Overcoming the Organizational Barriers to Transforming Your Software Business into an On-Demand Company Presented by, Jeff Kaplan Managing Director THINKstrategies [email_address] 781-431-2690

Agenda State of SaaS Key Market Drivers/Trends Market Opportunities/Challenges Migrating to SaaS Key Operational Challenges Industry Best Practices

State of SaaS

Key Market Drivers/Trends

Market Opportunities/Challenges

Migrating to SaaS

Key Operational Challenges

Industry Best Practices

Primary Drivers of SaaS Changing competitive forces Changing workplace requirements Changing economic & ecological conditions Changing technologies Changing priorities & sourcing policies

Changing competitive forces

Changing workplace requirements

Changing economic & ecological conditions

Changing technologies

Changing priorities & sourcing policies

An Equation for Greater Market Opportunities Economy Uncertainty Tighter Budgets Greater SaaS Opportunities + =

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 Multidimensional platforms Focus on added functionality Multiple configurations, greater versatility Vertical/industry solutions Easier integration Emphasis on higher ROI

Standalone point apps

Focus on ease of use/price

One size fits all, minimal customization

Horizontal applications

Limited interoperability

Emphasis on lower TCO

Multidimensional platforms

Focus on added functionality

Multiple configurations, greater versatility

Vertical/industry solutions

Easier integration

Emphasis on higher ROI

Shifting Adoption Patterns Unilateral End-User, SBU Adoption of SaaS Solutions Enterprise-Wide Acceptance and Adoption of SaaS

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’

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

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

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

Changing Competitive Landscape & & & AimNet Solutions ever dream

Cloud Computing: Today’s New Enablers

New Challenge: Cloud Computing Outages “ Amazon S3 Outage Rains On Cloud-computing Parade” “ Outages Force Cloud Computing Users To Rethink Tactics”

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

The Good

Proliferation of tools/solutions

Accelerated Development

Concepts of Community

The Bad and Ugly

Lower barriers to entry

Escalating price competition

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!

“ 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!

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

Real-time, aggregated data

Meaningful benchmark studies

Practical best practices forums

Continuous updates, new ideas

Dynamic toolkit clearinghouse

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

Concerns ,

Reliability

Security

Customization

Compliance

Integration

Customer Support

Responses ,

SLAs

Certifications

User Configurations

DR/BC

Connectors

Online/Pro Services

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?

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?

On-Demand Services & The IT Industry Inversion Services Technologies Past Future The IT Industry Inversion

Key Challenges Facing Established ISVs Re-architecting applications Re-structuring revenue models Repositioning marketing Re-orienting sales/support staff Reducing operating costs

Re-architecting applications

Re-structuring revenue models

Repositioning marketing

Re-orienting sales/support staff

Reducing operating costs

SaaS Lifecycle Requirements User Centricity Agile Development Transaction Mgmt System Security Certifications Service Orientation Professional Services Online Procurement Try & Buy Trials Tele-Sales Web/Search Marketing Service Delivery Infrastructure Ecosystem of Partners Web Support SLAs

SaaS vs. Legacy SW Economics Cost of Goods Sold (COGS) R&D SG&A EBITDA Source: McKinsey, May 2007

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.

Raises concerns about the product.

Complicates the sale/extends sales cycle.

Seldom properly incented.

Weak value proposition.

Poor track record.

Living in a Hybrid World Most enterprises will seek mix of on-premise & on-demand solutions. Users prefer choice. Users seeking on-demand/on-premise integration. ‘ Applets’, Appliances, etc. will permit off-line use and synchronization.

Most enterprises will seek mix of on-premise & on-demand solutions.

Users prefer choice.

Users seeking on-demand/on-premise integration.

‘ Applets’, Appliances, etc. will permit off-line use and synchronization.

Hybrid Model Pitfalls Balancing, Multiple Offerings Multiple Codes/Versions Differing Buyers Multiple Sales Channels/ Compensation Plans Differing Revenue Recognition

Balancing,

Multiple Offerings

Multiple Codes/Versions

Differing Buyers

Multiple Sales Channels/ Compensation Plans

Differing Revenue Recognition

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

Offshore SW Developers

3 rd party SW platforms

3 rd party HW systems

Hosting companies

Carriers

Distributors

VARs/Integrators

eCommerce Sites

SaaS Ecosystems – The New Channel Jamcracker

New Channels to Market? Banks Insurance Companies Retailers Web companies PS Firms

Banks

Insurance Companies

Retailers

Web companies

PS Firms

Corporate Positioning Roadmap Technical Features/ Solution Differentiators Strategic Vision/ Business Benefits Competitive Advantages Success Factors: Compelling Value Proposition Effective Mktg. Messages Defined Market Focus Unique Technical Competencies Strong Products/Solutions Solid Customer References Articulate Spokespeople Targeted Press/Analysts Consistent Internal/External Communications Continuous/Aggressive Effort

Success Factors:

Compelling Value Proposition

Effective Mktg. Messages

Defined Market Focus

Unique Technical Competencies

Strong Products/Solutions

Solid Customer References

Articulate Spokespeople

Targeted Press/Analysts

Consistent Internal/External Communications

Continuous/Aggressive Effort

THINKstrategies’ SaaS Balanced Scorecard Target Market Segmentation Competitive Landscape Corporate Management Functional Capabilities & Features Solution Packaging Pricing & Revenue Realization Service Delivery Platform & Architecture Security and Availability Assurance Service Provisioning, Billing and Metering Contracting, SLAs and Reporting Sales Strategies and Skills Strategic Partnering/ Ecosystem Strategies Marketing and Positioning Customer Support Capabilities Financing and Capital Structure

Target Market Segmentation

Competitive Landscape

Corporate Management

Functional Capabilities & Features

Solution Packaging

Pricing & Revenue Realization

Service Delivery Platform & Architecture

Security and Availability Assurance

Service Provisioning, Billing and Metering

Contracting, SLAs and Reporting

Sales Strategies and Skills

Strategic Partnering/ Ecosystem Strategies

Marketing and Positioning

Customer Support Capabilities

Financing and Capital Structure

Key Characteristics of a Winning SaaS Team CEO – Visionary, but disciplined CFO – Disciplined, and flexible CMO – Thought-leader, but focused CTO – Knowledgeable, yet practical VP, Sales – Persistent, and creative Product Development – Agile, and service-oriented Sales – Service-oriented, not product-centric Support – Business-oriented, not technical

CEO – Visionary, but disciplined

CFO – Disciplined, and flexible

CMO – Thought-leader, but focused

CTO – Knowledgeable, yet practical

VP, Sales – Persistent, and creative

Product Development – Agile, and service-oriented

Sales – Service-oriented, not product-centric

Support – Business-oriented, not technical

Can You Take Your Team Into The Future? Software Services Business Services Information Services Market Evolution

For More Information… www.SaaS-Showplace.com www.thinkstrategies.com [email_address]

www.SaaS-Showplace.com

www.thinkstrategies.com

[email_address]