Introduction To Saa S Tech Ba Apr 2009

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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reserved.

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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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Luis Aburto, CEO 408.239.4020

[email protected]

http://www.sciodev.com

Technology

Introduction To Saa S Tech Ba Apr 2009