SaaS Market Shifting from Point Solutions to Platform Strategies
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SaaS Market Shifting from Point Solutions to Platform Strategies SaaS Market Shifting from Point Solutions to Platform Strategies Document Transcript

  • Business Technology Trends & Impacts Advisory Service Executive Update Vol. 8, No. 24 SaaS Market Software-as-a-service (SaaS) is from point solutions to fuller rapidly evolving to emulate the functional suites, many SaaS ven- software industry as a whole. dors are moving from offering sim- Shifting Although most people associate ple point solutions to promoting the SaaS with Google’s collaboration- power of their SaaS platforms. and productivity-oriented applica- from Point tions and with’s Today’s SaaS platforms are built customer relationship management on a combination of “multitenant” (CRM) and sales automation solu- architectures, third-party integration technologies, and cooperative busi- Solutions tions, the truth is that SaaS alterna- tives now exist for nearly every ness partnerships or “ecosystems.” legacy application category. This is the second in a series to Platform In fact, nearly three-quarters (72%) of the people who responded to Cutter’s third annual SaaS survey of Executive Updates based on Cutter’s SaaS survey. In Part I, we addressed the overall SaaS adop- Strategies reported that they are using these Web-based solutions to fill unmet needs. More than a quarter of the tion patterns and satisfaction levels reported by the survey respondents. (For more information on survey respondents (28%) are hoping that demographics, refer to Part I, “SaaS these solutions will cut their costs Movement Accelerating” [Vol. 8, by Jeffrey M. Kaplan, by 20%-30%. No. 22].) Senior Consultant, As customers become more recep- This Update examines how the Cutter Consortium tive to SaaS alternatives to legacy SaaS market is evolving from a applications, their expectations are series of specific horizontal and also rising. In response, the Saas vertical market solutions to a set market is also undergoing a matu- of powerful platforms. ration process that resembles the shift that occurred in the traditional software industry when companies LEVERAGING HORIZONTAL like Microsoft, Oracle, and others AND INDUSTRY-SPECIFIC expanded their software products SAAS CAPABILITIES to full-service suites with multi- While the majority (54%) of our dimensional capabilities. survey respondents are utilizing horizontal SaaS applications, more Just as legacy independent soft- than a fifth (21%) are employing ware vendors (ISVs) sought to industry-specific SaaS solutions, better position themselves by and another quarter is using both expanding their product portfolios (see Figure 1).
  • 2 BUSINESS TECHNOLOGY TRENDS & IMPACTS ADVISORY SERVICE As Figure 2 shows, CRM is the It is noteworthy that a quarter of SAAS COMPANIES SHIFT most commonly used horizontal the survey respondents are using or FROM POINT PRODUCTS SaaS solution. This shouldn’t be considering IT management SaaS TO PLATFORM STRATEGIES surprising given the prominence solutions. The implications of this As SaaS gains mainstream accept- of, the premier finding will be discussed in Part III. ance, various SaaS providers are player in the SaaS market. Content/ repositioning themselves as plat- document management is the The survey respondents identi- form players to expand their sphere second most popular horizontal fied application features, service of influence in the market. This shift SaaS solution, followed by pricing model, and customization entails morphing their core prod- collaboration/productivity and capabilities as the top three criteria ucts into development platforms. human resources management. for selection for a SaaS provider (see Figure 3). Just as legacy application vendors like Microsoft, Oracle, and SAP sought to build software suites to Horizontal applications (ERP, win a greater share of their cus- Both CRM, salesforce automation, tomers’ application requirements, 25% supply chain, HR SaaS companies today are seeking management, etc.) to win market share via their plat- 54% form strategies. Aligning with a SaaS company Vertical, market-specific that has adopted a platform strategy applications offers benefits to customers and 21% third-party software developers as well. It enables third-party soft- Figure 1 — Types of SaaS solutions being used or considered. ware developers to avoid many of the costly steps of building and 50% 45% 45% 40% 37% 35% Percentage of respondents 31% 29% 30% 26% 25% 22% 22% 22% 20% 16% 16% 15% 10% 5% 0% CRM Content/ Collaboration/ HR IT Accounting/ ERP Salesforce Supply Other document productivity manage- manage- financial automation chain management ment ment manage- ment systems Figure 2 — Types of horizontal applications being used or considered. (Please check all that apply.) Vol. 8, No. 24 ©2007 Cutter Consortium
  • EXECUTIVE UPDATE 3 delivering their SaaS solutions. The AppExchange is’s development and service delivery old do-it-yourself approach creates third-party integration and market- ingredients they need to build and inefficiencies for ISVs and develop- ing clearinghouse. The deliver their SaaS solutions ers that add unnecessary costs and development toolkit enables soft- complexities to the development ware developers and ISVs to build By encouraging a wide array of process and extend the time-to- SaaS solutions on the develop- ISVs to build their applications market cycles. ment code and framework that on and link their has used to build applications to the AppExchange, By aligning themselves with an its own on-demand applications. is also expanding established platform provider, SaaS The platform also permits these its reach into additional application companies can also overcome developers and ISVs to integrate markets. Since its inception in customer concerns regarding inte- their applications to Salesforce. 2005, more than 60,000 developers gration issues. As Figure 3 shows, com’s applications. have added over 200,000 applica- nearly a fifth of the respondents tions and custom objects to the (19%) report that the third-party leverages Salesforce. AppExchange, resulting in more integration capabilities of SaaS com’s Apex Code.’s than 40,000 customer downloads. providers are a top consideration. integration platform capabilities are Even more importantly, Figure 4 based on a set of APIs, design spec- Other SaaS companies are trying to shows that a quarter of the survey ifications, service provisioning, and emulate’s platform respondents who are not planning support requirements. strategy. For instance, NetSuite has to adopt SaaS are hesitant because enables ISVs to build their appli- created a SuiteFlex platform that they are uncertain about the inte- cations more quickly by allowing enables ISVs and channel partners gration capabilities. them to focus on the features and to cater NetSuite’s applications to functions of their SaaS solutions specific industry requirements. In has spearheaded rather than software development conjunction with its technological this shift with its AppExchange architecture and service delivery foundation, NetSuite’s platform is partner “ecosystem” and Force. infrastructure. provides enhanced by its growing ecosystem com development toolkit. The ISVs and developers the software of third-party relationships. 59% 60% 50% 45% Percentage of respondents 39% 40% 30% 19% 19% 20% 12% 9% 10% 0% 0% Application Service Customization Third-party Vertical Reference Provider’s Other features pricing capabilities integration market accounts/ financial model experience/ proven viability expertise experience Figure 3 — Most important criteria for selecting a SaaS provider. (Please select your top two reasons.) Vol. 8, No. 24 View slide
  • 4 BUSINESS TECHNOLOGY TRENDS & IMPACTS ADVISORY SERVICE 35% 32% 29% 30% 26% Percentage of respondents 25% 19% 19% 19% 19% 20% 15% 10% 5% 0% Concerned Not clear Concerned Not confident Not comfortable Not convinced Other about security about cost about with the relying on SaaS can be issues advantages integrating viability Web-based customized regarding SaaS of SaaS SaaS with of the applications to meet legacy SaaS corporate applications providers requirements Figure 4 — Primary reasons companies are not considering SaaS. (Please check all that apply.) Both Point solutions can enhance their solutions and 35% 40% expand their channels to market. The success of’s AppExchange and potential of its platform are setting a standard for other SaaS companies as well as expectations for SaaS customers. Platform capabilities In response, Microsoft and other 25% established ISVs are beginning to promote their development plat- Figure 5 — Selecting SaaS companies offering point or platform solutions. forms as potential toolkits for SaaS companies. This will raise the A quarter (25%) of the respondents based on the strength of their tech- stakes in the platform battlefield to Cutter’s SaaS survey reported that nical capabilities and the breadth and give customers more options they are selecting SaaS providers of their portfolios and partner net- to choose from. that offer platform capabilities work, so too should they evaluate (see Figure 5). Nearly a third of the SaaS vendors based on their soft- Going forward, IT/business decision respondents (35%) said they are ware functionality and the strength makers should examine the plat- selecting SaaS companies that offer of their integration platforms and form strategies of their potential platform and point solutions. partner ecosystems. SaaS vendors as carefully as they do the specific application capa- SaaS companies seeking a strategic bilities, whether the vendor is an SOURCING IMPLICATIONS competitive advantage are those aspiring platform player or simply that are aggressively developing a point-solution supplier seeking In the same way that organizations robust development toolkits and to align with a primary platform judged legacy application vendors extensive partner relationships that vendor. Vol. 8, No. 24 ©2007 Cutter Consortium View slide
  • EXECUTIVE UPDATE 5 ABOUT THE AUTHOR Jeffrey M. Kaplan is a Senior Consultant with Cutter Consortium’s Sourcing & Vendor Relationships practice, and he is the founder and Managing Director of THINKstrategies, a strategic con- sulting firm that helps IT enterprise decision makers with their sourcing strategies; solution providers with their marketing strategies; and venture firms with their invest- ment strategies. Prior to forming THINKstrategies, Mr. Kaplan served as VP of Marketing and Business Development at InterOPS Management Solutions — an Internet operations management services provider. Prior to joining InterOPS, he was Director of Strategic Marketing at Lucent Technologies Worldwide Services, as a result of its acquisition of International Network Services (INS). Before his position at INS, Mr. Kaplan spent 13 years as a lead- ing industry analyst and market research consultant at IDC, the Ledgeway Group, Dataquest, and META Group. Mr. Kaplan is a frequent speaker at industry conferences and a con- tributing columnist for Mass High Tech, NetworkWorld, Business Communications Review, eWeek, InfoWorld, Computerworld, InformationWeek, and the Financial Times. He can be reached at The Executive Update is a publication of the Business Technology Trends & Impacts Advisory Service. ©2007 by Cutter Consortium. All rights reserved. Unauthorized reproduction in any form, including photocopying, faxing, image scanning, and downloading electronic copies, is against the law. Reprints make an excellent training tool. For information about reprints and/or back issues of Cutter Consortium publica- tions, call +1 781 648 8700 or e-mail Vol. 8, No. 24
  • Workshop Developers/ Presenters Every workshop is led by one of Cutter Consortium’s expert Senior Consultants — experienced IT professionals who have honed Workshops their skills and developed their methodologies over years in the field, at companies like yours. Verna Allee Sanjiv Augustine Rob Austin Christopher Avery Sam Bayer Kent Beck In these times of intense pressure to make every E.M. Bennatan development dollar and every development minute Bob Benson Tom Bugnitz count, the maxim you are only as strong as your David J. Caruso weakest link has never rung truer. Ken Collier Rachel Davies Tom DeMarco Moving your development organization Workshop Topics Sid Henkin up the productivity curve will improve Jim Highsmith the ROI of every one of your projects. Agile Development Methodologies Wendell Jones Just trace this back and you’ll discover Agile Project Management Jeff Kaplan the ROI in training is immense. And Business-IT Alignment Joshua Kerievsky with training and workshops designed CIO Dashboards Bartoz Kiepuszewski and delivered by Cutter Consortium’s Data Quality Tim Lister Senior Consultants, you can add to Michael Mah Data Warehousing that equation the peace of mind you Terry Merriman Enterprise Architecture get from being trained by the best Larissa Moss of the best. Estimation Techniques Ken Orr Extreme Programming Carl Pritchard Cutter Consortium offers inhouse training solutions from IT project IT Strategic Planning Ken Rau Thomas Redman management techniques to software Knowledge Management Suzanne Robertson development methodologies, improving Metrics/Benchmarking Mike Rosen data quality, architecting Web services Outsourcing Michael Schmitz applications, aligning business and IT Requirements Management David Spann objectives, and more. Risk Management Rob Thomsett John Tibbetts Software Development Practices Jim Watson Teamwork and Leadership Karl Wiig Web 2.0 Technologies Bob Wysocki For details about the courses offered in each Cutter Consortium 37 Broadway, Suite 1 of these areas, contact Dennis Crowley at Arlington, MA 02474-5552, USA +1 781 641 5125 or, or visit Tel: +1 781 648 8700 Fax: +1 781 648 1950 Web: E-mail: