1. Estrategias para explotar las
tendencias de SaaS y Cloud
Computing Luis Aburto, CEO
Scio Consulting
www.sciodev.com

2. Objetivo
Proporcionar un marco de referencia
acerca de SaaS y Cloud Computing, así
como estrategias para aprovechar estas
tecnologías y volverse más
competitivas.
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3. Agenda
What is SaaS and Cloud Computing?
Why are they important?
How do they relate to the software industry in Mexico?
Strategies and recommendations
Q&A
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4. What is SaaS?
SaaS = Softwar e as a Ser vice
It is a Deployment/Deliver y model
Hosted and Managed by vendor
Delivered across the Internet
It is a Business Model: usa ge-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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5. SaaS Examples
Looking for a specific SaaS provider in your industry?
http://www.saas-showplace.com/saasproviderdirectory.html
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6. 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 bust
Early SaaS companies born in early 00’s
2003-2005 High-speed Internet connectivity growth = trigger
for SaaS
Feb 2009 – Salesforce.com reported annual revenues of
$1,000 Million USD
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7. 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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8. What is Cloud Computing?
IaaS – Infrastructure as a Service
Utility computing (servers by the hour, storage by the GB, etc.)
Amazon EC2, GoGrid, Mosso, etc.
SaaS – Software as a Service
Specialized components
Billing, CLM, Monitoring, Integration, etc.
PaaS – Platform as a Service
Infrastructure + Technology Stack + Solution Services
SaaSGrid, Force.com
Generic vs. SaaS-specific
Enterprise Cloud
Use of PaaS and/or Virtualization technology within corporate IT

9. 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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10. Why is SaaS important?

11. 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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12. 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
Support direct from Vendor
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13. Benefits of SaaS – For Vendors
Market Reach – Catch the Long Tail
Traditional Model
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14. Long Tail - continued
SaaS Model
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15. 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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16. 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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17. Primary Drivers of SaaS
ü Changing competitive forces
ü Changing workplace requirements
ü Changing economic & ecological
conditions
ü Changing technologies
Ø Changing priorities & sourcing policies

18. 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.

19. Changing Customer Expectations
Old, New,
§ Capital Investment § Operating Expense
§ Complexity, § Simplicity, Utilization
Customization
§ Reactive § Proactive Management
Maintenance § Ongoing Monitoring
§ Response Time
§ Automated Delivery
§ Customer Support
§ Higher Accountability
§ Limited Responsibility
§ Outsourcing
§ Out-Tasking Options
Alternatives
Enterprises Seeking to Generate Greater ROI
at Lower TCO.

20. 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

21. SaaS Adoption
Source: THINKstrategies/Cutter Consortium © 2007

22. SaaS Deployment Plans
Source: THINKstrategies/Cutter Consortium © 2007

23. On-Demand Market Adoption
Forecast
Laggards
Market Penetration
Mainstream Buyers
Early Adopters
Innovators
2004 2006 2008 2010

24. Shifting Adoption Patterns
Unilateral End- Enterprise-Wide
User, Acceptance and
SBU Adoption of Adoption of SaaS
SaaS Solutions

25. Size of SaaS Deployments
Growing
SaaS Vendor Customer # Users
Salesforce.com Misys 40,000
SuccessFactor Wachovia 85,000
“A Financial
Concur Services Company”
185,000
Workday Flextronics 200,000
“A Leading Food
Authoria Services Company”
340,000

26. An Equation for
Greater Market Opportunities
Economic Tighter Greater SaaS
+ =
Uncertainty Budgets Opportunities

27. Building & Operating
a SaaS Product

28. Top SaaS Considerations
Click to edit Master text styles
Second level
● Third level
● Fourth level
● Fifth level
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29. SaaS Technical Architecture
Traditional SaaS Application – built from the ground up
User Interface, Business Logic, Database
Multi- User •Non-strategic
Security Scale
tenancy system •Difficult
•Time consuming
Provisio •Costly
Pricing Billing Etc.
ning
Hardware (Datacenter)
 Build vs Buy
 Till recently there was no choice – all this had to be built

30. Technology Choices
From the Ground Up Through a PaaS Combining Cloud Services
(Platform as a Service)
Deployment Platform
Billin Integration
g Analytics
IaaS
Platform Examples: PaaS Examples: Cloud Services exist for
• LAMP • SaaSGrid • Infrastructure
• Win, IIS, ASP.NET, SQL Server
• Ruby on Rails
• Force.com • Development
• Google App Engine
• Business functions
Hosting Alternatives: Hosting: • Monitoring
• In-house • Included in PaaS • Interoperability
• Co-location
• Cloud Computing (EC2, GoGrid)

31. PaaS for SaaS
SaaS Applications Using a SaaS-specific PaaS
Your 1st SaaS Your 2nd SaaS
App App
UI, Business Logic, UI, Business Logic,
Database Database
(SaaSGrid, Force.com)
Multi- User
Security Scale A Cloud OS
tenancy system
For SaaS Apps
Provisio
Pricing Billing Etc.
ning
Hardware (Datacenter)

32. Commercial Cloud Services for SaaS
Billing
Aria, OpSource Billing CLM,
Zuora, Vindicia
Customer Management
OpSource Billing CLM (Customer
Lifecycle Management), Aria Systems
Payment Processing
Paypal, etc.
Monitoring
TrustSaaS, Absolute Performance
SaaSMonitor.com
Integration
Boomi
Analytics
Sonoa

33. Mix and Match
Combinations of Cloud services can be used
to deploy SaaS applications faster and cheaper
App App App
A B C
SaaS Common Components
Multi- Payments Scalability
tenancy
Metering
User
Mgmnt
Billing Cloud
Services
Provisioning Reporting Security
Infrastructure

34. SaaS App Scenarios
Application X
Billing & CLM
Integration
Monitoring
Flexible
Infrastructure
Third-party App

35. SaaS App Scenarios – cont’d
Application Y
Multi- Payments Scalability
tenancy
User
Metering Billing
Mgmnt
Provisioning Reporting Security
Infrastructure

36. 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 customer service
Uptime and SLA
Professional Services
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37. Meaning of Community in SaaS
Real-time, aggregated data
Meaningful benchmark studies
Practical best practices forums
Continuous updates, new ideas

38. SaaS/Cloud
Challenges & Objections
Reliability
Security
Interoperability
Lock-in

39. Case Study
Cost Comparison

40. Overview
Scio Consulting, a SaaS product development and
consulting company, was hired by a medium size on-
premise software company with an on-premise niche
market vertical solution to perform a study comparing the
cost of developing a SaaS application under 2 different
scenarios.
● Building all components from scratch (thus a
proprietary SaaS platform)
● Leveraging a 3rd party Platform-as-a-Service (PaaS)

41. Development Costs - Proprietary PaaS
Only 4 months
remain for selling in
Year 1
Launch Date
Application development can only
start when there is enough
architectural foundation
Incr. Production Servers
to maintain performance
Dev. Servers
Add Production Servers
Add Test Servers

42. Development Costs – 3rd Party PaaS
Launch Date 7 months remain for
3 months selling in Year 1
earlier –
Application development saving 40%
can start on day 1
PaaS costs only start when the
ISV begins generating revenue

43. Accumulated Cost Comparison
Majority of investment goes into
Lower total investment when
ISVs product, rather than SaaS
using a 3rd party PaaS
intricacies.

44. Study Results
Technology
PaaS = SaaSGrid, Technology Stack = .NET
Cost Savings
Overall, using a 3rd party PaaS allows for a cost savings of $200,000, or 50% of
the total R&D for year 1.
Time to Market
With a 3rd party PaaS, the ISV is able to launch 3 months earlier, allowing for 3
additional months of selling and revenue generation.
Focus on Solving the Customer Need
The majority of R&D spending goes into building and enhancing the customer
application, not into SaaS intricacies, allowing the ISV to focus on their core
competency.
Flexible Expense
Hosting infrastructure is a variable cost proportional to revenue, not a fixed cost.

45. Opportunities & Strategies
for Software Companies
in Mexico

46. 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 and support
& maintenance fees.
● Small set in other areas: CRM, facility planning, construction,
point of sales, manufacturing, electronic commerce, and
content management systems
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47. 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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48. 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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49. For SI and CSD companies
New Platforms –> New Value Proposition –>
New Opportunities
Google App Engine
● Custom-built Cloud Automation/ERP
Salesforce.com
● Rapid App Dev for LofB
Private Clouds (SaaSGrid, LongJump)
● Maximize infrastructure investment
● Enable new cost accounting models for Internal IT
Teams (e.g., internal SaaS providers)

50. Most Attractive Possibilities
For SW vendors
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
For SI
Expand service offerings to include Cloud/PaaS
capabilities to provide more cost-effective solutions
to clients
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51. Conclusions

52. SaaS Model
SaaS is different from on-premise
software in more ways than one.
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53. Use the Cloud for SaaS…
Accelerate time to market (40-60%)
Reduce development costs (20-50%)
Leverage solutions with greater functionality and
based on best practices
Simplify scalability and application maintenance
More system components can be a variable cost
instead of a capital investment or fixed cost

54. But Evaluate Trade-offs…
Dependencies on vendors
Availability of SaaS solution depends on
availability and performance of all pieces
● Reliability
– if each component has a 99.99% SLA your app cannot get to 99.99%
Lock-in
Vendors going out of business
Potentially higher cost if volume of transactions is
very high

55. Conclusions
SaaS/Cloud open new opportunities and provides access to
new market segments
Leverage the Cloud
Minimize development costs and duration
Minimize fixed operating costs
Scale smoothly
Simplify building and delivering SaaS applications to focus on gaining market share
Lower barrier to entry
Never before access to global market had been so inexpensive
Expect growth and innovation – look at SaaS in India!

56. Preguntas y Respuestas
Luis Aburto, CEO
Scio Consulting
laburto@sciodev.com
+1 408 404 3897 ext 254
www.sciodev.com +52 443 324 6176 ext 254