the HMI software is installed on-premises, Aveva Connect monitors the number of users accessing the system to determine your costs.

“So, even though the InTouch application is running on-prem, it's still leveraging a cloud component in its licensing mechanism to track usage,” said Warren. He added that not all Aveva software does this yet, but “they all will use this the same common approach” soon.

In a company presentation, Aveva indicated that its Operations Control, System Platform, and Historian would be available only via Aveva Flex as of April 1, 2023. However, Aveva Plant SCADA, InTouch HMI and Edge will be available via Aveva Flex or the company’s existing “perpetual” commercial model (i.e., on-premises).

From tags to users

While all this may not sound like much of a change, it represents a dramatic shift from the automation industry licensing format used for decades, wherein the license was largely structured on implementation instances or tags, i.e., how many machines/workstations/devices it was installed on or connected to. In SCADA systems, tags can also refer to the different data types transferred among devices, such as motor or tank temperatures.

The costs of traditional SCADA systems and historian products we're generally sized using tags, said Warren. “The number of tags you want to have would determine the size of the license.”

This highlights a key cost differentiator between SaaS and on-premises software deployment. “Aveva’s Flex model goes to a completely different monetization model, where it's not based on tags at all,” explained Warren. “So, if you’re an energy supplier with a solar farm that starts with 1,000 tags and your deployment plan is to add another 1,000 tags every month for the next 12 months, in a tag-based model you're always having to pay for that license in advance—even if you don't know for certain how big the operation’s going to get based on demand or other factors. By moving to a user-based model, Flex doesn't care about how many tags you need; it’s basically an unlimited amount of software on which we monitor the number of users for pricing. This allows new users to install the software and never have to worry about installing more functionality when they need it because it's all there at the start. This allows users to have a much greater level of agility with their business.”

In this new model, the number of users determines your ongoing costs rather than the number of machines/workstations on which it is deployed. This is reflected in significantly lower upfront costs, which helps lower the barrier of entry and enable smaller companies to access the software.

See how the move from on-premises to the cloud is affecting MES software.

Cost effects

One of the most widely promoted benefits of SaaS, regardless of the supplier, is the lower upfront cost. For example, Aveva promotes a 65% lower upfront cost in the first year of use for its Flex program software.

Warren explained, “If a customer of ours was used to buying a perpetual license of a particular type of software, they would buy that license for, let's say, $100,000. And then they would pay a support fee every year. Let's say the support fee is $20,000. After five years, with the perpetual license paid, another $100,000 would have been spent on support, bringing the total costs to $200,000 after five years. Moving to a subscription-based model, in the first year, the license price might be something like $35,000—not the $100,000 spent the first year on the perpetual license. That's where the 65% reduction in cost comes from.”

Of course, there will still be ongoing support costs to pay, which—over a five-year period—will likely result in similar total costs compared to the perpetual model license. Though the longer-term costs may not differ much, the difference in approach can be evidenced in three areas:

• Lower upfront costs. Aveva claims this enables a return on investment within six months, thereby significantly lowering barriers to approval and use of such software.
• Updates. A major benefit of SaaS is access to the latest version of the software without having to negotiate new costs associated with that upgrade. Yes, the costs of those upgrades are built-in to your annual support costs, but it does not require additional capital outlays to ensure your software is up to date.
• Capex to opex. Warren points out that subscription licenses for operating software are typically paid out of operating expenditure (opex) budgets rather than capital expenditure (capex) budgets, helping to avoid some common corporate financial budget negotiations and creating a more stable model of expenses for your plant’s software.

“Having all that capital paid upfront in a perpetual model may not be as desirable these days, especially as more technologies move to the cloud and especially as we move to more rapid software upgrade cycles,” said Warren. “Some could argue that, over time, the subscription model ends up being more expensive, but look at how much things have changed over the last five years. What's going to change in the next five years? Are you going to be doing everything five years from now the way you do today?”

The answer to that last question is “probably not.”  That’s why the credit system in Flex and other SaaS models give users the added benefit of being able to move credits around to other parts of the supplier’s software portfolio. This means that, if your business changes and you want to test out use of new artificial intelligence tools, you can do so without necessarily adding costs.

Upgrades

One of the primary benefits of SaaS is the ability to continuously upgrade to the latest software version via pushed updates from the software provider. But it’s important to realize that such upgrades for industrial software are more complex than the transparent app updates on your mobile device.

The upgrade process for industrial software depends on your operating environment and the system architecture you’ve deployed.

“If it's a single system, and there's no redundancy involved, then the Flex upgrade would have to occur during a scheduled downtime, just as it’s done today [for on-premises systems],” said Warren. “More critical systems that have some form of redundancy allow for switching to a backup system. In this instance, you'll continue to run your operation on the backup system, while the update and subsequent testing is performed on the primary system. When testing is complete and everything is confirmed to be good to go, you can switch back to the primary system and run your plant with the updated system. Then you can upgrade the backup.”