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.
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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
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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
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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
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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
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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
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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
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Chart: 7
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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)
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Chart: 8
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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)
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Chart: 9
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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
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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
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Page: 11
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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
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Page: 12
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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
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Page: 13
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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
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Page: 14
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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
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Page: 15
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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
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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
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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
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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
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Questions?
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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
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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
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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
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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
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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
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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
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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.

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.