1. Software Delivery Models
Myth: SaaS is the Software Delivery Model of the future
Confirmed? Plausible? or Busted?

2. Terms
• Software as a Service
(SaaS)
• Application Service
Provider (ASP)
• Monthly Recurring
Revenue (MRR)
• Annual Recurring Revenue
(ARR)

3. SaaS Value – Mythical?
Break it down into separate “myths”
– SaaS software costs less than
packaged software
– SaaS can be implemented more
quickly than packaged software
– SaaS facilitates more frequent
improvements / releases
– SaaS facilitates faster corporate
growth
– SaaS software is more secure than
packaged software

4. SaaS Value – Mythical?
Break it down into separate “myths”
– The cost of SaaS development is
lower than that of packaged
software
– SaaS allows customers to focus on
their core mission
– SaaS provides the customer more
control over the software
– SaaS facilitates a better
understanding of the user
– SaaS companies have a higher
valuation

5. What is SaaS
• Define SaaS
– SaaS is a model of software
deployment where an
application is hosted as a service
provided to customers across
the Internet.
– Multi-tenant vs. Independent
environments
– Configure vs. Customize
– Rent vs. Own
– Centralized vs. Distributed

6. SaaS: The Elevator Pitch
Fee Structure
– All inclusive fees are steady
and predictable – no large
capital or expense outlay
upfront
– Vendor earns the customer
business every day
– Lower total cost of ownership
– Healthy revenue model for
the vendor, with longer term
sustainability
– Right-sized

7. SaaS: The Elevator Pitch
Platform
– Single platform facilitates
horizontal integration and best
of breed partnerships
– You are always on the latest
and greatest release
– Highly secure
– Scalable and performant

8. SaaS: The Elevator Pitch
Focus
– You focus on doing what
you do best, allow the
vendor to do the same
Keys
– Adoption
– Retention
– Clean AR
– Scalability

9. SaaS: Maturity Levels
• Level 1 – Ad-Hoc/Custom (ASP)
Benefit – Server Consolidation
• Level 2 – Configurable
Benefit – Ease of Program Flexibility
• Level 3 – Configurable, Multi-Tenant-Efficient
Benefit – Horizontal integration, Lower Cost of Ownership
• Level 4 – Scalable, Configurable, Multi-Tenant-
Efficient
Benefit – Scalability and Performance
Source: Microsoft

10. SaaS: Licensing Models
• Subscription-Based
• Usage-Based
• Transaction-Based
• Value-Based (DAXKO)
• Fixed-Fee

11. SaaS vs. Packaged: Fees
• Packaged software fees
are very unpredictable
• Fees will spike for “tech
refreshes”
• SaaS fees are very
predictable and are
based upon usage

12. SaaS vs. Packaged: Revenue
Example: Year over
year packaged sales
are much higher than
SaaS sales, yet SaaS
revenue wins out
over time

13. SaaS vs. Packaged: Engineering Costs
• SaaS Platform
– Support one version of the
product
– Support one technology stack
• Packaged Software
– Support n versions of the
product
– Support multiple technology
stacks
• “SaaS vendors spend from 5% to 10% of revenues
on R&D, well below the 10% to 22% at more
traditional software companies”
William Blair & Company, 2007

14. SaaS Myths: Cost
SaaS software costs less than packaged software
Myth busted, right?

15. SaaS Myths: Cost
• What about:
– Hosting costs?
– Systems Engineer support?
– Professional Services for upgrades?
• Myth: SaaS software costs less than packaged
software
Myth Result: Plausible

16. SaaS Myths: Speed
• SaaS can be implemented more quickly than
packaged software
Myth Result: Confirmed
• SaaS facilitates more frequent improvements /
releases
Myth Result: Confirmed
• SaaS facilitates faster corporate growth
Myth Result: Busted

17. SaaS Myths: Security
• SaaS software is more secure than packaged
software
Myth Result: Plausible

18. SaaS Myths: Customer / Control
• SaaS allows customers to focus on their core
mission
Myth Result: Confirmed
• SaaS facilitates a better understanding of the
customer / user
Myth Result: Confirmed
• SaaS provides the customer more control over
the software
Myth Result: Busted

19. SaaS Myths: Valuation
SaaS companies have a higher valuation
William Blair & Company, 2007
Myth Result: Confirmed

20. SaaS Market Trends
• AMR Research: SaaS Revenue
$2 billion in 2006, up 25% from
2005
• Gartner:
– $19.3 billion by 2010
– 25% of new business delivered via SaaS by
2011, up from 5% in 2005
• Aberdeen: 70% of 631 companies
surveyed are looking at or planning to use
SaaS
William Blair & Company, 2007

21. SaaS is the Software Delivery Model of the future
Myth Result: Confirmed

22. The End