Babson College CIM Software-as-a-Service Presentation


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Presentation given to a CIO group at Babson College November 21, 2008, examining the rapid growth of the SaaS market and the IT/business implications of the on-demand services market.

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Babson College CIM Software-as-a-Service Presentation

  1. 1. Tracking the Growth of Software-as-a-Service Presented by, Jeff Kaplan Managing Director THINKstrategies [email_address] 781-431-2690
  2. 2. The Evolution of Man
  3. 3. Primary Drivers of SaaS <ul><li>Changing economic conditions </li></ul><ul><li>Changing competitive forces </li></ul><ul><li>Changing ecological concerns </li></ul><ul><li>Changing workplace requirements </li></ul><ul><li>Changing technologies </li></ul><ul><li>Changing priorities & sourcing policies </li></ul>
  4. 4. Today’s Perfect Storm The Economy Enabling Technologies Shifting Customer Attitudes
  5. 5. <ul><li>Deployment Challenges </li></ul><ul><ul><li>31.1% of SW projects cancelled before completed. </li></ul></ul><ul><ul><li>52.7% of projects cost nearly 190% of original estimates. </li></ul></ul><ul><li>Operational Costs </li></ul><ul><ul><li>Maintenance & management costs >10x original license fee. </li></ul></ul><ul><ul><li>Escalating hardware & staff support costs. </li></ul></ul><ul><ul><li>Over provisioning and under-utilization of SW licenses </li></ul></ul><ul><li>Economic/Budgetary Pressures </li></ul><ul><ul><li>Need to reduce IT costs and increase business benefits. </li></ul></ul><ul><ul><li>Need to increase utilization to gain greater ROI. </li></ul></ul>The Shortcomings of Legacy, On-Premise Apps
  6. 6. The Nicholas Carr Affect &quot;...Imagine what future generations will see when they look back at the current time...won't the way corporate computing is practiced today appear fundamentally illogical -- and inherently doomed?” “ The End of Corporate Computing” Nicholas Carr, The MIT Sloan Management Review, Spring 2005.
  7. 7. Changing Customer Expectations <ul><li>Old, </li></ul><ul><li>Capital Investment </li></ul><ul><li>Complexity, Customization </li></ul><ul><li>Reactive Maintenance </li></ul><ul><li>Response Time </li></ul><ul><li>Customer Support </li></ul><ul><li>Limited Responsibility </li></ul><ul><li>Outsourcing Alternatives </li></ul><ul><li>New, </li></ul><ul><li>Operating Expense </li></ul><ul><li>Simplicity, Utilization </li></ul><ul><li>Proactive Management </li></ul><ul><li>Ongoing Monitoring </li></ul><ul><li>Automated Delivery </li></ul><ul><li>Higher Accountability </li></ul><ul><li>Out-Tasking Options </li></ul>Enterprises Seeking to Generate Greater ROI at Lower TCO.
  8. 8. Shift from Outsourcing to Out-Tasking <ul><li>Businesses seeking functionality, not technology. </li></ul><ul><li>IT outsourcing deals have failed. </li></ul><ul><li>Selective outsourcing, or ‘out-tasking’ gaining attention. </li></ul><ul><li>SaaS & cloud computing is a form of out-tasking. </li></ul>
  9. 9. On-Demand Has Become Mainstream
  10. 10. Enabling Technologies Broadband networks Grid computing Blade technology Virtualization Web services & SOA Service provisioning Performance management
  11. 11. <ul><li>Networked applications </li></ul><ul><li>Enhanced user experience </li></ul><ul><li>Subscription pricing </li></ul><ul><li>Real-time analytics </li></ul><ul><li>Continuous enhancements </li></ul><ul><li>Self-provisioned services & toolkits </li></ul><ul><li>Aggregated data & benchmarks </li></ul>Defining SaaS
  12. 12. <ul><li>ASPs </li></ul><ul><li>Resold legacy applications </li></ul><ul><li>Upfront perpetual license </li></ul><ul><li>Remained inflexible </li></ul><ul><li>Limited availability </li></ul><ul><li>Single-instance, inefficient </li></ul>ASPs vs. SaaS <ul><li>SaaS </li></ul><ul><li>Net-native applications </li></ul><ul><li>Pay-as-you-go model </li></ul><ul><li>New functionality </li></ul><ul><li>Universal availability </li></ul><ul><li>Multi-tenant, scalable </li></ul>
  13. 13. Interest in SaaS Growing Source: THINKstrategies/Cutter Consortium % of Respondents Using SaaS 2007 32% 2008 62%
  14. 14. Welcome to Gartner’s ‘Slope of Enlightenment’ Gartner’s Hype Cycle You are here.
  15. 15. On-Demand Market Adoption Forecast Market Penetration 2010 2008 2006 2004 Innovators Early Adopters Mainstream Buyers Laggards
  16. 16. SaaS Expands from Front- to Back- to Inter-Office Apps BUSINESS APPLICATIONS CRM SFA … Collaboration SCM … ERP Finance … Front Office Inter Office Back Office SaaS Market ‘Gold Rush’
  17. 17. Top Ten Showplace Application Categories Source: SaaS Showplace 44 Messaging 46 eCommerce 47 Human Resource Management (HRM) 49 Marketing 55 Enterprise Resource Planning (ERP) 62 Project Management 67 Document Management 78 Accounting/Financial 80 Collaboration 103 Customer Relationship Management
  18. 18. Top Ten Showplace Industry Categories Source: SaaS Showplace 42 Software 43 Telecommunications/xSPs 55 Professional Services 63 Government 69 Retail 72 Healthcare 80 Technology 91 Manufacturing 102 Banking/Financial Services 110 SMBs
  19. 19. SaaS Expands from Business Apps to IT Management BUSINESS APPLICATIONS CRM SFA … Collaboration SCM … ERP Finance … Front Office Inter Office Back Office Security Systems Mgmt … Network Mgmt Remote Access … Data Protection Storage … IT Management
  20. 20. Why IT Wants SaaS <ul><li>Most IT organizations spend 75-80% of their time reacting to problems, keeping systems and software up and running. They would prefer to focus on more strategic business initiatives. </li></ul>
  21. 21. <ul><li>Traditional NSM = ERP of the IT World </li></ul><ul><ul><ul><ul><li>Too complicated </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Too expensive </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Too time-consuming </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Too ineffective </li></ul></ul></ul></ul><ul><ul><li>>40 IT/Application Mgmt solutions on the SaaS Showplace. </li></ul></ul>SaaS Penetrating IT Management Market
  22. 22. Managed Services/SaaS Convergence Managed Services SaaS
  23. 23. Managed Services vs. SaaS <ul><li>Managed Services </li></ul><ul><li>Provider assumes management responsibility </li></ul><ul><li>Sold on an per device basis </li></ul><ul><li>Focus on network/system availability & performance </li></ul><ul><li>SaaS </li></ul><ul><li>Provider delivers software functionality </li></ul><ul><li>Sold on a per user basis </li></ul><ul><li>Focus on application availability & performance </li></ul><ul><li>Quicker Time-to-Value </li></ul><ul><li>Lower TCO/Higher ROI </li></ul><ul><li>Shifts Burden to Provider </li></ul>
  24. 24. The Convergence of Managed Services & SaaS
  25. 25. Ad-Supported SaaS <ul><li>“ iTunes of IT” </li></ul><ul><li>250K users </li></ul><ul><li>50,000 new users in last 2 months </li></ul><ul><li>Advertisers has grown from 4 to 40 </li></ul><ul><li>Market Opportunity, </li></ul><ul><ul><li>SMB IT pro = $125,000 annual budget. </li></ul></ul><ul><ul><li>250k users = $32B in annual spend </li></ul></ul><ul><ul><li>Growing at more >$3B per month! </li></ul></ul>
  26. 26. Open Source: The Good, Bad and Ugly <ul><li>The Good </li></ul><ul><ul><li>Proliferation of tools/solutions </li></ul></ul><ul><ul><li>Accelerated Development </li></ul></ul><ul><ul><li>Concepts of Community </li></ul></ul><ul><li>The Bad and Ugly </li></ul><ul><ul><li>Lower barriers to entry </li></ul></ul><ul><ul><li>Escalating price competition </li></ul></ul>
  27. 27. A New Level of Value in the SaaS Market <ul><li>Dynamic toolkit clearinghouse </li></ul><ul><li>Continuous updates, new ideas </li></ul><ul><li>Real-time, aggregated data </li></ul><ul><li>Meaningful benchmark studies </li></ul><ul><li>Practical best practices forums </li></ul>
  28. 28. Shifting Adoption Patterns Unilateral End-User, SBU Adoption of SaaS Solutions Enterprise-Wide Acceptance and Adoption of SaaS
  29. 29. The Role of SaaS in SMBs and Enterprises <ul><li>Small = Fill Unmet Needs </li></ul><ul><li>Mid-Size = Fill Unmet Needs/Replace </li></ul><ul><li>Enterprise = Augment/Extend Capabilities </li></ul>
  30. 30. Size of SaaS Deployments Growing
  31. 31. SaaS Evolution SaaS 1.0 SaaS 2.0 <ul><li>Standalone point apps </li></ul><ul><li>Focus on ease of use/price </li></ul><ul><li>One size fits all, minimal customization </li></ul><ul><li>Horizontal applications </li></ul><ul><li>Limited interoperability </li></ul><ul><li>Emphasis on lower TCO </li></ul><ul><li>Specialized vendors </li></ul><ul><li>Combination of choices </li></ul><ul><li>Focus on added functionality </li></ul><ul><li>Multiple configurations, greater versatility </li></ul><ul><li>Vertical/industry solutions </li></ul><ul><li>Easier integration </li></ul><ul><li>Emphasis on higher ROI </li></ul><ul><li>Strategic sources </li></ul>
  32. 32. Moving from SaaS Apps to Cloud Computing Cloud Computing Services SaaS Apps
  33. 33. Rewiring the World, From Edison to Google <ul><li>“ 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.” </li></ul><ul><li>- Nicholas Carr </li></ul>
  34. 34. Cloud Computing: Today’s New Enablers
  35. 35. New Challenge: Cloud Computing Outages “ Amazon S3 Outage Rains On Cloud-computing Parade” “ Outages Force Cloud Computing Users To Rethink Tactics”
  36. 36. Key Customer Concerns & SaaS Industry Responses <ul><li>Concerns , </li></ul><ul><li>Reliability </li></ul><ul><li>Security </li></ul><ul><li>Customization </li></ul><ul><li>Compliance </li></ul><ul><li>Integration </li></ul><ul><li>Customer Support </li></ul><ul><li>Responses , </li></ul><ul><li>SLAs </li></ul><ul><li>Certifications </li></ul><ul><li>User Configurations </li></ul><ul><li>DR/BC </li></ul><ul><li>Connectors </li></ul><ul><li>Online/Pro Services </li></ul>
  37. 37. On-Demand Services & The IT Industry Inversion Services Technologies Past Future The IT Industry Inversion
  38. 38. Key Challenges Facing SaaS Vendors <ul><li>Re-architecting applications </li></ul><ul><li>Re-structuring revenue models </li></ul><ul><li>Repositioning marketing </li></ul><ul><li>Re-orienting sales/support staff </li></ul><ul><li>Surviving market shakeout </li></ul>
  39. 39. No One Likes to Sell Services <ul><li>Raises concerns about the product. </li></ul><ul><li>Complicates the sale/extends sales cycle. </li></ul><ul><li>Seldom properly incented. </li></ul><ul><li>Weak value proposition. </li></ul><ul><li>Poor track record. </li></ul>
  40. 40. Hybrid Model Pitfalls <ul><li>Balancing, </li></ul><ul><li>Multiple Offerings </li></ul><ul><li>Multiple Codes/Versions </li></ul><ul><li>Differing Buyers </li></ul><ul><li>Multiple Sales Channels/ Compensation Plans </li></ul><ul><li>Differing Revenue Recognition </li></ul>
  41. 41. Channel/Supply Chain Opportunities Legacy ISVs New SaaS Providers Enabling Technology Vendors <ul><li>Offshore SW Developers </li></ul><ul><li>3 rd party SW platforms </li></ul><ul><li>3 rd party HW systems </li></ul>xSPs <ul><li>Hosting companies </li></ul><ul><li>Carriers </li></ul>Channel Partners <ul><li>Distributors </li></ul><ul><li>VARs/Integrators </li></ul><ul><li>eCommerce Sites </li></ul>Corporate Customers Consumers
  42. 42. New Channels to Market? <ul><li>Banks </li></ul><ul><li>Insurance Companies </li></ul><ul><li>Retailers </li></ul><ul><li>Web companies </li></ul><ul><li>PS Firms </li></ul>
  43. 43. SaaS Ecosystems – The New Channel Jamcracker
  44. 44. Changing Competitive Landscape & & & AimNet Solutions ever dream
  45. 45. A Future View Software Services Business Services Information Services Market Evolution
  46. 46. Key Questions <ul><li>Do you have adequate networking capabilities? </li></ul><ul><li>Can you deploy SaaS more quickly, with less risk? </li></ul><ul><li>Can it give your employees a better user experience? </li></ul><ul><li>Can you gain productivity improvements? </li></ul><ul><li>Can you distribute information more effectively? </li></ul><ul><li>Can you make decisions more intelligently? </li></ul><ul><li>Can you measure performance more accurately? </li></ul><ul><li>Can you achieve a greater ROI at a lower TCO? </li></ul>
  47. 47. Summary & Conclusions <ul><li>SaaS spreading </li></ul><ul><li>IT supporting & adopting SaaS </li></ul><ul><li>Market entering ‘gold rush’ era </li></ul><ul><li>Make strategic sourcing decisions </li></ul><ul><li>Use classic evaluation criteria </li></ul><ul><li>Focus on reliability, flexibility & viability </li></ul><ul><li>Expect new levels of value </li></ul>
  48. 48. For More Information… <ul><li> </li></ul><ul><li> </li></ul><ul><li>[email_address] </li></ul>
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