introduction to saa s tech ba apr 2009
DESCRIPTION
Presentation to Mexican ISVs of Basics about SaaSTRANSCRIPT
What is Software as a Service?
Introduction, Trends and Perspectives in Software as a Service
April 2009
The Evolution of Man
What is SaaS?
SaaS = Software as a Service
It is a Deployment/Delivery model» Hosted and Managed by vendor» Delivered across the Internet
It is a Business Model: usage-based pricing (vs. perpetual license model of on-premise software). Examples:» Per user per month» Per transaction» Per GB of storage per month
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SaaS Examples
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Looking for a specific SaaS provider in your industry?http://www.saas-showplace.com/saasproviderdirectory.html
History
Born during dot-com era (late 90’s)» “ASP” (Application Service Provider)
• Apps hosted/managed by Vendor• Remote access through VPN• Almost died with dot-com burst
Early SaaS companies born in early 00’s
2003-2005 High-speed Internet growth = trigger for SaaS
Feb 2009 – Salesforce.com reported annual revenues of $1,000 Million USD
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SaaS Evolution
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What makes a product SaaS?
Network-based access to commercially available software
Multi-tenancy (one-to-many)
Payment Model
Central Application Management
» Software
» Infrastructure
Control of Upgrade Process
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Benefits of SaaS – For Clients
Lower entry point» No large up-front investment in
• Software licenses• IT infrastructure
Lower operating/maintenance costs» Fast, easy deployment (Web browser)» Vendor maintains/upgrades
application» No IT staff necessary to keep running
Consumption-based expenditure» Pay As You Go (OpEx vs CapEx)» Scale up/down as needed
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Benefits of SaaS – For End-Users Easy deployment/ramp up
» Typically based on Web browser access
» No additional hardware/software needed
Any time, Any where access» Outside the corporate firewall
Transparent updates
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Market Reach – Catch the Long Tail» Traditional Model
Benefits of SaaS – For Vendors
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Long Tail - continued
SaaS Model
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Benefits of SaaS – For Vendors Economies of Scale
» Derived from Multi-tenant architecture• Better resource utilization• Simplified maintenance
» For a well designed app, operating costs per customer drop as customer base grows
Better understanding of usage patterns» To drive innovation and enhancements
Faster release cycles to keep up with market and competition
De-facto access to Global market
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SaaS vs ASP
ASP: Application Service Provider» Single-tenant architecture (one
customer per instance)» Multiple instances running (as many
as there are clients), typically hosted by third parties
Disadvantages» Significant management overhead» Difficult maintenance» No economies of scale
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SaaS Model
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SaaS is different from on-premise software in more ways than one.
Business Functionality of SaaS Client/User Registration &
Management Provisioning Billing & Payment Processing Performance Monitoring Usage Metering & Tracking Reporting Customer Service & Self-Service
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SaaS Business Model Implications New sales & marketing approach
» Greater emphasis on web-centric cycle
New sales & marketing compensation
New release cycles and maintenance model
New deployment/delivery approach New/higher expectations on
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Top SaaS Considerations
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Typical SaaS Application Stack
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Building SaaS - Alternatives
From the Ground Up Through a PaaS (Platform as a Service)
Platform Examples:• LAMP• Win, IIS, ASP.NET, SQL Server• Ruby on Rails
PaaS Examples:• Force.com• Google App Engine• SaaSGrid, Coghead, Bungee Lab
Hosting Alternatives:• In-house• Co-location• Cloud Computing (EC2, GoGrid)
Hosting:• Included
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PaaS
SaaS Growth Forecast
According to Gartner:» 9 out of 10 companies plan to grow
their use of software-as-a-service in the next year (2009) and more than 30% plan to replace on-premises software with SaaS to drive down TCO (Gartner)
» 2008 market value: $6.3 Billion USD (6% of the 2008 software market)
» Growth to $19.6 Billion USD for 2011(25% of the total software market)
Investors, VC, M&A look for recurring revenue model
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Primary Drivers of SaaS
Changing competitive forces
Changing workplace requirements
Changing economic & ecological conditions
Changing technologies
Changing priorities & sourcing policies
The Shortcomings of Legacy, On-Premise Apps
Deployment Challenges
» 31.1% of SW projects cancelled before completed.
» 52.7% of projects cost nearly 190% of original estimates.
Operational Costs
» Maintenance & management costs >10x original license fee.
» Escalating hardware & staff support costs.
» Over provisioning and under-utilization of SW licenses
Economic/Budgetary Pressures
» Need to reduce IT costs and increase business benefits.
» Need to increase utilization to gain greater ROI.
Changing Customer Expectations
Old, Capital Investment Complexity,
Customization Reactive
Maintenance Response Time Customer Support Limited
Responsibility Outsourcing
Alternatives
New, Operating Expense Simplicity, Utilization
Proactive Management
Ongoing Monitoring Automated Delivery Higher Accountability Out-Tasking Options
Enterprises Seeking to Generate Greater ROI at Lower TCO.
An Equation for Greater Market Opportunities
Economy Uncertaint
y
TighterBudgets
Greater SaaS
Opportunities
+ =
Rewiring the World,From Edison to Google
“A hundred years ago, companies stopped generating
their own power with steam engines and dynamos and
plugged into the newly built electric grid…Today, a similar
revolution is under way.”
- Nicholas Carr
And Gartner Says…
“The outsourcing market has reached a tipping point with regard to utility delivery models, and that change and innovation will take hold and accelerate in this area through 2008 and beyond. [And] the trend toward software-as-a-service (SaaS) is gaining
the most traction…”1/9/08
SaaS Adoption Today
Source: THINKstrategies/Cutter Consortium © 2007
SaaS Deployment Plans
Source: THINKstrategies/Cutter Consortium © 2007
SaaS Across the Enterprise
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The Role of SaaS in SMBs and Enterprises
Small = Fill Unmet Needs
Mid-Size = Fill Unmet Needs/Replace
Enterprise = Augment/Extend Capabilities
Welcome to Gartner’s ‘Slope of Enlightenment’
Gartner’s Hype Cycle
You are here.
On-Demand Market Adoption Forecast
Mark
et
Pen
etr
ati
on
2010200820062004
Innovators
Early Adopters
Mainstream Buyers
Laggards
SaaS Evolution
SaaS 1.0 SaaS 2.0
• Standalone point apps
• Focus on ease of use/price
• One size fits all, minimal customization
• Horizontal applications
• Limited interoperability
• Emphasis on lower TCO
• Multidimensional platforms
• Focus on added functionality
• Multiple configurations, greater versatility
• Vertical/industry solutions
• Easier integration
• Emphasis on higher ROI
Shifting Adoption Patterns
Unilateral End-User, SBU Adoption of SaaS Solutions
Enterprise-Wide Acceptance and
Adoption of SaaS
Size of SaaS Deployments Growing
SaaS Vendor Customer # Users
Salesforce.com Misys 40,000
SuccessFactor Wachovia 85,000
Concur“A Financial
Services Company”
185,000
Workday Flextronics 200,000
Authoria“A Leading Food
Services Company”
340,000
The Meaning of Community in the SaaS Market
Real-time, aggregated data
Meaningful benchmark studies
Practical best practices forums
Continuous updates, new ideas
Dynamic toolkit clearinghouse
Living in a Hybrid World
Most enterprises will seek mix of on-premise & on-demand solutions.
Users prefer choice. Users seeking on-demand/on-premise
integration. ‘Applets’, Appliances, etc. will permit
off-line use and synchronization.
Opportunity in Mexico - Context Limited number of Mexican SW product
companies» Most of them focused their sales and
applications to the domestic market. • Financial, accounting and operation related
applications (ERPs)• Sold using the licensing model (initial fee for
each user)• Additional income for the producer is the
upgrade o support maintenance fee. • Small set in other areas: CRM, facility
planning, construction, point of sales, manufacturing, electronic commerce, and content management systems
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Opportunity in Mexico – cont’d.
Level of use of computer applications in México is very low (1)» Vicious circle: low demand yields low
Application development High cost of implementation (SW + HW
+ Operations + Support) reduces the number of companies that are implementing advanced systems within Mexican enterprises.» Immense barrier to entry » This can be mitigated by SaaS with its pay-
by-use model opens which opens new opportunities for software companies.
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Opportunity in Mexico – cont’d
With SaaS, Mexican SW providers can » Have customers in any place in the
world without an international sales force and installation crews.
» Go after a substantially larger market • The opportunity for growth is more
realistic ▪ The company becomes more
attractive to its investors and shareholders.
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Most Attractive Possibilities
Get into a niche market to provide a specific Line-of-Business solution
» Combine software applications and a set of services (based on best practices) that provide value added
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