2 Saugatuck Saa S Strategies And Best Practises

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    2 Saugatuck Saa S Strategies And Best Practises - Presentation Transcript

    1. Strategic Advisor to Leading IT Vendors SaaS Readiness: ISV Transition Issues, Strategies and Best Practices IBM SaaS Event Frank P. Sempert Advisory Board Member Barcelona, Spain Saugatuck Technology December 3, 2008 Entire contents © 2008 Saugatuck Technology Inc. All rights reserved.
    2. Agenda • About Saugatuck - and our SaaS Readiness Assessment Services • What is SaaS? • SaaS Realities: Saugatuck SaaS Research • Five Key Challenges (and Critical Issues) for ISVs in Transition to SaaS • Case Studies • Select ISV “SaaS Transition” Best Practices • Follow-ups – Saugatuck Offerings – Saugatuck Research – Contacting Saugatuck – Why Clients Choose Saugatuck Source: Saugatuck Technology Page: 2 Entire contents © 2008 Saugatuck Technology Inc. All rights reserved.
    3. About Saugatuck – and Our SaaS Readiness Assessment (SRA) Services About Saugatuck Technology Inc. SaaS Readiness Assessment (SRA) Services • Strategy and marketing experts in enterprise IT Target Audience – Market strategy consulting and • Established ISVs with existing applications subscription advisory and research looking to adopt the SaaS model for application services delivery. – Focused on helping vendors identify and exploit new market opportunities in Strategic Issues to be Addressed: traditional and next-generation software • Transitioning from Software to Services and business / IT services Provider – Major practices and focus around key • Lifecycle Issues: SaaS Start-up to Mature ISV disruptive technologies – SaaS, Open • Determining Hybrid versus Pure-play Source, Web 2.0, SOA, Utility Computing Strategies • Experienced industry experts • The SaaS Marketplace and Competitive – Analysts average 25+ years with leading Challenges vendors / think tanks such as Gartner, • Marketing, Sales, Distribution, Pricing, Finance, Giga, KPMG, Accenture, IBM, HP Customer Support, IT Infrastructure issues • Headquartered in Westport, CT – with • Economic, Technological, Operational, offices in Santa Clara, CA, and regional Cultural, Organizational Issues staff in Europe (Germany) and key • Target Segments / Application prioritization research partners in Asia/Pac. • Channel Strategies and the Partner Ecosystem Source: Saugatuck Technology Page: 3 Entire contents © 2008 Saugatuck Technology Inc. All rights reserved.
    4. What is Software as a Service (SaaS)? • The Technical Perspective Software provided and used in a utility computing context, where the services provider delivers the functionality of the application or utility infrastructure software over the network through a services interface. Typically these services are sold via either a subscription model, or on a utility- style, \"pay as you go,\" or per unit, basis.\" Source: Saugatuck Technology Entire contents © 2008 Saugatuck Technology Inc. All rights reserved.
    5. What is Software as a Service (SaaS)? The Business Perspective: • With Software as a Service… – Users subscribe to a business service that they use whenever they want as often as they want, and pay for accordingly, instead of an application that they must install, upgrade and maintain themselves, no matter how often they use it. – Vendors deliver the service cost-effectively over the Internet using a web browser by leveraging modern technologies, common infrastructure, and in many cases next-generation application deployment methodologies such as multi-tenancy. Source: Saugatuck Technology Entire contents © 2008 Saugatuck Technology Inc. All rights reserved.
    6. Key Takeaways – Saugatuck SaaS Research • SaaS adoption / penetration continues to grow in enterprises of all sizes • SaaS goes international, especially in key geographies • SaaS customer satisfaction is surprisingly strong • SaaS becomes more fully integrated with on-premise architectures • SaaS Platforms proliferate – and embrace user development / runtimes • ISVs migrate en masse to SaaS • SaaS merger & acquisition will accelerate Source: Saugatuck Technology Chart: 6 Entire contents © 2008 Saugatuck Technology Inc. All rights reserved.
    7. Beyond Software as a Service • The focus of SaaS shifts over time from cost-effective delivery of stand-alone application services (Wave I), to integrated business solutions enabled by web services APIs and ESBs (Wave II), to workflow- and collaboration-enabled business transformation (Wave III), leading to measured, monitored and managed business processes (Wave IV). • By 2013, at least 20 percent of enterprise IT workloads -- that historically would have operated on- premise -- will be run in the cloud, providing significantly enhanced functionality, lower costs, fewer staff, and reduced carbon footprint. Beyond Software-as-a-Service: Cloud Computing High SaaS 2.0 Cloud Computing SaaS 1.0 Wave III: 2008-2013 Wave IV: 2011-2016 Wave I: 2001-2006 Wave II: 2005-2010 Workflow-Enabled Measured, Monitored, Managed Cost-Effective Integrated Business Transformation Business Processes Software Delivery Business Solutions Post-SaaS Adoption Adoption Ubiquitous SaaS Adoption • End-to-End Business Processes • Integrated w/ Services Anywhere • Optimized Business Ecosystems Mainstream SaaS Adoption • Intelligent Hubs Linking Platforms • IT-Targeted Ecosystems • Mobile Device- and Sensor-Controllable • Integrated w/ Business • SaaS Development Platforms Early SaaS Adoption • SLAs for Composite Service Offerings • SaaS Integration Platforms • Inter-enterprise Collaboration • Stand-alone Apps • Dynamically Scalable Infrastructure • Business Marketplaces • IT Utility / SaaS Infrastructure • Multi-tenancy • Focus on Optimal Business Process • Customized, Personalized Workflow and SaaS Ecosystems • Limited Configurability • Customization Capability • Focus on Business Transformation • Focus on TCO / rapid • Focus on Integration deployment Low 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Saugatuck Technology Entire contents © 2008 Saugatuck Technology Inc. Chart: 7 All rights reserved.
    8. SaaS Adoption By 2012, 70 percent or more of businesses with greater than 100 employees will have deployed at least one SaaS application. By 2010, SaaS becomes interwoven into the fabric of enterprise architecture, as buyers become increasingly comfortable with acquiring SaaS solutions as part of their broader business services portfolio. Worldwide SaaS Adoption: 2007-2009 Already 32% 4% implemented > 5000 53% SaaS 14% 6% Implementing in 1000-4999 39% 2008 23% 4% Planning 2009 500-999 46% and beyond 25% 100-499 43% 27% Still learning 18% < 100 15% 44% Not planning to use 0% 10% 20% 30% 40% 50% 60% 0% 10% 20% 30% 40% 50% Still learning about SaaS Not planning to use SaaS Source: Saugatuck Technology, SaaS Survey Research 2008 (n=418) Entire contents © 2008 Saugatuck Technology Inc. Chart: 8 All rights reserved.
    9. SaaS Solution Demand Through 2010 Although Collaboration and CRM continue to lead adoption worldwide through YE2010 – demand for traditional “core” systems of record and BI / analytic tools (both stand-alone & embedded into other solutions) experience explosive growth. While SaaS markets continue to remain highly fragmented, three-to-four dominant (best-of- breed) Enterprise SaaS Solution Providers emerge in most major business process areas by 2012; pre-integrated suites grow in importance, but remain concentrated in SME segments. SaaS Enterprise SaaS Solution Demand: 2008-2010 Company Adoption by Region YE 2008 YE 2010 SaaS Application Worldwide North America Europe Asia Worldwide 45.0% 44.7% 46.4% 43.1% Collaboration (Email, WebConf) 1 1 1 1 1 66.8% 36.4% 37.4% 33.6% 39.7% CRM/SFA 2 2 2 2 2 58.9% 31.2% 32.5% 32.5% 25.9% Payroll 3 3 3 3 3 45.8% 28.6% 30.1% 28.5% 25.9% Travel Services 4 5 5 4 7 39.7% 45.3% 28.3% 30.5% 28.5% 22.4% HR/Benefits 5 4 4 5 4 41.7% 22.7% 21.9% 25.5% 18.5% Specialized Verticals 6 6 6 9 5 18.3% 16.3% 20.7% 19.3% Finance /Accounting 7 7 8 8 8 39.3% 40.7% 17.3% 14.8% 22.0% 15.5% BI & CPM 8 8 7 11 6 16.9% 12.8% 20.1% 20.7% Procurement & Sourcing 9 9 9 7 9 38.9% 13.2% 9.7% 14.8% 20.7% ERP/Manufacturing 10 11 10 6 12 25.9% 12.5% 11.7% 12.2% 15.8% Supply Chain Mgt (SCM) 11 10 11 10 10 27.5% 10.4% 9.4% 10.0% 14.3% Compliance and Risk Mgt 12 12 12 12 11 26.0% Source: Saugatuck Technology, SaaS Survey Research 2008 (n=418) Entire contents © 2008 Saugatuck Technology Inc. Chart: 9 All rights reserved.
    10. SaaS Satisfaction: My company is satisfied with… Despite an accelerating competitive landscape (fueled by massive VC investment and ISVs attempting to transition their business models), customer churn will remain low for SaaS segment leaders through 2013. Through 2013, Saugatuck expects that SaaS leaders will continue to achieve greater than 85 percent customer renewal rates and better than 100 percent on annualized contract value renewal. My company is satisfied with the overall experience of using SaaS solution (s): Wave I Strongly Agree 34.3% 84% are satisfied Agree 50.0% Neither Agree nor Disagree 13.0% Disagree / Strongly Disagree 2.8% Important Customer Requirements Not Being Met Source: Saugatuck Technology, SaaS Survey Research 2008 (n=420) Source: Saugatuck Technology Page: 10 Entire contents © 2008 Saugatuck Technology Inc. All rights reserved.
    11. Five Key Challenges for ISVs Transitioning to SaaS Cultural Challenges • New Identity – establishing a new Organizational communication strategy as a SaaS provider; will a new brand be required • Planning a Smooth Organizational • Community, Collaboration and Customer Intimacy Transition Plan –Operational is the org designed to support ISV prods, SaaS or both? • Culture Evolving –• to embrace this new • Partnering StrategySecurity Levels, Back-up Security, - that can reduce the way of doing things & Recovery Technological size of the org and ensure lower costs • Defining and Exploiting Operational • Distribution Channel for Value-added • Technology Strategy (platform, infra svcs) Services Metrics Economic / Leadership • DeliveringManaging R&D Through& • Continuous Innovation Transition Ongoing Functional Enhancements both • Multi-tenancy Platform – for • Executive Support • Delivering Service•(not product)Approval efficiencies functional richness Excellence and cost Funding • Integration and Customization • Managing Legacy Products, • Technology Infrastructure Services Customers & Partners • SaaS Pricing • Migrating Legacy Customers • Profitability Strategy Source: Saugatuck Technology Entire contents © 2008 Saugatuck Technology Inc. Page: 11 All rights reserved.
    12. Five Key Challenges for ISVs Transitioning to SaaS Cultural Challenges Saugatuck Insight: The mostnew • New Identity – establishing a critical success factor is executive-level buy-in Organizational communication strategy as a SaaS - and ongoing support frombe required provider; will a new brand the executive level. • Planning a Smooth Organizational The Community, Collaboration and Customer ISV in transition to SaaS is whether • most critical business decision for an Intimacy Transition Plan –Operational the target business model will be SaaS-only orto is the org designed hybrid. support ISV prods, SaaS or both? • Culture Evolving –• to embrace this new • Partnering StrategySecurity Levels, Back-up Security, - that can reduce the way of doing things & Recovery Technological size of the org and ensure lower costs • Defining and Exploiting Operational • Distribution Channel for Value-added • Technology Strategy (platform, infra svcs) Services Metrics Economic / Leadership • DeliveringManaging R&D Through& • Continuous Innovation Transition Ongoing Functional Enhancements both • Multi-tenancy Platform – for • Executive Support • Delivering Service•(not product)Approval efficiencies functional richness Excellence and cost Funding • Integration and Customization • Managing Legacy Products, • Technology Infrastructure Services Customers & Partners • SaaS Pricing • Migrating Legacy Customers • Profitability Strategy Source: Saugatuck Technology Entire contents © 2008 Saugatuck Technology Inc. Page: 12 All rights reserved.
    13. Five Key Challenges for ISVs Transitioning to SaaS Saugatuck Insight: The most critical technological decision concerns multi- Cultural Challenges tenancy - whether to implement it immediately or transition to it through intermediate platforms. • New Identity – establishing a new Single-instance Organizationalis not only efficient from a service-delivery point of multi-tenancy communication strategy as a SaaS view, but also for managing be required provider; will a new brand the very frequent new releases typical of SaaS. • Planning a Smooth Organizational • Community, Collaboration and Customer Intimacy Transition Plan –Operational is the org designed to support ISV prods, SaaS or both? • Culture Evolving –• to embrace this new • Partnering StrategySecurity Levels, Back-up Security, - that can reduce the way of doing things & Recovery Technological size of the org and ensure lower costs • Defining and Exploiting Operational • Distribution Channel for Value-added • Technology Strategy (platform, infra svcs) Services Metrics • DeliveringManaging R&D Through& • Continuous Innovation Transition Ongoing Functional Enhancements both • Multi-tenancy Platform – for • Delivering functional richness Excellence Service (not product) and cost efficiencies • Integration and Customization • Technology Infrastructure Services • Services-Oriented Architecture • Web 2.0 capabilities Source: Saugatuck Technology Entire contents © 2008 Saugatuck Technology Inc. Page: 13 All rights reserved.
    14. Five Key Challenges for ISVs Transitioning to SaaS Cultural Challenges • New Identity – establishing a new Organizational communication strategy as a SaaS provider; will a new brand be required • Planning a Smooth Organizational • Community, Collaboration and Customer Intimacy Transition Plan –Operational is the org designed to support ISV prods, SaaS or both? • Culture Evolving –• to embrace this new • Partnering StrategyService Levels, Back-up Security, - way of doing things & Recoverythat can reduce the size of the org and ensure lower costs • Defining and Exploiting Operational • Distribution Channel for Value-added Services Metrics • Delivering Continuous Innovation & Ongoing Functional Enhancements • Delivering Service (not product) Excellence Saugatuck Insight: Moving from one to two new releases per year to a continuous innovation process with monthly or quarterly releases, some “barely-beta,” requires a radical redefinition of the product development process. Source: Saugatuck Technology Entire contents © 2008 Saugatuck Technology Inc. Page: 14 All rights reserved.
    15. Five Key Challenges for ISVs Transitioning to SaaS Cultural Challenges • New Identity – establishing a new Organizational communication strategy as a SaaS provider; will a new brand be required • Planning a Smooth Organizational • Community, Collaboration and Customer Intimacy Transition Plan – is the org designed to support ISV prods, SaaS or both? • Culture Evolving – to embrace this new way of doing things Strategy - that can reduce the • Partnering size of the org and ensure lower costs • Distribution Channel for Value-added Services Saugatuck Insight: While many parts of the organization will change significantly through the SaaS transition, none will evolve as radically as the Sales and Marketing functions. Often referred to as “marketing-driven sales”, SaaS implies a change in how firms capture mindshare, with a greater emphasis on trial usage, establishing “beach heads”, and strategies for gaining deeper penetration and expanded usage / function. Source: Saugatuck Technology Entire contents © 2008 Saugatuck Technology Inc. Page: 15 All rights reserved.
    16. Five Key Challenges for ISVs Transitioning to SaaS Cultural Challenges • New Identity – establishing a new communication strategy as a SaaS provider; will a new brand be required • Community, Collaboration and Customer Intimacy • Culture Evolving – to embrace this new way of doing things Saugatuck Insight: Customer feedback drives continuous solution evolution. Successful SaaS companies carefully nurture a culture of community, collaboration, and customer intimacy - and they utilize dashboards of usage and performance metrics to evaluate functional changes and upgrades. Best practice: Collect customer feedback and prioritize on 30-day projects. Source: Saugatuck Technology Entire contents © 2008 Saugatuck Technology Inc. Page: 16 All rights reserved.
    17. Risk and Change Across the ISV Spectrum SaaS Startup Early-stage ISV ISV - Private ISV - Public Mature ISV Key Challenges Degree Degree of Degree Degree of Degree Degree of Degree Degree of Degree Degree of of RISK CHANGE of RISK CHANGE of RISK CHANGE of RISK CHANGE of RISK CHANGE Economic Technological Operational Organizational Cultural Source: Saugatuck Technology Entire contents © 2008 Saugatuck Technology Inc. All rights reserved.
    18. Key SaaS Decisions: Organization, Platform, Technology Go Short Term Mid-Long Term ISSUES SaaS (2-3 years) (>3 years) Org change, Organization: Within same new division SaaS DNA org structure Build new or License part / all Platform: Acquire / of SIP platform Strategic Asset reengineer platform (SIP) Technology: Acquire Multi-tenancy, Acquire SaaS Co SOA and related SaaS Skills architecture is basis for Build / extend SaaS economic Acquire SaaS App(s) advantages SaaS App(s) Source: Saugatuck Technology Entire contents © 2008 Saugatuck Technology Inc. All rights reserved.
    19. Select List of ISV “SaaS Transition” Best Practices • Identify a new or adjacent business opportunity – rather than replicating traditional on-premise offerings. • Every aspect of the company will be impacted by the shift to SaaS. • Don’t forget about the IT infrastructure: Partners will always be key. • Focus on keeping your customers happy and continuously measure your success. • Pick your battles regarding what to own and control. • But be cautious about “quick fixes” that limit your ability to expand. Source: Saugatuck Technology Entire contents © 2008 Saugatuck Technology Inc. Page: 19 All rights reserved.
    20. Questions? Entire contents © 2008 Saugatuck Technology Inc. All rights reserved.
    21. Fast Track Offerings • SaaS Readiness Assessment (SRA) – Executive-level business and technology strategy / readiness assessment engagement – Upfront learning / background research, SaaS Readiness Assessment questionnaire, on-site workshop, follow-up presentation / report highlighting SaaS readiness gaps, transition best practices and recommendations for success – Anticipated timeframe to engage / complete: 2-6 weeks – Anticipated price range for IBM Business Partners: $15,000 - $50,000 • Continuous Research Services (CRS) – Research and advisory service providing ongoing access to Saugatuck’s published research, with a focus around key disruptive technologies such as SaaS impacting the enterprise. – Includes inquiry privileges into our team of senior industry analysts – 12-month subscription pricing for IBM Business Partners: $12,500 - $85,000 (depending on size of organization) • SRA + CRS (3-User) – Special pricing for IBM Business Partners Source: Saugatuck Technology Page: 21 Entire contents © 2008 Saugatuck Technology Inc. All rights reserved.
    22. Saugatuck’s - SaaS Readiness Assessment (SRA) Services Target Audience Overview • Established ISVs with existing applications looking to • After more than a half dozen business strategy consulting adopt the SaaS model for application delivery. projects with independent software vendors (ISVs) focusing on SaaS transition strategies, Saugatuck launched its SaaS Strategic Issues to be Addressed: Readiness Assessment (SRA) practice in October, 2007. • Transitioning from Software to Services Provider • In today’s shifting enterprise software market, ISVs are • Lifecycle Issues: SaaS Start-up to Mature ISV faced with strategic decisions that could determine the • Determining Hybrid versus Pure-play Strategies future of their companies: • The SaaS Marketplace and Competitive Challenges Should we develop a SaaS-based solution? • Marketing, Sales, Distribution, Pricing, Finance, If so, when? And how? What are the best business model and Customer Support, IT Infrastructure issues business strategy options available? • Economic, Technological, Operational, Cultural, What are my biggest strengths and challenges? Organizational Issues What are the best practices and “lessons learned” from others • Target Segments / Application prioritization who have already made this transition? • Channel Strategies and the Partner Ecosystem • Making the shift from a product- to a services-oriented Engagement Steps/Deliverables: company is a huge leap, and critical to navigating the transition to a SaaS-based business model. • Engagement kick-off and review of ISVs key issues • SaaS Readiness Assessment questionnaire • Background research on client market segments, Why Saugatuck marketing, positioning and other relevant information • Extensive SaaS strategy consulting experience across a • Summary review of key strategy / positioning wide range of ISVs and startups, both packaged business materials provided by ISV applications and IT management solutions • Leadership briefing and work session – including • Seasoned perspective – experienced consultant / analyst review of key SaaS market trends, business strategy teams averaging 25+ years in business and technology considerations, business transition best practices, and consulting, focused on disruptive IT market trends and preliminary SaaS Readiness Assessment rating. related buyer behavior – with deep expertise in Software-as- • Follow-up summary presentation and discussion – a-Service including final SaaS Readiness Assessment, gap • Actionable recommendations and guidance based on analysis and actionable recommendations. independent, unbiased insights supported by fact-based • Typical elapsed time for initial engagement: 2-weeks research and exec-level interviewing Source: Saugatuck Technology Page: 22 Entire contents © 2008 Saugatuck Technology Inc. All rights reserved.
    23. Follow-ups • To learn more about Saugatuck’s SaaS Readiness Assessment (SRA) services, call Bill McNee at 1-203-454-3900 x223, or go to: – http://www.saugatech.com/sra.htm • To learn more about Saugatuck’s broader Market Strategy Consulting services, go to: – http://www.saugatech.com/strategyconsulting.htm • To learn more about Saugatuck’s research and advisory subscription service (CRS), go to: – http://www.saugatech.com/crs.htm • To register for Saugatuck’s complimentary Research Alerts – that both adds you to the weekly distribution of our Research Alerts as well as provides you access to our Research Library (that includes our premium research), go to: – http://research.saugatech.com/cgi-bin/order/signup3.pl • For a link to a listing of recently published SaaS research in Saugatuck’s Research Library, go to: – http://www.saugatech.com/researchbytopic.htm#Saas About Saugatuck Technology Inc. • Strategy and marketing experts in enterprise IT – Market strategy consulting and subscription research services – Focused on helping vendors identify and exploit new market opportunities in traditional and next-generation software and business / IT services – Major practices and focus around key disruptive technologies – SaaS, Open Source, Web 2.0, SOA, Utility Computing • Experienced industry experts – Analysts average 25+ years with leading vendors / think tanks such as Gartner, Giga, KPMG, Accenture, IBM, HP • Headquartered in Westport, CT – with offices in Santa Clara, CA, and regional staff in Europe (Germany) and key research partners in Asia/Pac. Source: Saugatuck Technology Page: 23 Entire contents © 2008 Saugatuck Technology Inc. All rights reserved.
    24. How to Contact: Regional Sales Offices US OFFICES INTERNATIONAL Headquarters Germany Saugatuck Technology Inc. Saugatuck Technology Inc. 49 Riverside Ave. Bluecherstr. 4 Westport, CT 06880 D 65343 Eltville am Rhein USA Germany (P) +1.203.454.3900 (P) +49.6123.630285 Regional Sales: Al.Vanek@Saugatech.com Regional Sales: frank.sempert@saugatech.com Silicon Valley Saugatuck Technology Inc. 5201 Great America Parkway, Suite 320 • Santa Clara, CA 95054 • • USA (P) +1.408.727.9700 Regional Sales: Andrew.Jeffs@Saugatech.com Source: Saugatuck Technology Page: 24 Entire contents © 2008 Saugatuck Technology Inc. All rights reserved.
    25. Revenues: $120 M Case Study – Concur Technologies Employees: 500 Expense Reimbursement Solution Public Company • Staff Turnover: In 2000, Concur had 17 executives. Of these only two – the founders – survived the transition. The remaining executives just could not make the transition. – SaaS requires a service mentality, not a product mentality, in which a company moves from a “limited accountability” situation (as cash has been received up front) to a “full accountability” situation (cash received monthly). – Companies with a service mentality have a leg up in such a situation. – Key learning: SaaS requires companies to continually re-cement the customer relationship as customers can go out to bid at any time and new competitors are pushing the bar up. • Timeframe: “You can only repurpose the knowledge in your heads. The technology is a complete rewrite. This required two years.” – Key learning: Create a group within the company that is not bound by the same P&L restrictions as the rest of the company. – Ensure upper management involvement, as that group will be the kernal of the future version of the company, so it can’t be allowed to atrophy or die. • Multi-tenancy: Provides so much power and ability to deliver a great service. – Ability to upgrade the service with new features without impact to core technology stack. – Ability to offer opt-in features to customers. – Ability to offer customization and integration with services on the other side of the firewall. – Ability to analyze what elements of the application are being used (or not used) and provide feedback to customers based on real usage. – Key learning: multi-tenancy is the key to reducing the cost of providing SaaS solutions Source: Saugatuck Technology Entire contents © 2008 Saugatuck Technology Inc. All rights reserved.
    26. Revenues: $10 M (est.) Case Study - Kadient (formerly Pragmatech) Employees: 45 (est.) Sales Performance Privately held • Product/Solution Transition: Preserve asset (Cash cow mode) – ISV legacy Products (RFP and Proposal Software)– Hold functionality constant for period of developing new platform and solutions – With a very mature set of ISV products, many enhancements being asked for couldn't easily be accomplished under the existing architecture. This made it easier to build out the web- based capability and invest in the multi-tenant opportunity. – Key Learning: Avoid duplicating current functionality, broaden functionality and target new buying centers, e.g., Kadient targeted the sales and marketing function, not just RFPs (Pragmatech) • SaaS Pricing – SaaS market has set a general upper limit for SaaS pricing near $100/user month, so structure offerings to enable low-cost entry (after free trial period, self-provisioned if possible) – In the SaaS model, the entire focus is on time to value, e.g., 30-day SaaS implemenation that delivers real value and has visibility to the executive sponsor – Key learning: SaaS is not sold like ISV software: get ‘em on, hook ‘em, increase user numbers across the customer organization, produce a continuous stream of new functionality for subscription • Installed Base Customers – how many will migrate to new platform and new functionality? – Segment customer base and identify those who are most likely to migrate to the new platform – Help them plan when and how to do the migration – Key learning: Distribute ISV Legacy Products via Channel – Hold functionality constant for period of developing new platform and solutions. Then when ready to announce, spin out indirect channel for distribution, integration, training and support of legacy ISV products Source: Saugatuck Technology Entire contents © 2008 Saugatuck Technology Inc. All rights reserved.
    27. Case Study – Concur Technologies • Reducing Costs: The key to success in a transaction-intensive SaaS business is to constantly reduce unit costs. Not only does this expand margins for current customers but also for future customers as well. – This means you have to leverage technology in order to scale. If you have to leverage people to scale then you cannot reduce costs. – Key learning: R&D focus (at least 50 percent at Concur) is on operational improvements (e.g., increasing customer on-boarding time, or making system updates with less customer disruption) • Co-location: Critical to success for two reasons – Scale: now that the company has scale, this contributes to the margin expansion described above. While savings can be achieved on scale through a hosting partner, it is not always as dramatic. – Quality: by owning all the boxes and doing the application management, Concur was able to drive quality to the level it required; however it may make sense to use a full-service host early in a SaaS company’s life, or potentially even longer-term due to expensive compliance issues. – Key learning: Use an outside facility for purposes of “commodity items” such as internet access, electricity, racks, cages, physical infrastructure that makes more sense to share with others. Saugatuck Insight: The key to profitability to the transformed Concur Technologies -- cost efficiencies – were achieved through exploiting multi-tenancy and co-location. This may be a model that other ISVs with utility-like offerings can implement. Source: Saugatuck Technology Entire contents © 2008 Saugatuck Technology Inc. All rights reserved.
    28. Case Study – Kadient • Partnering – Utilize third parties to manage down company size – R&D partners (e.g., Indian developers) increase throughput during transition period; distribution partners manage the legacy channel (revenue sharing); customer services partners help with tier one support • Operational Robustness – Security (branded security offerings?), Service Levels (99.5 minimum), Backup Capability (second site) – Hosting partner – SaaS infrastructure providers moving up the stack to offer complementary services, e.g., services, platform integration – Moving to co-location over time to capture and manage operational efficiencies • Platform Transition – multi-tenancy with customization and integration – Virtualization approach is more expensive primarily due to the cost of implementing new functionality across multiple instances; new releases every 2 weeks or more often. – Key learning: Harder to be profitable in a managed services company with SaaS attributes. • Metrics – usage and adoption issues – We track those metrics (10-15 of them) for every company and display on a dashboard. – Focus on a high renewal rate on the platform - where we get the annuity benefit. – Key learning: Measure of weekly satisfaction with the application (drives renewal) and ability to expand the relationship by adding new functionality. Saugatuck Insight: The key to long-term profitability for Kadient – top line growth – is achieved through multi-tenancy and a culture of customer intimacy and continuous innovation. Source: Saugatuck Technology Entire contents © 2008 Saugatuck Technology Inc. All rights reserved.

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