thinkstrategies software business 2008 presentation
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©2008, THINKstrategies [www.thinkstrategies.com]Slide 1
THINKstrategies Strategic Consulting Services
Overcoming the Organizational Barriers to Transforming Your
Software Business into an On-Demand Company
Presented by,Jeff Kaplan
Managing DirectorTHINKstrategies
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 2
Agenda
State of SaaS• Key Market Drivers/Trends• Market Opportunities/Challenges
Migrating to SaaS• Key Operational Challenges• Industry Best Practices
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 3
Primary Drivers of SaaS
Changing competitive forces
Changing workplace requirements
Changing economic & ecological conditions
Changing technologies
Changing priorities & sourcing policies
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 4
An Equation for Greater Market Opportunities
Economy Uncertainty
TighterBudgets
Greater SaaS Opportunities+ =
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 5
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
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 6
Shifting Adoption Patterns
Unilateral End-User, SBU Adoption of SaaS Solutions
Enterprise-Wide Acceptance and
Adoption of SaaS
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 7
SaaS Expands from Front- to Back- to Inter-Office Apps
BUSINESS APPLICATIONS
CRMSFA…
CollaborationSCM
…
ERPFinance
…
Front Office Inter OfficeBack Office
SaaS Market ‘Gold Rush’
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 8
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
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 9
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
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 10
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
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 11
Changing Competitive Landscape
&
&
& AimNetSolutions
everdream
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 12
Cloud Computing:Today’s New Enablers
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 13
New Challenge:Cloud Computing Outages
“Amazon S3 Outage Rains On
Cloud-computing Parade”
“Outages Force Cloud Computing Users To Rethink
Tactics”
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 14
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
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 15
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!
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 16
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
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 17
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
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 18
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?
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 19
On-Demand Services &The IT Industry Inversion
Services Technologies
Past
Future
TheIT IndustryInversion
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 20
Key Challenges Facing Established ISVs
Re-architecting applications
Re-structuring revenue models
Repositioning marketing
Re-orienting sales/support staff
Reducing operating costs
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 21
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
SLAs
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 22
SaaS vs. Legacy SW Economics
1925 25
15
15 13
35
46 49
31
14 13
All Traditional Softwarecompanies
Traditional Software companieswith <$1.2bn revenue
Software as a Servicecompanies with <$1.2bn
revenue.
Cost of GoodsSold (COGS)
R&D
SG&A
EBITDA
Source: McKinsey, May 2007
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 23
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.
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 24
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.
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 25
Hybrid Model Pitfalls
Balancing,
Multiple Offerings
Multiple Codes/Versions
Differing Buyers
Multiple Sales Channels/ Compensation Plans
Differing Revenue Recognition
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 26
Channel/Supply Chain Opportunities
Legacy ISVs
New SaaSProviders
EnablingTechnologyVendors
• Offshore SW Developers• 3rd party SW platforms• 3rd party HW systems
xSPs
• Hosting companies• Carriers
Channel Partners
• Distributors• VARs/Integrators• eCommerce Sites
Corporate Customers
Consumers
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 27
SaaS Ecosystems – The New Channel
Jamcracker
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 28
New Channelsto Market?
Banks
Insurance Companies
Retailers
Web companies
PS Firms
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 29
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
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 30
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
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 31
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
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 32
Can You Take Your Team Into The Future?
Software Services
Business Services
Information Services
Market Evolution
©2008, THINKstrategies, Inc. www.thinkstrategies.comSlide 33
For More Information…
www.SaaS-Showplace.comwww.thinkstrategies.com