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© 2010 Forrester Research, Inc. Reproduction Prohibited1

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To SaaS or Not?What Is The Right IT Service Management Model For Your Organization?

Evelyn Oehrlich Senior AnalystForrester Research

October 19, 2010


Weigh your options to support service

management preparations for the

upturn.


Agenda

� IT budget outlook

� IT operations challenges

� IT fears

� IT goals and initiatives

� Alternative business models for IT

– SaaS maturity model

– Differences

– Decision model

� Summary/conclusion


A year ago, things began to look uniquely black


Business leaders put emphasis again on growth while CIOs still focus on efficiencies and cost

Base: 2,803 IT budget decision-makers

Source: Global IT Budgets, Priorities, And Emerging Technology Tracking Survey, Q2 2010

* 5 on a scale of 1 (not on our agenda) to 5 (critical priority)

“What are your firm's three most important corporate business priorities over the next

12 months?”

“Which of the following initiatives are your IT organization's top IT management priorities over the next 12 months?”*


Adoption

Justifications

Customer satisfaction

Service delivery

Service consumption

New technologies

Business demands

IT Operation groups face challenges


Normal IT tradeoffs have been skewed to short term priorities

Short Term Long Term

Most savings today Overall total value

Take-orders vendor Value-added supplier

Run what exists today Build for the future

Cost-plus transparency Outcome-based visibility

Financial

Relational

Architectural

Contractual

Recession has pushed many firms’emphasis way over to the short term

agenda


IT fears


The economic tide is hesitantly turning


Goals and initiatives

Source: February 12, 2010, “The State Of Enterprise Software And Emerging Trends: 2010” Forrester report


MOOSE and IT spending by verticals

Source: Enterprise And SMB Software Survey, North America And Europe, Q4 2008

Maintain and operate the IT organization, systems, and equipment

© 2010 Forrester Research, Inc. Reproduction Prohibited13Source: Enterprise IT Services Survey, North America And Europe, Q2 2009

IT’s recession responses shift in 2009 — NA

© 2010 Forrester Research, Inc. Reproduction Prohibited14Source: Enterprise IT Services Survey, North America And Europe, Q2 2009

IT’s recession responses shift in 2009 — EMEA


IT should consider alternative business models

to reduce the MOOSE.


Cloud computing

Source: February 12, 2010, “The State Of Enterprise Software And Emerging Trends: 2010” Forrester report


SaaS adoption by applications

Source: May 19, 2010, “SaaS Adoption 2010: Buyers See More Options But Must Balance TCO, Security,

And Integration” Forrester report


The leading benefits of SaaS are lower costs, faster deployment, and less IT staff

Source: May 19, 2010, “SaaS Adoption 2010: Buyers See More Options But Must Balance TCO, Security,

And Integration” Forrester report


SaaS markets

Self Hosted

BusinessApplication

ITMS

Outsourcing

LegacyApplication

ITMS

ASP

PackagedApplication

ITMS

SaaSApplications

SaaS Applications(CRM, HR, ERP)

ITMS as a Service

% moves to SaaS

% moves to SaaS

% moves to SaaS

PaaSPlatforms

Enterprise Mash up

of Legacy/Packaged/SaaS

Apps with business logic by

ISVs attracted via install base

ITMS

Enterprise Mash Up

Disruptive Replacement

outsourced

replaced

% moves to SaaS

Ven

do

r E

vo

luti

on

Vendor Evolution

PaaSInfrastructure

PaaS Infrastructure

Technology Stack

License

ProvidePlatform

Technology


Forrester’s SaaS Maturity Model

Source: August 14, 2008 “Forrester’s SaaS Maturity Model” Forrester report

SaaS

maturity level


SaaS versus Application Service Provisioning versusApplication Outsourcing


SaaS versus ASP versus AO

Architecture SaaS ASP AO

Originally designed to be

SaaS

Yes No –

client/server

architecture with added

web GUI

No –

client/server

architecture with added

web GUI

End-to-end responsibility

(hw, sw, security, dr …)

Yes Yes Yes

Deployment

Demo Immediate

demo available

Sometimes

needs to be set up

Sometimes

needs to be set-up

Production Immediate

production instance

Needs to be

set-up

Needs to be

set-up


SaaS versus ASP versus AO (cont.)

Upgrade SaaS ASP AO

Who controls timing? Provider/Customer

Customer Customer

Payment model Subscription Subscription Upfront

license &

maintenance

fee

Customer owns license No No Yes


SaaS versus ASP versus AO (cont.)

Application

management?

SaaS ASP AO

Who develops application? Provider Software provider (not

ASP)

Software provider (not

AO)

Who has responsibility for operating & maintenance

of application &

infrastructure

Provider ASP AO

Who owns HW Provider ASP AO*sometimes customer

PO’s


SaaS TechRadar™

Source: March 12, 2009, “TechRadar™ For Sourcing & Vendor Management Professionals: Software-As-A-

Service” Forrester report


Forecast: IT management SaaS market, 2008 to 2013

Source: November 17, 2008, “How Big Is SaaS In IT Management Software?” Forrester report


Forecast: IT management SaaS market, 2008 to 2013 (cont.)

Source: November 17, 2008, “How Big Is SaaS In IT Management Software?” Forrester report


SaaS buyers cite value add in times of recession

� Reduce upfront costs . . .

– . . . and have more predictable costs over time.

� Prove value before committing . . .

– . . . and continue to demand value from your vendor.

� Ability to scale — up or down

� Offload risk to the SaaS vendor


But decision-makers voice concerns with adopting SaaS

Source: February 20, 2009, “Software-As-A-Service Adoption Expands” Forrester report


A new dawn perhaps? But what does it take

to achieve it?


� Financial analysis

- third party process consulting

- licenses cost vs. subscription cost (implementation, integration, training)

- administration, maintenance and upgrades

- support, administration, user management

� Capital efficiency

- increased output per capital investment

- direct cost avoidance

� Protection of assets

- cost avoidance

A “more science than art” decision model


A “more science than art” decision model (cont.)

� Business Impact

- Need uptime guarantee (depending on vertical)

- Penalties for missed SLA’s

- Compliance

- Mandate

� User Productivity

- Immediately

- Reduction of staff

� Risk

- Implementation risk

- Impact risk

- Strategic risk

- Measurement risk


� Skill and process analysis

- Process maturity

- Size and skill of team/members

� Technical requirements

- Integrations needed

- Depth and breadth of solution

- Fill in the blank

- Support needs

- Maintenance needs



� Contract terms and SLAs

- Uptime and performance

- Disaster recovery and business continuity

- Support assistance

� Vendor SaaS value

- Size and profitability of vendor

- Mix of SaaS and other business



Your SaaS Checklist

� Budget, contract, SLA:

- Pay as you go model, pricing, SLA details

� Speed-to-delivery

- Implementation, deployment, ongoing changes

� Security and business continuity

- Some risks – evaluate the vendors DC

� Uptime and performance

- depends on your scope and size

� Vendor viability and trust


Recommendations

� Implement a formal method of due diligence.

– Weigh cost, benefits, risk

� Be rigorous in the development of metrics for cost, benefits and risk.

� Pricing and contracts matter.

– Don’t forget SLAs, protection against heavy price increases at contract

termination, and support expectations.

� Vendors with an on-premise alternative mitigate risk.

– By providing option to move to perpetual license

– On-premise version typically provides greater flexibility and customization

capabilities

© 2009 Forrester Research, Inc. Reproduction Prohibited

Thank you. Danke. Merci. Gracie.

Evelyn Oehrlich

+1 617-613-8803

[email protected]

www.forrester.com

www.forrester.com

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© 2010 Forrester Research, Inc. Reproduction … © 2010 Forrester Research, Inc. Reproduction Prohibi© 2009 Forrester Research, Inc. Reproduction Prohibited ... 6 © 2010 Forrester