Presentation to Mexican ISVs of Basics about SaaS

1. What is Software as
a Service?
Introduction, Trends and Perspectives in Software as
a Service
April 2009

2. The Evolution of Man

3. 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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4. SaaS Examples
Looking for a specific SaaS provider in your industry?
http://www.saas-showplace.com/saasproviderdirectory.html
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5. 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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6. SaaS Evolution
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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. 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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9. 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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10. Benefits of SaaS – For Vendors
 Market Reach – Catch the Long Tail
» Traditional Model
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11. Long Tail - continued
 SaaS Model
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12. 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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13. 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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14. SaaS Model
SaaS is different from on-premise
software in more ways than one.
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15. 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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16. 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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17. Top SaaS Considerations
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18. Typical SaaS Application Stack
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19. Building SaaS - Alternatives
From the Ground Up Through a PaaS
(Platform as a Service)
PaaS
Platform Examples: PaaS Examples:
• LAMP • Force.com
• Win, IIS, ASP.NET, SQL Server • Google App Engine
• Ruby on Rails • SaaSGrid, Coghead, Bungee Lab
Hosting Alternatives: Hosting:
• In-house • Included
• Co-location
• Cloud Computing (EC2, GoGrid)
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20. 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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21. Primary Drivers of SaaS
 Changing competitive forces
 Changing workplace requirements
 Changing economic & ecological conditions
 Changing technologies
 Changing priorities & sourcing policies

22. 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.

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

24. An Equation for Greater Market
Opportunities
Economy Tighter = Greater SaaS
+
Uncertainty Budgets Opportunities

25. 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

26. 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

27. SaaS Adoption Today
Source: THINKstrategies/Cutter Consortium © 2007

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

29. SaaS Across the Enterprise
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30. The Role of SaaS in SMBs and Enterprises
Small = Fill Unmet Needs
Mid-Size = Fill Unmet Needs/Replace
Enterprise = Augment/Extend Capabilities

31. Welcome to Gartner’s ‘Slope of
Enlightenment’
Gartner’s Hype Cycle
You are here.

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

33. SaaS Evolution
SaaS 1.0 SaaS 2.0
• Standalone point apps • Multidimensional platforms
• Focus on ease of use/price • Focus on added functionality
• One size fits all, minimal • Multiple configurations,
customization greater versatility
• Horizontal applications • Vertical/industry solutions
• Limited interoperability • Easier integration
• Emphasis on lower TCO • Emphasis on higher ROI

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

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

36. 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

37. 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.

38. 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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39. 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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40. 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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41. 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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42. Luis Aburto, CEO
408.239.4020
laburto@sciodev.com
http://www.sciodev.com