thinkstrategies software business 2008 presentation

THINKstrategies Strategic Consulting Services

Overcoming the Organizational Barriers to Transforming Your

Software Business into an On-Demand Company

Presented by,Jeff Kaplan

Managing DirectorTHINKstrategies

jkaplan@thinkstrategies.com781-431-2690

Agenda

State of SaaS• Key Market Drivers/Trends• Market Opportunities/Challenges

Migrating to SaaS• Key Operational Challenges• Industry Best Practices

Primary Drivers of SaaS

Changing competitive forces

Changing workplace requirements

Changing economic & ecological conditions

Changing technologies

Changing priorities & sourcing policies

An Equation for Greater Market Opportunities

Economy Uncertainty

TighterBudgets

Greater SaaS Opportunities+ =

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

SaaS Expands from Front- to Back- to Inter-Office Apps

BUSINESS APPLICATIONS

CRMSFA…

CollaborationSCM

ERPFinance

Front Office Inter OfficeBack Office

SaaS Market ‘Gold Rush’

Top Ten Showplace Application Categories

Customer Relationship Management 103

Collaboration 80

Accounting/Financial 78

Document Management 67

Project Management 62

Enterprise Resource Planning (ERP) 55

Marketing 49

Human Resource Management (HRM) 47

eCommerce 46

Messaging 44

Source:SaaS

Showplace

Top Ten Showplace Industry Categories

SMBs 110

Banking/Financial Services 102

Manufacturing 91

Technology 80

Healthcare 72

Retail 69

Government 63

Professional Services 55

Telecommunications/xSPs 43

Software 42

Source:SaaS

Showplace

SaaS Expands from Business Apps to IT Management

BUSINESS APPLICATIONS

CRMSFA…

CollaborationSCM

ERPFinance

Front Office Inter OfficeBack Office

SecuritySystems Mgmt

Network MgmtRemote Access

Data ProtectionStorage

…IT Management

Changing Competitive Landscape

& AimNetSolutions

everdream

Cloud Computing:Today’s New Enablers

New Challenge:Cloud Computing Outages

“Amazon S3 Outage Rains On

Cloud-computing Parade”

“Outages Force Cloud Computing Users To Rethink

Tactics”

Open Source: The Good, Bad and Ugly

The Good• Proliferation of tools/solutions

• Accelerated Development

• Concepts of Community

The Bad and Ugly• Lower barriers to entry

• Escalating price competition

Ad-Supported SaaS

“iTunes of IT” 250K users 50,000 new users in

last 2 months Advertisers has grown

from 4 to 40 Market Opportunity,

• SMB IT pro = $125,000 annual budget.

• 250k users = $32B in annual spend

• Growing at more >$3B per month!

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

Key Customer Concerns & SaaS Industry Responses

Concerns, Reliability Security Customization Compliance Integration Customer Support

Responses, SLAs Certifications User Configurations DR/BC Connectors Online/Pro Services

Enterprise Expectations & Challenges for SaaS

Can you provide a better user experience?

Can you create a different type of community?

Can you support hybrid environments?

Can you permit rapid on-boarding?

Can you track service usage levels?

Can you measure performance levels?

Can you identify & resolve service issues?

Can you verify SLA compliance?

On-Demand Services &The IT Industry Inversion

Services Technologies

Future

TheIT IndustryInversion

Key Challenges Facing Established ISVs

Re-architecting applications

Re-structuring revenue models

Repositioning marketing

Re-orienting sales/support staff

Reducing operating costs

SaaS Lifecycle Requirements

User Centricity

Agile Development

Transaction Mgmt System

SecurityCertifications

Service Orientation

Professional Services

Online Procurement

Try & Buy Trials

Tele-Sales

Web/Search Marketing

Service Delivery Infrastructure

Ecosystem of Partners

Web Support

SaaS vs. Legacy SW Economics

1925 25

All Traditional Softwarecompanies

Traditional Software companieswith <$1.2bn revenue

Software as a Servicecompanies with <$1.2bn

revenue.

Cost of GoodsSold (COGS)

EBITDA

Source: McKinsey, May 2007

No One Likesto Sell Services

Raises concerns about the product.

Complicates the sale/extends sales cycle.

Seldom properly incented.

Weak value proposition.

Poor track record.

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.

Hybrid Model Pitfalls

Balancing,

Multiple Offerings

Multiple Codes/Versions

Differing Buyers

Multiple Sales Channels/ Compensation Plans

Differing Revenue Recognition

Channel/Supply Chain Opportunities

Legacy ISVs

New SaaSProviders

EnablingTechnologyVendors

• Offshore SW Developers• 3rd party SW platforms• 3rd party HW systems

• Hosting companies• Carriers

Channel Partners

• Distributors• VARs/Integrators• eCommerce Sites

Corporate Customers

Consumers

SaaS Ecosystems – The New Channel

Jamcracker

New Channelsto Market?

Insurance Companies

Retailers

Web companies

PS Firms

Corporate Positioning Roadmap

Technical Features/Technical Features/Solution DifferentiatorsSolution Differentiators

Strategic Vision/Strategic Vision/Business BenefitsBusiness Benefits

CompetitiveCompetitiveAdvantagesAdvantages

Success Factors:• Compelling Value Proposition

• Effective Mktg. Messages

• Defined Market Focus

• Unique Technical Competencies

• Strong Products/Solutions

• Solid Customer References

• Articulate Spokespeople

• Targeted Press/Analysts

• Consistent Internal/External Communications

• Continuous/Aggressive Effort

THINKstrategies’SaaS Balanced Scorecard

• Target Market Segmentation

• Competitive Landscape

• Corporate Management

• Functional Capabilities & Features

• Solution Packaging

• Pricing & Revenue Realization

• Service Delivery Platform & Architecture

• Security and Availability Assurance

• Service Provisioning, Billing and Metering

• Contracting, SLAs and Reporting

• Sales Strategies and Skills

• Strategic Partnering/ Ecosystem Strategies

• Marketing and Positioning

• Customer Support Capabilities

• Financing and Capital Structure

Key Characteristics of a Winning SaaS Team

CEO – Visionary, but disciplined

CFO – Disciplined, and flexible

CMO – Thought-leader, but focused

CTO – Knowledgeable, yet practical

VP, Sales – Persistent, and creative

Product Development – Agile, and service-oriented

Sales – Service-oriented, not product-centric

Support – Business-oriented, not technical

Can You Take Your Team Into The Future?

Software Services

Business Services

Information Services

Market Evolution

For More Information…

www.SaaS-Showplace.comwww.thinkstrategies.com

jkaplan@thinkstrategies.com

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