Software Delivery Model

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Software Delivery Model

  1. 1. Software Delivery Models Myth: SaaS is the Software Delivery Model of the future Confirmed? Plausible? or Busted?
  2. 2. Terms • Software as a Service (SaaS) • Application Service Provider (ASP) • Monthly Recurring Revenue (MRR) • Annual Recurring Revenue (ARR)
  3. 3. SaaS Value – Mythical? Break it down into separate “myths” – SaaS software costs less than packaged software – SaaS can be implemented more quickly than packaged software – SaaS facilitates more frequent improvements / releases – SaaS facilitates faster corporate growth – SaaS software is more secure than packaged software
  4. 4. SaaS Value – Mythical? Break it down into separate “myths” – The cost of SaaS development is lower than that of packaged software – SaaS allows customers to focus on their core mission – SaaS provides the customer more control over the software – SaaS facilitates a better understanding of the user – SaaS companies have a higher valuation
  5. 5. What is SaaS • Define SaaS – SaaS is a model of software deployment where an application is hosted as a service provided to customers across the Internet. – Multi-tenant vs. Independent environments – Configure vs. Customize – Rent vs. Own – Centralized vs. Distributed
  6. 6. SaaS: The Elevator Pitch Fee Structure – All inclusive fees are steady and predictable – no large capital or expense outlay upfront – Vendor earns the customer business every day – Lower total cost of ownership – Healthy revenue model for the vendor, with longer term sustainability – Right-sized
  7. 7. SaaS: The Elevator Pitch Platform – Single platform facilitates horizontal integration and best of breed partnerships – You are always on the latest and greatest release – Highly secure – Scalable and performant
  8. 8. SaaS: The Elevator Pitch Focus – You focus on doing what you do best, allow the vendor to do the same Keys – Adoption – Retention – Clean AR – Scalability
  9. 9. SaaS: Maturity Levels • Level 1 – Ad-Hoc/Custom (ASP) Benefit – Server Consolidation • Level 2 – Configurable Benefit – Ease of Program Flexibility • Level 3 – Configurable, Multi-Tenant-Efficient Benefit – Horizontal integration, Lower Cost of Ownership • Level 4 – Scalable, Configurable, Multi-Tenant- Efficient Benefit – Scalability and Performance Source: Microsoft
  10. 10. SaaS: Licensing Models • Subscription-Based • Usage-Based • Transaction-Based • Value-Based (DAXKO) • Fixed-Fee
  11. 11. SaaS vs. Packaged: Fees • Packaged software fees are very unpredictable • Fees will spike for “tech refreshes” • SaaS fees are very predictable and are based upon usage
  12. 12. SaaS vs. Packaged: Revenue Example: Year over year packaged sales are much higher than SaaS sales, yet SaaS revenue wins out over time
  13. 13. SaaS vs. Packaged: Engineering Costs • SaaS Platform – Support one version of the product – Support one technology stack • Packaged Software – Support n versions of the product – Support multiple technology stacks • “SaaS vendors spend from 5% to 10% of revenues on R&D, well below the 10% to 22% at more traditional software companies” William Blair & Company, 2007
  14. 14. SaaS Myths: Cost SaaS software costs less than packaged software Myth busted, right?
  15. 15. SaaS Myths: Cost • What about: – Hosting costs? – Systems Engineer support? – Professional Services for upgrades? • Myth: SaaS software costs less than packaged software Myth Result: Plausible
  16. 16. SaaS Myths: Speed • SaaS can be implemented more quickly than packaged software Myth Result: Confirmed • SaaS facilitates more frequent improvements / releases Myth Result: Confirmed • SaaS facilitates faster corporate growth Myth Result: Busted
  17. 17. SaaS Myths: Security • SaaS software is more secure than packaged software Myth Result: Plausible
  18. 18. SaaS Myths: Customer / Control • SaaS allows customers to focus on their core mission Myth Result: Confirmed • SaaS facilitates a better understanding of the customer / user Myth Result: Confirmed • SaaS provides the customer more control over the software Myth Result: Busted
  19. 19. SaaS Myths: Valuation SaaS companies have a higher valuation William Blair & Company, 2007 Myth Result: Confirmed
  20. 20. SaaS Market Trends • AMR Research: SaaS Revenue $2 billion in 2006, up 25% from 2005 • Gartner: – $19.3 billion by 2010 – 25% of new business delivered via SaaS by 2011, up from 5% in 2005 • Aberdeen: 70% of 631 companies surveyed are looking at or planning to use SaaS William Blair & Company, 2007
  21. 21. SaaS is the Software Delivery Model of the future Myth Result: Confirmed
  22. 22. The End
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