The Changing Economics of the SaaS Marketplace

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  • 1. THINKstrategies Strategic Consulting Services The Changing Economics of the SaaS Marketplace Presented by, Jeff Kaplan Managing Director THINKstrategies jkaplan@thinkstrategies.com 781-431-2690 ©2008, THINKstrategies [www.thinkstrategies.com] Slide 1
  • 2. Why On-Demand Services Will Soar in 2008 1. Services are Recession Proof 2. Everyone’s Going Virtual 3. Amazon, IBM and Google Bet on Cloud Computing 4. Nick Carr Returns 5. SaaS Solves SOX 6. MS 3.0, Unified Communications & Service Automation 7. Carriers and Channels Find Success With New Services 8. Failure Doesn’t Matter 9. IT Discovers Services are the Solution 10. Wall Street Buys Into Services ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 2
  • 3. Rewiring the World, From Edison to Google “A hundred years ago, companies stopped generating their own power with steam engines and dynamos and plugged into the newly built electric grid…Today, a similar revolution is under way.” - Nicholas Carr ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 3
  • 4. Changing Customer Expectations Old, New, Capital Investment Operating Expense Complexity, Customization Simplicity, Utilization Reactive Maintenance Proactive Management Response Time Ongoing Monitoring Customer Support Automated Delivery Limited Responsibility Higher Accountability Outsourcing Alternatives Out-Tasking Options Enterprises Seeking to Generate Greater ROI at Lower TCO. ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 4
  • 5. SaaS Adoption Today Source: THINKstrategies/Cutter Consortium © 2007 ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 5
  • 6. SaaS Deployment Plans Source: THINKstrategies/Cutter Consortium © 2007 ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 6
  • 7. Welcome to Gartner’s ‘Slope of Enlightenment’ Gartner’s Hype Cycle You are here. ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 7
  • 8. On-Demand Market Adoption Forecast Laggards Market Penetration Mainstream Buyers Early Adopters Innovators 2004 2006 2008 2010 ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 8
  • 9. Top Ten Showplace Application Categories Customer Relationship Management 103 Collaboration 80 Accounting/Financial 78 Document Management 67 Project Management 62 Enterprise Resource Planning (ERP) 55 Marketing 49 Human Resource Management (HRM) 47 eCommerce 46 Messaging 44 ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 9
  • 10. Top Ten Showplace Industry Categories SMBs 110 Banking/Financial Services 102 Manufacturing 91 Technology 80 Healthcare 72 Retail 69 Government 63 Professional Services 55 Telecommunications/xSPs 43 Software 42 ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 10
  • 11. SaaS Evolution SaaS 1.0 SaaS 2.0 • Standalone apps • Multidimensional platforms • Focus on ease of use/price • Focus on added functionality • One size fits all, minimal • Multiple configurations, customization greater versatility • Limited interoperability • Easier integration • Emphasis on lower TCO • Emphasis on higher ROI ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 11
  • 12. Point Solutions vs. Platforms Source: THINKstrategies/Cutter Consortium © 2007 ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 12
  • 13. Shifting Adoption Patterns Unilateral End-User, Enterprise-Wide SBU Adoption of Acceptance and SaaS Solutions Adoption of SaaS ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 13
  • 14. SaaS Expands from Business Apps to IT Management Back Office Front Office Inter Office ERP CRM Collaboration Finance SFA SCM … … … BUSINESS APPLICATIONS Data Protection Security Network Mgmt Storage Systems Mgmt Remote Access … … … IT Management ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 14
  • 15. SaaS Moving into IT Management Market Traditional NSM = ERP of the IT World Too expensive Too complicated Too time-consuming Too ineffective >40 IT/Application Mgmt SaaS companies on the SaaS Showplace ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 15
  • 16. Managed Services/SaaS Convergence Managed Services SaaS ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 16
  • 17. Managed Services vs. SaaS Managed Services SaaS Provider assumes Provider delivers software management responsibility functionality Sold on an per device basis Sold on a per user basis Focus on network/system Focus on application availability & performance availability & performance Quicker Time-to-Value Lower TCO/Higher ROI Shifts Burden to Provider ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 17
  • 18. The Convergence of Managed Services & SaaS ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 18
  • 19. SaaS Compliance Solutions: Enviance Web-based environmental compliance solution. Deployed at >2,500 sites, in > 100 companies, Customers • AEP • Chevron Corporation • DuPont • Freeport LNG • Georgia Power • Savannah Electric • Southern Power 40 Compliance & Risk Companies on Showplace ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 19
  • 20. Living in a Hybrid World Most enterprises will seek mix of on-premise & on-demand solutions. ‘Applets’, Appliances, etc. will permit on-demand/ on-premise integration. Adobe AIR, Microsoft Silverlight ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 20
  • 21. Today’s Hybrids ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 21
  • 22. Changing Competitive Landscape & & everdream & AimNetSolutions ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 22
  • 23. Today’s New Enablers ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 23
  • 24. Open Source: The Good, Bad and Ugly The Good • Proliferation of tools/solutions • Accelerated Development • Concepts of Community The Bad and Ugly • Lower barriers to entry • Escalating price competition ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 24
  • 25. Ad-Supported SaaS “iTunes of IT” 250K users 50,000 new users in last 2 months Advertisers has grown from 4 to 40 Market Opportunity, • SMB IT pro = $125,000 annual budget. • 250k users = $32B in annual spend • Growing at more >$3B per month! ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 25
  • 26. The Meaning of Community in the SaaS Market Real-time, aggregated data Meaningful benchmark studies Practical best practices forums Continuous updates, new ideas Dynamic toolkit clearinghouse ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 26
  • 27. Channel/Supply Chain Opportunities Legacy ISVs Corporate Customers Enabling Technology Channel xSPs Vendors Partners • Hosting • Offshore SW • Distributors companies Developers • VARs/Integrators • Carriers • 3rd party SW • eCommerce Sites platforms • 3rd party HW systems Consumers New SaaS Providers ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 27
  • 28. New Channels to Market? Banks Insurance Companies Retailers Web companies PS Firms ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 28
  • 29. On-Demand Services & The IT Industry Inversion Future The Services IT Industry Technologies Inversion Past ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 29
  • 30. Key Challenges Facing Established ISVs Re-architecting applications Re-structuring revenue models Repositioning marketing Re-orienting sales/support staff Reducing operating costs ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 30
  • 31. No One Likes to Sell Services Raises concerns about the product. Complicates the sale/extends sales cycle. Seldom properly incented. Weak value proposition. Poor track record. ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 31
  • 32. Enterprise Expectations & Challenges for SaaS Can you provide a better user experience? Can you create a different type of community? Can you support hybrid environments? Can you permit rapid on-boarding? Can you track service usage levels? Can you measure performance levels? Can you identify & resolve service issues? Can you verify SLA compliance? ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 32
  • 33. Summary & Conclusions SaaS spreading. Shift from point solutions to platform strategies. IT getting onboard, but still worried. Quality development and delivery key. Selling & marketing costs will remain high. Price competition could emerge, as providers seek share. Continuously enhancing user experience essential. Properly supporting customers becoming more critical. Publishing benchmarks and best practices new opportunity. ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 33