SaaS: Business Myth or Reality

Alvin Lim

Director, Hosting & Software Services

Microsoft Asia

What is Software as a Service?

S o f t w a r e D e l i v e r y M o d e l s

Traditional Software Software as a Service

On Premise In the Cloud

Centralized Decentralized

Large Upfront Cost Pay As You Go

S o f t w a r e - a s - a - S e r v i c e B u s i n e s s M o d e l

Application Hosting Net-Native Software-as-Services

Perpetual License Subscription

One-to-Few One-to-Many

Private Infrastructure

Public Infrastructure

Source: Software On Demand’s Impact on the Software Industry: Transformation, Extinction or Rebirth?; July 2005

Source: U.S. Software On-Demand Delivery Model 2005–2009 Forecast; IDC #33493 June 2005

Worldwide Trends – Rapid Growth Continues

• The players has a new face

• Platform Gorillas (Amazooglesoft)

• Ad-funded Web 2.0 hosters (Google Sites, Facebook,

Windows Live etc.)

• Bundled “SaaS + Hosting” solution providers (Office Live

Small Business, Yahoo Small Business, etc.)

• Utility cloud computing enters the Hype phase

• Amazon Web Services: 330,000 registered developers

• Announced recently: Wells Fargo vSafe

• New tools and markets – CohesiveFT, DigitalRibbon,

Network.com (SUN)

ISVs

Technology & connectivity

makes it possible

Recurring revenue stream

Single version for all

customers

Strong customer feedback

loop

Easier to trial

Reach broader target market

End Users

Pricing matches economic

benefits

Reduced initial outlay;

complexity and risk

Reducing IT Operations cost

Shift Capex to Opex

Easier to trial

Focus on core business

Drivers for SaaS Adoption

Business Myth or Reality?

The SaaS market opportunity

IDC’s Updated Position

0

2

4

6

8

10

12

14

16

2005 2006 2007 2008 2009 2010 2011

Mar-06 Forecast

May-07 Forecast

0123456789

1011121314

2006 2011

Key Takeaways:• Rapid growth!

• Total WW revenue

CAGR of 30%

over 5 Years

Source: IDC Worldwide Software on Demand 2007-2011 Forecast Update and 2006 Vendor Shares: Sky's the Limit for On-

Demand Providers," Doc # 207491, July 2007

($B

)

($B

)

Worldwide Software On Demand

Revenue, 2006 and 2011

WW Software On Demand Revenue 2005-2011:

Comparison Of May 2006 And March 2007 Forecasts

Gartner: SaaS Growth by Sector ($M)

Source: Gartner August 2007 Dataquest Insight: SaaS Demand Set to Outpace Enterprise Application Software Market Growth

Total Software Revenue Forecast for SaaS Delivery within the Enterprise Software Markets, 2005-2011

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2005 2006 2007 2008 2009 2010 2011

Content, Communications and Collaboration

CRM

ERP

Office Suites and DCC

SCM

Others

DCC: Digital Content Creation

SaaS Market and Growth – APAC, 2007 –

2011

Companies (incl. SMB’s) using or piloting SaaS software applications

Last year, respondents were much more likely to adopt SaaS for ERP (31%) and CRM (27%): CRM has in fact grown by 11% while ERP remained static.

SaaS Uptake on Key Business Applications

Note*: Sample size: 42, Respondents’ profile: Software decision makers at companies of all sizes that are currently piloting or using SaaS, Geography: Europe

Source 1: Forrester The State Of Enterprise Software Adoption In Europe Jan 2006

0% 10% 20% 30% 40% 50% 60%

Other

Enterprise resource planning (ERP)

Customer relationship management …

Supply Chain Management

Security

Messaging (incl. email, calendar, …

Human Resources (HR)

Small Business Needs - Email

*Source: SMB Messaging Survey, 2005-2009, The Radicati Group

SMB Survey respondents indication of Email Features

0 50 100 150 200 250

SPAM

Spyware

Viruses

Email Archiving

Wireless Email Access

Upgrade Messaging Software

Regulatory Compliance

Reducing Downtime

Calendaring

Simplify Administration

ITS A LOT OF HARD WORK TO DO THIS IN-HOUSE !!!

11

Email & Messaging

Productivity

Line of Business (LOB)

Applications

Unified Communications

(UC)

Enterprise

Portal

Web

Presence

Full client- Majority

Web mail with tasks

management - Minority

Enterprise IM & VOIP

with multi-party audio /

video conference

Ranked

Popularity

1

2

2

3Doc repository - file

share & version control.

Anywhere access

Basic Hosting

1

2

3

1

3

31

Ranked choices

25-1005-245-100

(low end)101-250

Gp 1 Gp 2 Gp 3 Gp 4

Choice of Subscription

1

2

3 Full Enterprise CRM

features

Top ranked components are

1. Email & Messaging Productivity

2. LOB applications

3. Enterprise Portals and UC

What is important to a SMB in Singapore?

Anti-SPAM,

Anti-Virus

Archival, Backup

& recovery

Anti-SPAM,

Anti- Virus

Security and Archival/

recovery services are

perceived to be critical for

most needs.

Anti- Virus

Archival, Backup

& recovery

Anti- Virus

Archival, Backup

& recovery

Preferred suppliers

Software on Demand (Worldwide)

Buying SaaS Solutions

ISVs are the preferred suppliers

38%

19%

8%

0%

10%

20%

30%

40%

50%

ISV providing

software on

demand

System Integrator Business process

outsourcer

• According to a survey1 conducted by IDC in 2006, ISVs are the preferred suppliers for on demand software solutions with nearly 40% of organizations preferring them

• System integrators are the second most preferred suppliers with 19% of organizations approaching them for SaaS solutions

• Lack of formalized channels in the broad software on demand landscape is a major reason for ISV popularity

The WW Impact Of Windows

1.1 Billion

End Users

Worldwide

8.6 Million

Professional

Developers

$506 Billion

In Ecosystem

Revenue

Revenue and

Profit Generator

CUSTOMERS DEVELOPERS MICROSOFTPARTNERS

“Cloud computing apps are for suckers. If there

is an alternative that runs locally on your own

machine, it will always be better”

John C. Dvorak of PCMag

Deployment: The Power of ChoiceOn Premise and Hosted

• Infrastructure TCO

• External dependencies

• Time to market

• Control & ownership

• Strategic capabilities

• Customization, compliance

“Traditional IT” “Pure-Play SaaS”“Hybrid Model”

The Power of Choice

Winning Software + Services with Microsoft

Software +

Services

Licensing

User Experience Guidance

Support and Community

Platform and Tools

Connecting the

ecosystems

Connecting a SaaS Ecosystem

Telco 2.0 Application Distribution

S+S ISV

Telco 2.0 / SOA

S+S Incubation Center

Self

Hosted

ISV

NTT

Europe

Online

7global

Telco

Telco

AXSaaS

Siennax

Telco

SMB Customer

SMB Customer

Telco’s are becoming a platform for distribution of SaaS applications

Microsoft Hosting partners are expert on building and operating the right infrastructure for scale against best TCO

Microsoft Partner Program ISVs benefit from overall ecosystem, getting access to previously unavailable distribution channels

SaaS App