Rainer Stropek                                          software architects gmbhBusiness Model                    Mail    ...
A business model describes the rationaleof how an organizationcreates, delivers, and captures value                       ...
Business Model Evolution                 Customer Segments                    Business Model                              ...
Business Model Evolution                 Customer Segments                             Business Model                     ...
Business Model Canvas
Business Model Evolution                 Customer Segments                             Innovation                         ...
Business Model Evolution                 Customer Segments                             Customer            CRM            ...
Business Model Evolution                                       Customer-Centric                                       What...
Customers   Pain, fears, frustration,…                                                         We will take care    „I wa...
Customers   Address new markets    Customer size           Make sure your entire organization                            ...
Design to Cost   Your product is not ready for the mass market just    because you make it cheaper   Different customer ...
Business Model Evolution                Customer Segments                              Value Proposition            CRM   ...
Value Proposition   Value proposition = Bundle of products and services   How can SaaS help to solve customers problems ...
Business Model Evolution                                                                     Example                      ...
Business Model Evolution                                          Classical Model                                         ...
Business Model Evolution                                          Outsourcing                                          Sof...
Business Model Evolution                                          Enriched Model                                          ...
Business Model Evolution                                          SaaS Single Tenancy                                     ...
Business Model Evolution                                          SaaS Multi Tenancy                                      ...
Business Model Evolution                Customer Segments                              Channel            CRM             ...
SaaS Channel Opportunities Make   it super-simple to evaluate our services Self-service via web Time-based freemium model...
SaaS Channel Threats   Different pricing model necessary    Fair dual licensing model is hard to find    What to do with ...
Business Model Evolution                Customer Segments                              CRM             CRM                ...
“We design the price tag first”Source: http://www.flickr.com/photos/gordon2208/6237893181Under Creative Commons License
CRM   End user support    You run the solution for the customer   Importance of self-service    Manual processes will ma...
Business Model Evolution                Customer Segments                              Revenue Stream            CRM      ...
Business Model Evolution                                                     Classical Model                              ...
Business Model Evolution                                                     Classical Model             V1               ...
Business Model Evolution                                                     SaaS Model                                   ...
Business Model Evolution                                                     SaaS Model             V1                    ...
Revenue Streams Pricing   model                                                       Low                                ...
Rating/Billing/Payment   Web portal for…                                                                                 ...
Business Model Evolution                Customer Segments                              Cost Structure            CRM      ...
Business Model Evolution                              Drives Costs                              (HW+SW)                   ...
“We design the price tag first”Source: http://www.flickr.com/photos/kalebdf/221051106Under Creative Commons License
Business Model Evolution                                Simple                                                            ...
Business Model Evolution                   Probability for a                                                              ...
Business Model Evolution                                                                                  StatisticsOperat...
Business Model Evolution                                                 Black Swan                                       ...
Mediokristan                                                           ExtremistanSources: http://www.flickr.com/photos/ak...
Business Model Evolution                Customer Segments                          Resources            CRM               ...
Skills   Developers    Software development tools might not change    Knowledge about new patterns and standard necessary...
Business Model Evolution                Customer Segments                          Activities and                         ...
Activities   Move to Platform as a Service if possible    Reduces operational costs and enables you to catch the long tai...
Sources: http://www.flickr.com/photos/massenpunkt/47436435/ http://www.flickr.com/photos/alancleaver/2370612355/Under Crea...
Monitoring and Scaling Relatively    easy to monitor overall load/health of compute  servers  Example: Azure Diagnostics ...
Business Model EvolutionApplication Performance Monitoring (APM)Example: Compuware Dynatrace
Monitoring and Scaling…   …directly influence your companys margin by dynamically right-sizing the    infrastructure   …...
Resources•   Microsoft Patterns & Practices    The Autoscaling Application Block•   Windows Azure PowerShell Cmdlets (Vers...
Business Model Evolution                            Tenant Separation                            decide about the right le...
Resources•   Windows Azure PowerShell Cmdlets (Version prio June 2012)•   Getting Started with Windows Azure PowerShell (J...
Disaster Recovery Backup/Recovery  Done by Microsoft  Protect your customers from unwanted deletions and modifications S...
Business Model Evolution                                                          Service Level                           ...
Resources   Business Model Canvas    http://en.wikipedia.org/wiki/Business_Model_Canvas    http://www.businessmodelgenera...
Business Model Evolution                 Customer Segments                      Summary                                   ...
Business Model Evolution                 Customer Segments                             Summary                            ...
Rainer Stropek                                  software architects gmbh                          Mail    rainer@timecockp...
Business Model Evolution - Why The Journey To SaaS Makes Sense
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Business Model Evolution - Why The Journey To SaaS Makes Sense

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SaaS is an important trend in the software industry. In this presentation Rainer Stropek from time cockpit (http://www.timecockpit.com) speaks about typical challenges that software vendors have to solve to successfully transfer from the classical licensing-based model to a SaaS strategy.

Note that the original slide deck contains quite a lot of animations. If you want to have the original PPTX file including all the animations, feel free to contact me via twitter (@rstropek).

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  • Introduction Rainer StropekSerial EntrepreneurPassion for software technologyFocus on data-oriented business appsStartup: COTS product “time cockpit”Mention SimonStory about starting time cockpitApprox. 15 years experience in IT consulting and custom software developmentNever thought that building a SaaS solution would be so challengingDifference between original business plan and realityDoes SaaS make sense for us?Not a silver bulletNot always ideal worldSaaS is a strategic option for the entire enterprise and not just a technical problem.Ask for interactivity
  • Let’s talk about what a “business model” is.Too much theory for my taste
  • Let’s talk about the 9 building blocks of a business modelCustomer segmentsWhich groups of people or organizations your enterprise aims to reach and serveDifferentiated by size, functionality, channel, price, etc.Value propositionBundle of products and servicesIn IT nearly every company offers software + servicesHas to fit customer segmentsChannelHow do you reach your customers?MarketingSales (evaluation)PurchaseDeliveryCustomer supportCRMMarketing and salesRetentionUpsellingRevenue streamPricingCash FlowPayment
  • ResourcesAssets required to make your business model workPhysicalFinancialIntellectualHumanActivitiesKey processes that make the business model workPartnersNetwork of suppliers and partnersStrategic alignment“Coopetition”Join venturesBuyer-supplier relationshipsCost structureIncurred costs
  • Customer demand innovationVery importantAs IT guys we often don’t like this kind of innovation.“You want to migrate from VB6 to a modern technology? I don’t care, give me feature X”Ford: If I’d asked my customers what they wanted, they’d have said a faster horse.CapabilitiesThis is where we are great in as IT guysResource-drivenIdea from Mario’s talk – this is what I meanFinance-drivenPricingReduced costsIn this talk we will evaluate how SaaS and the Cloud influence your business model.
  • Into which segments can we divide our customers?What is their need?How can we help them?Example: How did we analyze our market? Show business plan.Well, what did we forget?
  • Are we too cheap?Price sensitivity by customer segmentCan we/should we build different offerings/pricings for different segments?Make it even free?Are we ready for “free” and the long tail?MarketingConversion rate
  • Talk about experience with low-features competitors in the web.Customization vs. pre-built processes
  • What is the value proposition of SaaS?Do customers see SaaS as a “value”?Some want to have it on-prem
  • Talk about example of large customer in Switzerland
  • Talk about upcoming escrow serviceWhat happens if your company decides to no longer run tc?How can I get my data?
  • Talk about/demo hybrid solutionOffline-capable full clientOnline client
  • Talk about experiences with potential customers from india.Missing credit cardTalk about CLV exampleCustomer with 10 users asking for a custom extension
  • Demo scripting capabilities in tcKnowledge about the end userTalk about idea of integrating Yammer in TFM
  • Talk about how to handle customers who cannot pay.
  • Business Model Evolution - Why The Journey To SaaS Makes Sense

    1. 1. Rainer Stropek software architects gmbhBusiness Model Mail rainer@timecockpit.com Web http://www.timecockpit.comEvolution Twitter @rstropekWhy the journey to SaaS makessense Saves the day.
    2. 2. A business model describes the rationaleof how an organizationcreates, delivers, and captures value (source: Wikipedia)
    3. 3. Business Model Evolution Customer Segments Business Model Which customers do you serve? CRM Channels Revenue What is the value that you deliver Stream to your customers? Value Proposition Which communication, distribution, an d sales channels do you use? How do you establish and maintain the relationship with your customer? How does your value propositionBuilding Blocks of a Business Model result in revenue?What is a business model?
    4. 4. Business Model Evolution Customer Segments Business Model What are the key resources that CRM Channels Revenue you need? Stream What are the key activities you Value Proposition have to perform? Which activities do you acquire Resources Activities from outside? Cost How does your cost structure look Partners Structure like?Building Blocks of a Business ModelWhat is a business model?
    5. 5. Business Model Canvas
    6. 6. Business Model Evolution Customer Segments Innovation Customers might tell us about CRM Channels Revenue areas where they need Stream innovation Value Proposition New capabilities might enable new value propositions Resources Activities Different revenue or cost Cost structures might open new Partners markets Structure How can SaaS and CloudInnovation Computing influenceWhere does innovation come from? your business model?
    7. 7. Business Model Evolution Customer Segments Customer CRM Channels Revenue Stream Value Proposition Resources Activities Cost Partners StructureBuilding Blocks of a Business ModelWhat is a business model?
    8. 8. Business Model Evolution Customer-Centric What job does our customer needs to get done? Is it her job to run our software? What does our customer hear, feel, and think about SaaS and cloud computing?Customer Empathy MapTool developed by the company XPLANE Source: http://innovatus.org.uk/2012/01/empathy-maps/
    9. 9. Customers Pain, fears, frustration,… We will take care „I want to concentrate on my core competencies“ of that for you! „I have to be able to rely on that system“ Wants/needs SaaS reduces risk because you „Buying this expensive system is too risky for me“ pay for what you really need „I don‘t know our exact needs in the future“ Environment „Cloud is unsecure“ Does your customer trust you and/or your partners enough? „Our data must be under our control“
    10. 10. Customers Address new markets Customer size Make sure your entire organization is ready for that change New customer segments
    11. 11. Design to Cost Your product is not ready for the mass market just because you make it cheaper Different customer segments might have different functional needs Example: SAP Business ByDesign Source: http://www.flickr.com/photos/mava/2445734571/
    12. 12. Business Model Evolution Customer Segments Value Proposition CRM Channels Revenue Stream Value Proposition Resources Activities Cost Partners StructureBuilding Blocks of a Business ModelWhat is a business model?
    13. 13. Value Proposition Value proposition = Bundle of products and services How can SaaS help to solve customers problems or satisfy customer needs? Performance – make your solution available faster Customization – customized product while taking benefit from economy of scale/scope Price – we will get back to this later Cost – lower TCO of your solution because of specialization Risk reduction – trials, availability, security Accessibility – let more customers benefit from your solution Convenience – Make your solution easier to use
    14. 14. Business Model Evolution Example SaaS has always been a „no brainer“ On-premise technically possible but not wanted (strategic decision) How our „blue ocean“ has Massive changed/evolved: consequences on Extensibility and customization SaaS architecture is in our blue ocean We did not implement the „data validation“ feature yet Added support for online and offline workBlue Ocean StrategyMethod for developing the value proposition strategy
    15. 15. Business Model Evolution Classical Model Customer owns infrastructure Control over code and data Deployment is hardDeployment ModelsDifferent options for implementing SaaS
    16. 16. Business Model Evolution Outsourcing Software consumed as a service Customer still owns infrastructure Private CloudDeployment ModelsDifferent options for implementing SaaS
    17. 17. Business Model Evolution Enriched Model Software is enriched by (optional) cloud services Public services Backup Message BusDeployment ModelsDifferent options for implementing SaaS
    18. 18. Business Model Evolution SaaS Single Tenancy Infrastructure as a Service Server virtualization Escrow Service Code DataDeployment ModelsDifferent options for implementing SaaS
    19. 19. Business Model Evolution SaaS Multi Tenancy Dynamically scaling infrastructure PaaS Economy of scaleDeployment ModelsDifferent options for implementing SaaS
    20. 20. Business Model Evolution Customer Segments Channel CRM Channels Revenue Stream Value Proposition Resources Activities Cost Partners StructureBuilding Blocks of a Business ModelWhat is a business model?
    21. 21. SaaS Channel Opportunities Make it super-simple to evaluate our services Self-service via web Time-based freemium models Direct communication with operating departments Web (=self-service) might be an important (new) channel Make use of existing market places of cloud vendors The power of trust!
    22. 22. SaaS Channel Threats Different pricing model necessary Fair dual licensing model is hard to find What to do with existing customers („bring your license“ model)? Don‘t forget existing channels Cannibalization effects for existing partner network New sales compensation rules necessary Different revenue stream New revenue sharing model necessary New KPIs (Customer Lifetime Value instead of one-time revenue)
    23. 23. Business Model Evolution Customer Segments CRM CRM Channels Revenue Stream Value Proposition Resources Activities Cost Partners StructureBuilding Blocks of a Business ModelWhat is a business model?
    24. 24. “We design the price tag first”Source: http://www.flickr.com/photos/gordon2208/6237893181Under Creative Commons License
    25. 25. CRM End user support You run the solution for the customer Importance of self-service Manual processes will make your operational costs explode Co-creation and Community Customization and extensibility You „know“ the end user Establish a network of specialists Remember: Users can use your system less or turn away every single month Billing is an important part of your service offering
    26. 26. Business Model Evolution Customer Segments Revenue Stream CRM Channels Revenue Stream Value Proposition Resources Activities Cost Partners StructureBuilding Blocks of a Business ModelWhat is a business model?
    27. 27. Business Model Evolution Classical Model Licensing-based Maintenance fee TimeRevenue StreamHow does SaaS influence the revenue stream?
    28. 28. Business Model Evolution Classical Model V1 Licensing-based Maintenance fee Licensing & Maintenance Revenue TimeRevenue StreamHow does SaaS influence the revenue stream?
    29. 29. Business Model Evolution SaaS Model Subscription fee or usage fee Revenue stream can be different month by month Entirely new billing process is needed Micro- or mini-payments Handle defaulting customers Time Existing market places and services might helpRevenue StreamHow does SaaS influence the revenue stream?
    30. 30. Business Model Evolution SaaS Model V1 Subscription fee or usage fee TimeRevenue StreamHow does SaaS influence the revenue stream?
    31. 31. Revenue Streams Pricing model Low implementation Subscription-based and/or usage-based effort Minimum fee/usage Rebates, flat fees Fair use policies, limits Complex pricing model Rating, billing, payment Organization has to be ready for small invoices/payments
    32. 32. Rating/Billing/Payment Web portal for…  Fraud detection …registration of new users (has to handle very sensitive credit card data  has to be stored Infrastructure for credit checking and fraud detection; examples are… safely and securely, too!) …credit card checking …maintaining customer billing data (e.g. customer changes address or credit card provider) …check of credit ranking for users …cancelling accounts or users  Support infrastructure for rating/billing/payment issues Infrastructure for rating Measure usage Rage usage with rates/unit  Alternatives Additional rating logic will be necessary; examples: Mechanisms for sales discounts (e.g. introductory offer)  Alternatives for building such a system from scratch could be: Buying an existing billing system (expensive; does only make sense if customer needs such Infrastructure for billing a system in other areas, too) Creation of invoices (in total for accounting and itemized bills for checking the correctness) Handle payments with payment partners (e.g. payment via phone invoice  difficult Sending out invoices (electronically with/without signature, printed) because such contracts have to be maintained country by country) Storing invoices internally. Use existing SaaS payment solutions (e.g. PayPal; difficult with pay-per-use) Infrastructure for payment; options could be: Credit card payments including mechanisms for handling payment cancellations, invalid credit cards (e.g. expired cards), etc. Payments via online payment solution like PayPal Payment with vouchers (e.g. voucher that an end user received with hardware) Account/balance infrastructure (debit system instead of credit system; example: Skype) E.g. what to do with remaining balance if user cancels his account?
    33. 33. Business Model Evolution Customer Segments Cost Structure CRM Channels Revenue Stream Value Proposition Resources Activities Cost Partners StructureBuilding Blocks of a Business ModelWhat is a business model?
    34. 34. Business Model Evolution Drives Costs (HW+SW) Costs Fluctuating loadIT Capacity Costs of data center resources TCO for customer Resources Dynamic resource allocation Compute Drives Storage Revenue/Value Bandwidth Time … Cost Structure How does SaaS influence the cost structure?
    35. 35. “We design the price tag first”Source: http://www.flickr.com/photos/kalebdf/221051106Under Creative Commons License
    36. 36. Business Model Evolution Simple Design to Costs ImplementationOperational Costs/RGU [€] Strategic decision, not a technical decision Highly optimized Windows Azure Calculator solution Few large customer s Many small customers Development Costs [€] Cost Structure How does SaaS influence the cost structure?
    37. 37. Business Model Evolution Probability for a customer of being on this side of the bell Average Customer Rule of Five curve? 50%Operational Costs/RGU [€] There is about 93% Probability that a probability that the median second customer is also on this side of the (and mean) of the entire bell curve? population is between the 50% * 50% = 25% highest and the lowest values of a sample of five Prerequisite: Gaussian distribution Probability that five customers in a row are on this side of the bell curve? Estimating Costs 50% * 50% * 50% * 50% * 50% = 3,125% How to estimate costs for SaaS?
    38. 38. Business Model Evolution StatisticsOperational Costs/RGU [€] Statistics can be dangerous! Endless potential for e.g. fraud, EDoS Natural minimum Estimating Costs How to estimate costs for SaaS?
    39. 39. Business Model Evolution Black Swan You cannot predict the future exactly We do not live in the asymptote, we live in the real lifeBlack Swanhttp://www.flickr.com/photos/essjay/224318029/Under Creative Commons License
    40. 40. Mediokristan ExtremistanSources: http://www.flickr.com/photos/akc77/3370167184/, http://www.flickr.com/photos/thomashawk/337323578/Under Creative Commons License
    41. 41. Business Model Evolution Customer Segments Resources CRM Channels Revenue Stream Value Proposition Resources Activities Cost Partners StructureBuilding Blocks of a Business ModelWhat is a business model?
    42. 42. Skills Developers Software development tools might not change Knowledge about new patterns and standard necessary (e.g. federated identity, programming for clusters, dynamic infrastructure, messaging, etc.) Architects and designers Understanding of SaaS and especially multi-tenancy Design to cost Designs that make use of PaaS offerings Tools From software vendor to service operator (e.g. monitoring, scaling, operations dashboard, etc.)
    43. 43. Business Model Evolution Customer Segments Activities and Partners CRM Channels Revenue Stream Value Proposition Resources Activities Cost Partners StructureBuilding Blocks of a Business ModelWhat is a business model?
    44. 44. Activities Move to Platform as a Service if possible Reduces operational costs and enables you to catch the long tail Standardization and automation rules Reduces the effort for upgrades and drives continuous innovation If something is hard – do it more often! Develop and IT operations practice Operating a multi-tenant SaaS solution needs specific IT operation skills Offer a level of operational excellence that exceeds your customers‘ expectations
    45. 45. Sources: http://www.flickr.com/photos/massenpunkt/47436435/ http://www.flickr.com/photos/alancleaver/2370612355/Under Creative Commons License
    46. 46. Monitoring and Scaling Relatively easy to monitor overall load/health of compute servers Example: Azure Diagnostics gathers data System Center Operation Manager or 3rd party tools for monitoring Harder to monitor end-to-end performance for a certain user/tenant Application-level logging 3rd party APM tools like DynaTrace
    47. 47. Business Model EvolutionApplication Performance Monitoring (APM)Example: Compuware Dynatrace
    48. 48. Monitoring and Scaling… …directly influence your companys margin by dynamically right-sizing the infrastructure …cares for great user experience by scaling up/out whenever necessary …gathers the base data to enable usage-based billing …is used to enforce usage limits …helps monitoring fair use policies etc.
    49. 49. Resources• Microsoft Patterns & Practices The Autoscaling Application Block• Windows Azure PowerShell Cmdlets (Version prio June 2012)• Getting Started with Windows Azure PowerShell (June 2012 Version)• System Center Monitoring Pack for Windows Azure Applications• MSDN: Collecting Logging Data by Using Windows Azure Diagnostics• MS TechNet: How to Shard with SQL Azure• 3rd party tools – AzureWatch – opstera – Compuware DynaTrace – redgate Cloud Services – Cerebrata Diagnostics Manager
    50. 50. Business Model Evolution Tenant Separation decide about the right level of sharing Influences security Influences systems management Influences operational costs Example: Windows Azure Mobile ServicesTenant SeparationHow to secure tenant data
    51. 51. Resources• Windows Azure PowerShell Cmdlets (Version prio June 2012)• Getting Started with Windows Azure PowerShell (June 2012 Version)• MSDN: How to: Run Partially Trusted Code in a Sandbox• MSDN: Managing Application Pools in IIS 7• Federations in SQL Azure• 3rd party tools – Cerebrata Cloud Storage Studio
    52. 52. Disaster Recovery Backup/Recovery Done by Microsoft Protect your customers from unwanted deletions and modifications Service Level Azure‘s SLA is not silver bullet Take extra precautions if necessary
    53. 53. Business Model Evolution Service Level Secure by default Cluster by default Bring your application and data to your customers Load balancing/failover across data centersService LevelHow to raise the service level of your SaaS application
    54. 54. Resources Business Model Canvas http://en.wikipedia.org/wiki/Business_Model_Canvas http://www.businessmodelgeneration.com/ Amazon: A. Osterwalder, Y. Pigneur: Business Model Generation Customer Empathy Map https://www.google.at/search?q=xplane+customer+empathy+map http://innovatus.org.uk/2012/01/empathy-maps/ Blue Ocean Strategy http://en.wikipedia.org/wiki/Blue_Ocean_Strategy http://www.blueoceanstrategy.com/ Books Hubbard: How To Measure Anything Taleb: Der Schwarze Schwan
    55. 55. Business Model Evolution Customer Segments Summary With SaaS you might reach new CRM Channels Revenue customer segments Stream Value proposition Value Proposition = Products + Service SaaS helps you to establish new sales channels Your customers become subscribers Prepare for changes in your revenue streamSummaryWhat did we cover?
    56. 56. Business Model Evolution Customer Segments Summary Development tools stay the same CRM Channels Revenue but your architecture will be Stream different Value Proposition You have to develop new skills regarding operating your SaaS solution Resources Activities Cost Build on a PaaS infrastructure Partners whenever possible Structure Optimization is sexy again!SummaryWhat did we cover?
    57. 57. Rainer Stropek software architects gmbh Mail rainer@timecockpit.comQ&A Web Twitter http://www.timecockpit.com @rstropekThank you for coming. Saves the day.

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