Running a World Class SaaS Organization


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by Dr. Richard Northing, SVP of Global Services, Flexera Software Presented at SoftSummit 2010

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Running a World Class SaaS Organization

  1. 1. Running a W ld ClR i World-ClassSaaS OrganizationDr. Richard NorthingSVP of Global ServicesFlexera Software
  2. 2. Agenda• SaaS Market Overview and Trends• SaaS as a Business Transformation for Incumbents• Running a World Class SaaS Organization • Challenges g • Opportunities• Best Practices to Consider• Let’s Dispel a few Myths 2
  3. 3. Industry Trend Summary1. Pressure on businesses for less-capital-intensive alternatives and opportunities to operationalize costs2.2 Widespread use of SaaS in companies of all sizes legitimizes the model3. Rising maintenance fees from the "megavendors," such as SAP and Oracle4. Faster time to market and more-rapid ROI demand reduced deployment times5.5 Financial markets favor investments in vendors with predictable subscription revenue models6. Increased availability of broadband extends the viability of Web-based solutions globally7. Opportunities exist in submarket segments, specific verticals, and within underserved small or midsize business (SMB) market8.8 Increasing functional sophistication of SaaS vendors — "standardized" user experience standardized is now inaccurate9. Line-of-business buyers, constrained budgets and IT resources and a desire for rapid deployment pressure the on-premises model10. The market is continually shifting as on-premises vendors acquire on-demand niche players; market leaders extend reach, major new entrants challenge leaders 3
  4. 4. SaaS and Cloud Computing Market Segments Cloud Applications Cl d A li ti Software as a Service (SaaS) Packaged Software High-Tech ERP, CRM, Virtual Appliances Manufacturers Email, Pure-play SaaS Software + Services for Packaged SW Virtual Appliances pp Collaborative C ll b ti Apps Cloud Platform Platform as a Service (PaaS) App Development APIs App D A Development, l t Web Infrastructure, Data Warehousing Cloud Infrastructure Infrastructure as a Service (IaaS) Servers, , Networking, StorageSources: Flexera Software analysis, based on IDC and Gartner
  5. 5. SaaS and Cloud Computing Market CAGR 20% CAGR 39% CAGR 27% Source: IDC, May 2010 5
  6. 6. Packaged Software Incumbents vs. Pure-Play SaaS Pure-play Pure play SaaS Leaders Source: Ray Wang, March 2010
  7. 7. Packaged Software Incumbents vs. Pure-Play SaaS• Incumbents: How can you transform • Pure-play SaaS Providers: How do your business to leverage SaaS and you run a profitable SaaS operation Cloud Cl d computing t d i a slow- ti trends in l when growing at b k h i t breakneck speeds? k d ? growth environment?• Packaged Software Market • Pure-play SaaS Market – 2010 Market Size $300B – 2010 Market Size $10B – 2010-11 Growth Rate ~ 5% 2010 11 – 2010-11 Growth Rate ~ 25% 2010 11 – Strategic Imperative 7
  8. 8. What are Incumbents Thinking?1 Augment (S+S)2 Accelerate3 Abandon Other responses: “No plans for cloud computing”Source: Flexera Software Virtualization and Cloud Computing Business Model Trends Survey, June 2010
  9. 9. Software + Service to Accelerate Time to Benefits Mathworks Parallel Computing Toolbox (Desktop) + MATLAB Distributed Computing Server (in the Cloud) • Program on the desktop • Compute in the cloudSource: Company website 9
  10. 10. Software + Service: Augmenting CAD SoftwareAutodesk Revit (Desktop) + Autodesk Seek (SaaS app) • Design on the desktop • Search for parts online (stored in Amazon S3)Source: Company website and Youtube videos 10
  11. 11. Why is SaaS a Business Transformation forIncumbents?ChallengesSwitching from the “cocaine” of perpetual license revenue to deferred cocaine”subscription revenue is a major business transformationOthers: • Revenue recognition • Contractual SLAs • Security and data privacy • Availability and scalability • Sales compensation 11
  12. 12. Making the Transition• Build vs. rent?• What building blocks are available?• Plan for scalability 12
  13. 13. Business Advantages of SaaS• Solve the customer’s full business problem vs. just technical/functional needs• Better understand the customer – Behaviors More than 95% of SaaS – Usage Patterns implementations do not – Ceate Up-Sell and Cross-Sell Opps use a large enterprise• Deploy new capabilities faster and incrementally external service provider (ESP)/system• Faster, self-service implementations integrator*• Technology exchanges and the SaaS ecosystem• All customers on single release - lower support and engineering costs• Recurring revenue model! Recurring Revenue Model * Source: Gartner 2010 13
  14. 14. Cross-sell and Up-SellAt Login Via Email 14
  15. 15. Usage Report 15
  16. 16. Running a Successful SaaS Organization Total Cost of Service for SaaS Provider Total Cost of Ownership for End Customer Source: “SaaS Model Economics 101”, Joel York/Chaotic Flow 16
  17. 17. SaaS Operations Best Practices1.1 Develop clear SLA around availability and performance • Ensure all departments understand commitments/obligations. Avoid deviation from standard.2. IT operations must be customer and business-aware • By understanding the value proposition IT Operations can plan and react accordingly3. Build architecture to scale and support SLAs • Allow real time software deployment and maintenance4.4 Stringent controls around software deployment • Customer facing change control5. Build high touch customer management model • Subscription renewals will drive revenue growth6. Develop Sales Compensation plans that match business plan • Are multi-year deals important? What are goals of SaaS business vs. perpetual7.7 Use knowledge of customers behavior to drive roadmap and upsell • You know so much more about your customer than for on premise software8. Enable self evaluation, self start up wherever possible • S b i ti renewals will d i revenue growth Subscription l ill drive th9. Make the solution “open” though comprehensive APIs • Customer adoption will be higher through ease of data input and retrieval 17
  18. 18. SaaS Myths• SaaS costs more in the long run than comparable on-premises software – Usually the result of comparing apples and oranges…such as comparing a SaaS model that has fees tied to usage (e.g. $ g ( g $/email account/month for corporate e- p mail) to an on-premise product that is monetized through a perpetual license ($/mail server). Also consider ongoing support and maintenance.• Risky to have critical information and IP located offsite, outside my firewall – The availability, security and data archival operations provided my the leading availability SaaS players are typically far superior to that provided by the average enterprise IT organization. Backed with SLAs, validated through vendor selection.• Little opportunity for Professional Services in SaaS model – Customer self-evaluation /startup and the availability of abundant APIs reduces the need for integration services. But deep knowledge of customer behavior services provides opportunity for strategic and business process consulting. 18
  19. 19. Questions? Dr. Richard Northingrnorthing@flexerasoftware.comrnorthing@flexerasoftware com
  20. 20. The SaaS Market 25% Growth 25% Penetration (CAGR) of $220 Billion Software Industry by 2011 $40.5 $40 B 25% $13.1B 2009 2014 20