Software as a service (SaaS) is a software application delivery model in which customers pay to access and use software functionality over a network through a hosted, web-native platform operated by the software vendor (either independently or through a third-party).
Not just a change in delivery model
Requires significant shift in thinking
Forces fundamental changes in thinking across the business
Changes many assumptions about being a successful software vendor
Software as a service (SaaS) Traditional Software Build Your Own On-Demand Utility Plug In, Subscribe Pay-per-Use
Product vs. Service Software as a Product Software as a Service Delivery Installed Hosted Development Longer cycle, “big bang” Short, continuous cycle Pricing Perpetual license + maintenance Subscription (all inclusive) Allocation Capitalized Expensed Additional Costs Installation, maintenance, customization, & upgrades Configuration Platform Multi-version Single Platform Updates Larger, less-frequent Shorter, frequent Sales Focus Close the deal Prove value in first 90 days Feedback Cycle Long Short Profits Initial sale Ongoing Success New license revenue Lack of churn
Network-based access to, and management of, commercially available (i.e., not custom) software
Activities that are managed from central locations rather than at each customer's site, enabling customers to access applications remotely via the Web
Application delivery that typically is closer to a one-to-many model (single instance, multi-tenant architecture) than to a one-to-one model, including architecture, pricing, partnering, and management characteristics.
We expect more customers to opt for term or subscription based licensing versus the traditional perpetual model and move toward outsourced solutions.
Very simply put, software in an On Demand world will change the way customers buy, vendors sell, and investors invest.
It is clear that the traditional software business model is unwinding. ‘ On demand’ is becoming the preferred method for licensing and deploying software. The impact on valuations and creating sustainable shareholder wealth are enormous.
The SaaS Market Opportunity WW Software On Demand Revenue 2005-2011: Comparison Of May 2006 And March 2007 Forecasts Worldwide Software On Demand Revenue, 2006 and 2011 Source: IDC Worldwide Software on Demand 2007-2011 Forecast Update and 2006 Vendor Shares: Sky's the Limit for On- Demand Providers," Doc # 207491, July 2007
But here is the question should be really asking
While the SaaS Market grows by $11.2B in the next 5 years
The overall Software Applications market will be growing by $51B
Your target customer is much bigger than their Web Browser
What if you could SaaS model to deliver what your customers want both inside and outside the browser?
SaaS Model vs ASP Model What’s Driving SaaS Viability? • Increasing broadband penetration • Improvements in remote access technologies • General increases in computing capacity and corresponding cost reductions • Virtualization technologies • Improvements in technologies for development of web-based applications
Comparison of business model Traditional packaged software Software as a service
Designed for customers to install, manage and maintain
Designed from the outset up for delivery as Internet-based services
Architect solutions to be run by an individual company in a dedicated instantiation of the software
Designed to run thousands of different customers on a single code
Comparison of business model Company name Traditional packaged software Software as a service
Fixing a problem for one customer fixes it for everyone
Streamlined, repeatable functionality via Web services, open APIs and standard connectors
Infrequent, major upgrades every 18-24 months, sold individually to each installed base customer
Frequent, "digestible" upgrades every 3-6 months to minimize customer disruption and enhance satisfaction
May use open APIs and Web services to facilitate integration, but each customer must typically pay for one-off integration work.
SaaS Requirements ITS satisfies this requirement Customer Application Requirements Vendor Platform Requirements Rich Functionality Comprehensive, Web 2.0 Support, Analytics Hosted Provisioning & Support Subscription Metering and Billing Integration Service Oriented Architecture (SOA) Security Identity Management & Data Security Low Cost Multi tenancy, Grid Support, Virtualization SLA RASP, Integrated Management Customizability Meta Data Driven Development No Lock in Open, Standards
Primary reasons for deploying SaaS vary by region. While Europe, the Middle East and Africa (EMEA) respondents cited total cost of ownership (TCO) as the main motivator, North America and Asia/Pacific participants focused on ease and speed of deployment
Most SaaS deployments for large companies begin without CIO knowledge or involvement
SaaS value propositions will vary greatly based on application market maturity
SaaS is not guaranteed to be less expensive than on-premises software