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.

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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  • 1. Tracking the Growth of Software-as-a-Service Presented by, Jeff Kaplan Managing Director THINKstrategies [email_address] 781-431-2690
  • 2. The Evolution of Man
  • 3. Primary Drivers of SaaS
    • Changing economic conditions
    • Changing competitive forces
    • Changing ecological concerns
    • Changing workplace requirements
    • Changing technologies
    • Changing priorities & sourcing policies
  • 4. Today’s Perfect Storm The Economy Enabling Technologies Shifting Customer Attitudes
  • 5.
    • Deployment Challenges
      • 31.1% of SW projects cancelled before completed.
      • 52.7% of projects cost nearly 190% of original estimates.
    • Operational Costs
      • Maintenance & management costs >10x original license fee.
      • Escalating hardware & staff support costs.
      • Over provisioning and under-utilization of SW licenses
    • Economic/Budgetary Pressures
      • Need to reduce IT costs and increase business benefits.
      • Need to increase utilization to gain greater ROI.
    The Shortcomings of Legacy, On-Premise Apps
  • 6. The Nicholas Carr Affect "...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. Changing Customer Expectations
    • Old,
    • Capital Investment
    • Complexity, Customization
    • Reactive Maintenance
    • Response Time
    • Customer Support
    • Limited Responsibility
    • Outsourcing Alternatives
    • New,
    • Operating Expense
    • Simplicity, Utilization
    • Proactive Management
    • Ongoing Monitoring
    • Automated Delivery
    • Higher Accountability
    • Out-Tasking Options
    Enterprises Seeking to Generate Greater ROI at Lower TCO.
  • 8. Shift from Outsourcing to Out-Tasking
    • Businesses seeking functionality, not technology.
    • IT outsourcing deals have failed.
    • Selective outsourcing, or ‘out-tasking’ gaining attention.
    • SaaS & cloud computing is a form of out-tasking.
  • 9. On-Demand Has Become Mainstream
  • 10. Enabling Technologies Broadband networks Grid computing Blade technology Virtualization Web services & SOA Service provisioning Performance management
  • 11.
    • Networked applications
    • Enhanced user experience
    • Subscription pricing
    • Real-time analytics
    • Continuous enhancements
    • Self-provisioned services & toolkits
    • Aggregated data & benchmarks
    Defining SaaS
  • 12.
    • ASPs
    • Resold legacy applications
    • Upfront perpetual license
    • Remained inflexible
    • Limited availability
    • Single-instance, inefficient
    ASPs vs. SaaS
    • SaaS
    • Net-native applications
    • Pay-as-you-go model
    • New functionality
    • Universal availability
    • Multi-tenant, scalable
  • 13. Interest in SaaS Growing Source: THINKstrategies/Cutter Consortium % of Respondents Using SaaS 2007 32% 2008 62%
  • 14. Welcome to Gartner’s ‘Slope of Enlightenment’ Gartner’s Hype Cycle You are here.
  • 15. On-Demand Market Adoption Forecast Market Penetration 2010 2008 2006 2004 Innovators Early Adopters Mainstream Buyers Laggards
  • 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. 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. 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. 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. Why IT Wants SaaS
    • 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.
  • 21.
    • Traditional NSM = ERP of the IT World
          • Too complicated
          • Too expensive
          • Too time-consuming
          • Too ineffective
      • >40 IT/Application Mgmt solutions on the SaaS Showplace.
    SaaS Penetrating IT Management Market
  • 22. Managed Services/SaaS Convergence Managed Services SaaS
  • 23. Managed Services vs. SaaS
    • Managed Services
    • Provider assumes management responsibility
    • Sold on an per device basis
    • Focus on network/system availability & performance
    • SaaS
    • Provider delivers software functionality
    • Sold on a per user basis
    • Focus on application availability & performance
    • Quicker Time-to-Value
    • Lower TCO/Higher ROI
    • Shifts Burden to Provider
  • 24. The Convergence of Managed Services & SaaS
  • 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!
  • 26. 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
  • 27. A New Level of Value in the SaaS Market
    • Dynamic toolkit clearinghouse
    • Continuous updates, new ideas
    • Real-time, aggregated data
    • Meaningful benchmark studies
    • Practical best practices forums
  • 28. Shifting Adoption Patterns Unilateral End-User, SBU Adoption of SaaS Solutions Enterprise-Wide Acceptance and Adoption of SaaS
  • 29. The Role of SaaS in SMBs and Enterprises
    • Small = Fill Unmet Needs
    • Mid-Size = Fill Unmet Needs/Replace
    • Enterprise = Augment/Extend Capabilities
  • 30. Size of SaaS Deployments Growing
  • 31. SaaS Evolution SaaS 1.0 SaaS 2.0
    • Standalone point apps
    • Focus on ease of use/price
    • One size fits all, minimal customization
    • Horizontal applications
    • Limited interoperability
    • Emphasis on lower TCO
    • Specialized vendors
    • Combination of choices
    • Focus on added functionality
    • Multiple configurations, greater versatility
    • Vertical/industry solutions
    • Easier integration
    • Emphasis on higher ROI
    • Strategic sources
  • 32. Moving from SaaS Apps to Cloud Computing Cloud Computing Services SaaS Apps
  • 33. 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
  • 34. Cloud Computing: Today’s New Enablers
  • 35. New Challenge: Cloud Computing Outages “ Amazon S3 Outage Rains On Cloud-computing Parade” “ Outages Force Cloud Computing Users To Rethink Tactics”
  • 36. Key Customer Concerns & SaaS Industry Responses
    • Concerns ,
    • Reliability
    • Security
    • Customization
    • Compliance
    • Integration
    • Customer Support
    • Responses ,
    • SLAs
    • Certifications
    • User Configurations
    • DR/BC
    • Connectors
    • Online/Pro Services
  • 37. On-Demand Services & The IT Industry Inversion Services Technologies Past Future The IT Industry Inversion
  • 38. Key Challenges Facing SaaS Vendors
    • Re-architecting applications
    • Re-structuring revenue models
    • Repositioning marketing
    • Re-orienting sales/support staff
    • Surviving market shakeout
  • 39. 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.
  • 40. Hybrid Model Pitfalls
    • Balancing,
    • Multiple Offerings
    • Multiple Codes/Versions
    • Differing Buyers
    • Multiple Sales Channels/ Compensation Plans
    • Differing Revenue Recognition
  • 41. Channel/Supply Chain Opportunities Legacy ISVs New SaaS Providers Enabling Technology Vendors
    • Offshore SW Developers
    • 3 rd party SW platforms
    • 3 rd party HW systems
    xSPs
    • Hosting companies
    • Carriers
    Channel Partners
    • Distributors
    • VARs/Integrators
    • eCommerce Sites
    Corporate Customers Consumers
  • 42. New Channels to Market?
    • Banks
    • Insurance Companies
    • Retailers
    • Web companies
    • PS Firms
  • 43. SaaS Ecosystems – The New Channel Jamcracker
  • 44. Changing Competitive Landscape & & & AimNet Solutions ever dream
  • 45. A Future View Software Services Business Services Information Services Market Evolution
  • 46. Key Questions
    • Do you have adequate networking capabilities?
    • Can you deploy SaaS more quickly, with less risk?
    • Can it give your employees a better user experience?
    • Can you gain productivity improvements?
    • Can you distribute information more effectively?
    • Can you make decisions more intelligently?
    • Can you measure performance more accurately?
    • Can you achieve a greater ROI at a lower TCO?
  • 47. Summary & Conclusions
    • SaaS spreading
    • IT supporting & adopting SaaS
    • Market entering ‘gold rush’ era
    • Make strategic sourcing decisions
    • Use classic evaluation criteria
    • Focus on reliability, flexibility & viability
    • Expect new levels of value
  • 48. For More Information…
    • www.SaaS-Showplace.com
    • www.thinkstrategies.com
    • [email_address]