4. SaaS Concepts “ Software as a Service is not just about a new way of creating, delivering, selling and utilizing applications, but a philosophical change for how to solve some of the biggest challenges faced by earlier generations of technology - cost, complexity, time-to-market, risk, and ease of use.” (TripleTree – Software as a Service Update – September 2006)
6. SaaS Concepts Software as a Service sits at the core of a movement towards "customer-centric" solutions whereby pricing, deployment, and ongoing technology usage is closely aligned with customer interests.
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10. DNA of SaaS Companies Single application code base and single platform and database selection that is used across the entire customer base allowing for significant product development and R&D efficiencies.
11. DNA of SaaS Companies A "one-to-many" application delivery model that is often defined as a multi-tenant architecture, which is a scalable, secure, and replicable application architecture capable of supporting thousands of concurrent customers on a single instance of the application.
12. DNA of SaaS Companies Frequent upgrade cycles occurring multiple times per year in addition to minor product enhancements on a routine basis that are all seamlessly deployed over the Web.
13. DNA of SaaS Companies “ Pay-as-you-go" pricing with a wide variety of models (i.e., subscription, transaction, etc.) and terms ranging from monthly to multi-year contractual agreements and various collection terms ranging from payments received upfront, to prepay, to as-incurred.
Risks shift from the customer to the service provider. Software as a Service firms and their investors benefit from a predictable, recurring revenue stream, high margin potential through economies of scale and sustainable client relationships.
Risks shift from the customer to the service provider. Software as a Service firms and their investors benefit from a predictable, recurring revenue stream, high margin potential through economies of scale and sustainable client relationships.
With Software as a Service, the burden of technology purchases and its underlying risks shifts from the customer to the technology provider with the former demanding more accountability and higher service quality. Customers are gaining more predictable costs combined with lower risks and shared incentives from each new technology investment. Software as a Service firms and their investors benefit from a predictable, recurring revenue stream, high margin potential through economies of scale and sustainable client relationships. trends include including "maturing" growth cycles, pricing commoditization and margin pressure, a shift towards maintenance rather than new software licenses, industry fragmentation, intense competition and consolidating trends, and investors' proclivity for recurring revenue models.
Projected to reach over $10 billion in the next several years, the sector will have much deeper implications affecting virtually every legacy application category as well as sending disruptive "ripple effects" into multi-billion dollar software, outsourcing and consulting sectors. Overcoming challenges like "discrete“ business requirements within vertical industries or solving core infrastructure demands with "utility-based" on-demand alternatives will become the norm. Gone are the days where value is determined by revenue growth, profit margins, or P&L analyses alone. Revenue growth and profit margins must now be measured alongside cash flow, backlog, bookings/billings and deferred revenue.
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Kareo 2.0 needs to be focused on code that is re-usable and testable at the component level. We need to be able to continue to improve the database tier without changes rippling throughout the rest of the system. We get a lot of leverage out of the .NET platform, we need to keep other components, especially ones that are not free, to a minimum (i.e. BizTalk).
We have done a good job on providing this with Kareo 1.0. It’s not clear how far 1.0 will scale, maybe not much further than double our current customer volume. Kareo 2.0 will definitely have to scale at multiple levels, most notably at the web server (IIS). Introducing service layers requires that you have throttling and various other controls in place to prevent service consumers from crippling your service. Security will need to be greatly enhanced as we roll forward, especially intrusion detection. Physical security (from corporate) and controlled access to the data center will become more important as well.
This is a problem for us now as many customers expect to get regular product updates, which is part of the reason that they sign up for our service. Major disruptions can occur is updates are not carefully planned and regression testing is not automated. Rolling out updates without requiring massive system outages will become a bigger and bigger problem for us going forward, as we get more discrete customer DB’s.
We eventually want to move away from per-provider pricing to a license fee model, easier to manage and predict revenue. We may need to continue to have other pricing models, depending on what we find in the physician market but it’s unlikely that we’ll try to get % of claim revenue, which is more of a business partnership arrangement. Customers need to be able to view their bills and pay them without requiring our intervention.
Workflow is especially important for customization and we hear this requirement over and over. Integration is part of SOA. We absolutely have to find a way to prevent ourselves from having a large services component to our business, especially at this early stage. That means that customers need to be able to do integration themselves or worst case we partner to do these projects. Ongoing maintenance of custom integrations is a big concern.
Talk a little bit about how we can grow in the future: Savvis in Irvine can double in power capacity before we need to expand. There is room to expand in Irvine. Need to think about Disaster Recovery and cost of service in a location like Irvine. 24x7x365 will require that we carefully structure our coverage to avoid burnout and to allow everyone on the team to participate. Troubleshooting will need to be divided up so that we can most efficiently use Support and Engineering to resolve issues.
We’ve learned from Kareo 1.0 that while our user interface is effective, we need to simplify it moving forward. When addressing the physician market with more casual users, this will be a key differentiator for us. Customization is important and will take a lot of development time but the alternative is to provide professional services or integration with other products which is not core to an SaaS business. Salesforce.com leverages 3 rd party tools like Excel and other tools to prevent them from having to implement every one-off feature that comes to them. Our billing company customers are especially prone to demanding that everything comes out-of-the-box and we need to gently push them into acknowledging that Kareo won’t be successful as a company doing that work for them, especially at our price point.
Talk about how SOA fits into this and the fact that I’ll do a presentation on SOA next week or the week after. Customer retention is key in SaaS companies, especially ones at our price point. Physicians will be different from billing companies in their expectations and we’ll have to adjust. Barriers to scalability are things that prevent customers from being deployed with minimum touch on our part. If we slow things down, we can’t grow and we will ultimately fail.
We’re definitely aiming for Generation 3.0. TripleTree is watching for firms to deliver a more tightly integrated set of application services (both on-demand and on-premise) and embedded workflow with underlying business logic built on a Services Oriented Architecture (SOA), Web Services and AJAX technologies that are all deployed across a Web-enabled framework. Enriched workflow becomes mission critical to customers are they embed these workflows into their daily working habits. Content enrichment and rich analytics create stickiness. Industry specific functionality leads to deeper services specialization.
