Software Delivery ModelsMyth: SaaS is the Software Delivery Model of the futureConfirmed? Plausible? or Busted?

TermsSoftware as a Service (SaaS)Application Service Provider (ASP)Monthly Recurring Revenue (MRR)Annual Recurring Revenue (ARR)

Software as a Service (SaaS)

Application Service Provider (ASP)

Monthly Recurring Revenue (MRR)

Annual Recurring Revenue (ARR)

SaaSValue – Mythical?Break it down into separate “myths”SaaS software costs less than packaged softwareSaaS can be implemented more quickly than packaged softwareSaaS facilitates more frequent improvements / releasesSaaS facilitates faster corporate growthSaaS software is more secure than packaged software

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

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

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

What is SaaSDefine SaaSSaaS is a model of software deployment where an application is hosted as a service provided to customers across the Internet.Multi-tenant vs. Independent environmentsConfigure vs. CustomizeRent vs. OwnCentralized vs. Distributed

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

SaaS: The Elevator PitchFee StructureAll inclusive fees are steady and predictable – no large capital or expense outlay upfrontVendor earns the customer business every dayLower total cost of ownershipHealthy revenue model for the vendor, with longer term sustainabilityRight-sized

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

SaaS: The Elevator PitchPlatformSingle platform facilitates horizontal integration and best of breed partnershipsYou are always on the latest and greatest releaseHighly secureScalable and performant

Single platform facilitates horizontal integration and best of breed partnerships

You are always on the latest and greatest release

Highly secure

Scalable and performant

SaaS: The Elevator PitchFocusYou focus on doing what you do best, allow the vendor to do the sameKeysAdoptionRetentionClean ARScalability

You focus on doing what you do best, allow the vendor to do the same

Adoption

Retention

Clean AR

Scalability

SaaS: Maturity LevelsLevel 1 – Ad-Hoc/Custom (ASP)Benefit – Server ConsolidationLevel 2 – ConfigurableBenefit – Ease of Program FlexibilityLevel 3 – Configurable, Multi-Tenant-EfficientBenefit – Horizontal integration, Lower Cost of OwnershipLevel 4 – Scalable, Configurable, Multi-Tenant-EfficientBenefit – Scalability and Performance Source: Microsoft

Level 1 – Ad-Hoc/Custom (ASP)

Level 2 – Configurable

Level 3 – Configurable, Multi-Tenant-Efficient

Level 4 – Scalable, Configurable, Multi-Tenant-Efficient

SaaS: Licensing ModelsSubscription-BasedUsage-BasedTransaction-BasedValue-Based (DAXKO)Fixed-Fee

Subscription-Based

Usage-Based

Transaction-Based

Value-Based (DAXKO)

Fixed-Fee

SaaS vs. Packaged: FeesPackaged software fees are very unpredictableFees will spike for “tech refreshes”SaaS fees are very predictable and are based upon usage

Packaged software fees are very unpredictable

Fees will spike for “tech refreshes”

SaaS fees are very predictable and are based upon usage

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

SaaS vs. Packaged: Engineering CostsSaaS PlatformSupport one version of the productSupport one technology stackPackaged SoftwareSupport n versions of the productSupport 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

Support one version of the

Support one technology stack

Support n versions of the

Support multiple technology

SaaSMyths: CostSaaS software costs less than packaged softwareMyth Busted, Right?

Myth Busted, Right?

SaaS Myths: CostWhat about:Hosting costs?Systems Engineer support?Professional Services for upgrades?Myth: SaaS software costs less than packaged softwareMyth Result: Plausible

Hosting costs?

Systems Engineer support?

Professional Services for upgrades?

SaaS Myths: SpeedSaaS can be implemented more quickly than packaged softwareMyth Result: ConfirmedSaaS facilitates more frequent improvements / releasesMyth Result: ConfirmedSaaS facilitates faster corporate growth Myth Result: Busted

SaaS can be implemented more quickly than packaged software

SaaS facilitates more frequent improvements / releases

SaaS facilitates faster corporate growth

SaaS Myths: SecuritySaaS software is more secure than packaged softwareMyth Result: Plausible

SaaS software is more secure than packaged software

SaaS Myths: Customer / ControlSaaS allows customers to focus on their core missionMyth Result: ConfirmedSaaS facilitates a better understanding of the customer / userMyth Result: ConfirmedSaaS provides the customer more control over the software Myth Result: Busted

SaaS Myths: ValuationSaaS companies have a higher valuationWilliam Blair & Company, 2007Myth Result: Confirmed

SaaS Market TrendsAMR Research: SaaS Revenue$2 billion in 2006, up 25% from 2005Gartner: $19.3 billion by 201025% of new business delivered via SaaS by 2011, up from 5% in 2005Aberdeen: 70% of 631 companies surveyed are looking at or planning to use SaaS William Blair & Company, 2007

SaaS is the Software Delivery Model of the futureMyth Result: Confirmed