THINKstrategies                                 Strategic Consulting Services




                                        ...
Why On-Demand Services
                                  Will Soar in 2008

   1.      Services are Recession Proof
   2. ...
Rewiring the World,
                               From Edison to Google

                                         “A hund...
Changing Customer
                                  Expectations

  Old,                                 New,
          Ca...
SaaS Adoption Today




                               Source: THINKstrategies/Cutter Consortium © 2007
©2008, THINKstrate...
SaaS Deployment Plans




                               Source: THINKstrategies/Cutter Consortium © 2007
©2008, THINKstra...
Welcome to Gartner’s
                               ‘Slope of Enlightenment’


                                      Gartn...
On-Demand Market
                                        Adoption Forecast


                                             ...
Top Ten Showplace
                               Application Categories

                       Customer Relationship Mana...
Top Ten Showplace
                                 Industry Categories

                    SMBs                          ...
SaaS Evolution

                        SaaS 1.0                  SaaS 2.0

           • Standalone apps              • Mu...
Point Solutions vs.
                                        Platforms




                               Source: THINKstra...
Shifting Adoption Patterns




       Unilateral End-User,            Enterprise-Wide
        SBU Adoption of             ...
SaaS Expands from Business
                                 Apps to IT Management
                 Back Office           F...
SaaS Moving into IT
                                   Management Market

                     Traditional NSM = ERP of th...
Managed Services/SaaS
                                   Convergence




              Managed Services             SaaS

...
Managed Services vs. SaaS

   Managed Services                            SaaS
        Provider assumes                   ...
The Convergence of
                               Managed Services & SaaS




©2008, THINKstrategies, Inc.                ...
SaaS Compliance
                               Solutions: Enviance

              Web-based environmental compliance solut...
Living in a Hybrid World


       Most enterprises will seek mix
       of on-premise & on-demand
       solutions.
      ...
Today’s Hybrids




©2008, THINKstrategies, Inc.               www.thinkstrategies.com
Slide 21
Changing Competitive
                                    Landscape


                                    &

              ...
Today’s New Enablers




©2008, THINKstrategies, Inc.                 www.thinkstrategies.com
Slide 23
Open Source: The Good,
                                   Bad and Ugly

       The Good
        •   Proliferation of tools...
Ad-Supported SaaS

           “iTunes of IT”
           250K users
           50,000 new users in
           last 2 months...
The Meaning of Community
                             in the SaaS Market

                           Real-time, aggregated...
Channel/Supply Chain
                                   Opportunities

 Legacy ISVs
                                      ...
New Channels
                                to Market?

           Banks

           Insurance Companies

           Reta...
On-Demand Services &
                               The IT Industry Inversion

                                      Futur...
Key Challenges Facing
                                 Established ISVs


                                    Re-architect...
No One Likes
                                    to Sell Services

                           Raises concerns about the pr...
Enterprise Expectations
                                & Challenges for SaaS

                  Can you provide a better ...
Summary & Conclusions

                    SaaS spreading.

                    Shift from point solutions to platform str...
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The Changing Economics of the SaaS Marketplace

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The Changing Economics of the SaaS Marketplace

  1. 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. 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. 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. 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. 5. SaaS Adoption Today Source: THINKstrategies/Cutter Consortium © 2007 ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 5
  6. 6. SaaS Deployment Plans Source: THINKstrategies/Cutter Consortium © 2007 ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 6
  7. 7. Welcome to Gartner’s ‘Slope of Enlightenment’ Gartner’s Hype Cycle You are here. ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 7
  8. 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. 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. 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. 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. 12. Point Solutions vs. Platforms Source: THINKstrategies/Cutter Consortium © 2007 ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 12
  13. 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. 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. 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. 16. Managed Services/SaaS Convergence Managed Services SaaS ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 16
  17. 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. 18. The Convergence of Managed Services & SaaS ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 18
  19. 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. 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. 21. Today’s Hybrids ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 21
  22. 22. Changing Competitive Landscape & & everdream & AimNetSolutions ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 22
  23. 23. Today’s New Enablers ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 23
  24. 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. 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. 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. 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. 28. New Channels to Market? Banks Insurance Companies Retailers Web companies PS Firms ©2008, THINKstrategies, Inc. www.thinkstrategies.com Slide 28
  29. 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. 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. 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. 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. 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

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