MythBusters: Software Delivery Models


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MythBusters: Software Delivery Models

  1. 1. Software Delivery Models<br />Myth: SaaS is the Software Delivery Model of the future<br />Confirmed? Plausible? or Busted?<br />
  2. 2. Terms<br /><ul><li>Software as a Service (SaaS)
  3. 3. Application Service Provider (ASP)
  4. 4. Monthly Recurring Revenue (MRR)
  5. 5. Annual Recurring Revenue (ARR)</li></li></ul><li>SaaSValue – Mythical?<br />Break it down into separate “myths”<br /><ul><li>SaaS software costs less than packaged software
  6. 6. SaaS can be implemented more quickly than packaged software
  7. 7. SaaS facilitates more frequent improvements / releases
  8. 8. SaaS facilitates faster corporate growth
  9. 9. SaaS software is more secure than packaged software</li></li></ul><li>SaaSValue – Mythical?<br />Break it down into separate “myths”<br /><ul><li>The cost of SaaS development is lower than that of packaged software
  10. 10. SaaS allows customers to focus on their core mission
  11. 11. SaaS provides the customer more control over the software
  12. 12. SaaS facilitates a better understanding of the user
  13. 13. SaaS companies have a higher valuation</li></li></ul><li>What is SaaS<br />Define SaaS<br /><ul><li>SaaS is a model of software deployment where an application is hosted as a service provided to customers across the Internet.
  14. 14. Multi-tenant vs. Independent environments
  15. 15. Configure vs. Customize
  16. 16. Rent vs. Own
  17. 17. Centralized vs. Distributed</li></li></ul><li>SaaS: The Elevator Pitch<br />Fee Structure<br /><ul><li>All inclusive fees are steady and predictable – no large capital or expense outlay upfront
  18. 18. Vendor earns the customer business every day
  19. 19. Lower total cost of ownership
  20. 20. Healthy revenue model for the vendor, with longer term sustainability
  21. 21. Right-sized</li></li></ul><li>SaaS: The Elevator Pitch<br />Platform<br /><ul><li>Single platform facilitates horizontal integration and best of breed partnerships
  22. 22. You are always on the latest and greatest release
  23. 23. Highly secure
  24. 24. Scalable and performant</li></li></ul><li>SaaS: The Elevator Pitch<br />Focus<br /><ul><li>You focus on doing what you do best, allow the vendor to do the same</li></ul>Keys<br /><ul><li>Adoption
  25. 25. Retention
  26. 26. Clean AR
  27. 27. Scalability</li></li></ul><li>SaaS: Maturity Levels<br /><ul><li>Level 1 – Ad-Hoc/Custom (ASP)</li></ul>Benefit – Server Consolidation<br /><ul><li>Level 2 – Configurable</li></ul>Benefit – Ease of Program Flexibility<br /><ul><li>Level 3 – Configurable, Multi-Tenant-Efficient</li></ul>Benefit – Horizontal integration, Lower Cost of Ownership<br /><ul><li>Level 4 – Scalable, Configurable, Multi-Tenant-Efficient</li></ul>Benefit – Scalability and Performance <br /> Source: Microsoft<br />
  28. 28. SaaS: Licensing Models<br /><ul><li>Subscription-Based
  29. 29. Usage-Based
  30. 30. Transaction-Based
  31. 31. Value-Based (DAXKO)
  32. 32. Fixed-Fee</li></li></ul><li>SaaS vs. Packaged: Fees<br /><ul><li>Packaged software fees are very unpredictable
  33. 33. Fees will spike for “tech refreshes”
  34. 34. SaaS fees are very predictable and are based upon usage</li></li></ul><li>SaaS vs. Packaged: Revenue<br />Example: Year over year packaged sales are much higher than SaaS sales, yet SaaS revenue wins out over time<br />
  35. 35. SaaS vs. Packaged: Engineering Costs<br />SaaS Platform<br /><ul><li>Support one version of the </li></ul>product<br /><ul><li>Support one technology stack</li></ul>Packaged Software<br /><ul><li>Support n versions of the </li></ul> product<br /><ul><li>Support multiple technology </li></ul> stacks<br />“SaaS vendors spend from 5% to 10% of revenues on R&D, well below the 10% to 22% at more traditional software companies”<br /> William Blair & Company, 2007<br />
  36. 36. SaaSMyths: Cost<br />SaaS software costs less than packaged software<br /><ul><li>Myth Busted, Right?</li></li></ul><li>SaaS Myths: Cost<br />What about:<br /><ul><li>Hosting costs?
  37. 37. Systems Engineer support?
  38. 38. Professional Services for upgrades?</li></ul>Myth: SaaS software costs less than packaged software<br />Myth Result: Plausible<br />
  39. 39. SaaS Myths: Speed<br /><ul><li>SaaS can be implemented more quickly than packaged software</li></ul>Myth Result: Confirmed<br /><ul><li>SaaS facilitates more frequent improvements / releases</li></ul>Myth Result: Confirmed<br /><ul><li>SaaS facilitates faster corporate growth</li></ul> Myth Result: Busted<br />
  40. 40. SaaS Myths: Security<br /><ul><li>SaaS software is more secure than packaged software</li></ul>Myth Result: Plausible<br />
  41. 41. SaaS Myths: Customer / Control<br />SaaS allows customers to focus on their core mission<br />Myth Result: Confirmed<br />SaaS facilitates a better understanding of the customer / user<br />Myth Result: Confirmed<br />SaaS provides the customer more control over the software<br /> Myth Result: Busted<br />
  42. 42. SaaS Myths: Valuation<br />SaaS companies have a higher valuation<br />William Blair & Company, 2007<br />Myth Result: Confirmed<br />
  43. 43. SaaS Market Trends<br />AMR Research: SaaS Revenue<br />$2 billion in 2006, up 25% from <br />2005<br />Gartner: <br />$19.3 billion by 2010<br />25% of new business delivered via SaaS by 2011, up from 5% in 2005<br />Aberdeen: 70% of 631 companies surveyed are looking at or planning to use SaaS<br /> William Blair & Company, 2007<br />
  44. 44. SaaS is the Software Delivery Model of the future<br />Myth Result: Confirmed<br />