Cloud 'Brokers' Can Help ISVs Move To SaaS


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A new type of cloud provider -- a cloud broker -- can deliver "solutions as a service" to help ISVs transition to SaaS with the least possible risk, while protecting their margins.

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Cloud 'Brokers' Can Help ISVs Move To SaaS

  1. 1. • Cognizant 20-20 InsightsCloud ‘Brokers’ Can HelpISVs Move to SaaS Executive Summary but it also allows them to reduce or increase their software purchases as their needs fluctuate. Many large organizations are purchasing software as a service (SaaS) rather than buying However, SaaS requires ISVs to transform from and hosting software internally. Industry research- software developers to services providers. From an er International Data Corp. says worldwide sales operational perspective, this requires new capa- of public IT cloud services will reach $55.5 billion bilities, such as meeting service level agreements, in 2014, a compound annual growth rate (CAGR) establishing real-time usage monitoring and of 27.4%. But for independent software vendors billing capabilities and meeting strict security (ISVs) that built their business around the tradi- requirements. tional model of selling licenses and maintenance agreements, moving to SaaS involves wrenching The robust infrastructure required to provide SaaS changes in everything from their business model,1 services 24x7 requires a substantial investment. to their development strategies and their own IT The business challenges are even greater, ranging requirements. A new type of cloud provider, a cloud from the dramatically lower margins provided by broker, can deliver new “solutions as a service” SaaS, to changes in cash flow and pricing models, to help ISVs transition to SaaS with the least to requirements for customer support. possible risk, while protecting their margins. Faced with all these challenges, and because there This white paper will explore the business and are no standard pricing models, ISVs should try technology challenges for ISVs moving to a various SaaS business models before committing SaaS model and highlight how cloud brokers can to a full build-out of SaaS business processes and overcome many of them by providing entitlement, technology infrastructure. They might, for example, analytical, billing/payment and security services. begin with a free version with limited features, released to a limited customer set, to establish a Major Challenges presence in the market and begin getting feedback SaaS turns the traditional model of software deliv- while aligning their internal processes with a sub- ery on its head. Rather than purchasing licenses, scription model. Given this incremental, experi- paying an annual maintenance fee for upgrades mental approach, it is usually easier and more and support and running applications in-house, cost-effective to test the market using a cloud SaaS allows organizations to buy only the number broker that can provide the platforms and capabili- of “seats” they require at any time. This is not only ties for these early rollouts. This means less capital less expensive than the traditional license model, spending and internal change management for cognizant 20-20 insights | june 2011
  2. 2. the ISV, enabling the vendor to move to SaaS as Because pricing is based on specific features easily and profitably as possible. rather than overall modules, this requires more granular real-time tracking of the number The Role of Cloud Brokers of users than the traditional license-based A cloud broker is an intermediary between the model. SaaS also requires complex entitle- ISV and various cloud providers. It helps the ISV ment models because vendors often lock in choose the platform or platforms that best suit its long-term contracts (yearly or multi-year) but needs; deploy and integrate applications across bill on a monthly basis. multiple clouds; and/or enable the ISV to move When a cloud broker provides an entitlement between cloud platforms. By sourcing services and service, it maintains a database of end users, capabilities through cloud the specific modules, the functions or data By sourcing services brokers, the ISV can focus each is entitled to access and the links toand capabilities through on its core competency of understanding and provisioning systems to ensure that only the proper entitlements are granted. The benefits cloud brokers, the meeting customer needs for the ISV include lower cost of operations ISV can focus on its with compelling software (compared with implementing this capability solutions. core competency of in-house), more assured contract compliance and less lost revenue. For the customer, the understanding and A “cloud broker” can benefits include reduced risk of non-compli- add value through verti- meeting customer cal solutions, based on its ance and greater flexibility in changing the needs with compelling knowledge of the specific amount and type of services it purchases as its needs evolve. software solutions. industry the ISV is target- ing. The broker can also These services could include everything from provide functions required across verticals, such managing user rights configuration and the as entitlement, subscription management and updating of provisioning information, through billing. Additionally, the broker can take respon- initial provisioning and onboarding, usage mon- sibility for operational functions that were not itoring and analytics, billing and subscription required, or were not as critical, in the earlier management. By having more accurate, real- license-based delivery model. time availability of information about users’ access rights, as well as real-time visibility into Here are some examples of the “services as a provisioning, ISVs can ensure that users’ access solution” that brokers can offer, spanning the rights match what they have paid for. SaaS value cycle, from the creation of the service, through consumption and billing. • Analytics Service: The analysis of large amounts of complex data, whether to • Entitlement Service: ISVs traditionally relied identify hidden costs or opportunities or for on per-module licensing models and software new product development, often requires audits to ensure that the customers to invest in expensive, proprietary systems that sit idle between peak demand A cloud-based appropriate the modules users access number of periods. A cloud-based analytics solution as a analytics solution and functions for which service from a cloud broker could significantly as a service from a the customer paid. The reduce costs for the customer, while serving as a complementary revenue stream for the ISV. cloud broker could real-time, dynamic nature of SaaS requires new capa- To use such a service, a customer would copy a significantly reduce bilities, such as real-time relatively compact, un-indexed data set to the costs for the customer, usage tracking, to ensure cloud environment, anonymizing fields where while serving as a the ISV receives the proper revenue, while allowing privacy and compliance require it. Once in the cloud, the data is teased apart to make analysiscomplementary revenue customers to increase or easy and fast by creating many indexes along stream for the ISV. reduce their services, as the various columns of the data or by dividing needed. These changes the analysis. Once the results are generated, make entitlement processes more complicat- the data is brought back in-house. Anonymized ed because they must support the dynamic fields are mapped back to their original values, creation, revision and deployment of multiple and the newly generated information is stored pricing models, based upon which features and distributed. particular users access. cognizant 20-20 insights 2
  3. 3. Process Map for Business Support On-Boarding Provisioning Metering Billing Payments and Collections Analytics Demand GenerationFigure 1 User companies benefit through the ability to • Security Services: SaaS services may require analyze terabytes of data on demand without ISVs to provide a higher level of security a steep investment in hardware and software, than in previous provisioning models. It may while ISVs benefit by generating additional also present more complicated governance revenue from existing clients. issues than a traditional deployment as the scope expands beyond the enterprises’ own• Billing and Payment Service: ISVs whose boundaries. businesses grew up within the software license model may not have billing systems adapted A cloud-based security solution would protect to handle a subscription-based business that the servers providing the SaaS solution, ensure requires monthly, quarterly and annual billing, proper identity and access management and credit card transactions and automatic provi- provide protection against unseen threats, sioning of services. such as malware and spyware, as well as rootkit protection. The benefits for A cloud broker might provide a solution as the ISV include cost-effective A cloud broker might a service that would receive, reconcile and compliance with the user provide a solution as manage recurring payments at any frequency company’s security require- and using any form of electronic payment. Its ments at a lower cost. User a service that would notification engine would automatically and companies would benefit receive, reconcile and proactively update customers, depending from more consistent levels manage recurring upon the situation. The solution would apply of performance and security. payments against invoices, easily reconcile payments at any and reflect any change to the original sub- • Context: This service helps frequency and using scription and any amendments applied. It ISVs provision the amount would be capable of generating reports to and type of information an any form of electronic gain insight into transactions and overall end-user is authorized to payment. revenue operations, as well as encrypt all access, as well as the types sensitive customer data to ensure regulatory of application functionality to which they are compliance. entitled. These parameters may vary with the user’s position in the organization, as well as For the ISV, this would eliminate the cost and their involvement in specific business processes delay of purchasing and installing an expensive and the device they are using. For example, a accounting software suite, resulting in greater broker can tell the ISV if a CIO rather than a and faster ROI, and allow it to offer more varied system administrator is accessing a particular and flexible payment terms to customers. service. Armed with that information, or cognizant 20-20 insights 3
  4. 4. context, the SaaS service can provide the data development of custom code to modify it to the or capabilities appropriate to the CIO. customer’s needs. By also providing information about the user’s The platform would have extensible connectivity interests and affiliations from social media sites and XML support to leverage virtually any Web such as LinkedIn, Facebook and Twitter, this service API. It would also include a scheduler service can help ISVs better target their offerings for integration jobs and handle semantic recon- and promotions to members of particular online ciliation, such as between different data formats communities. This enhanced targeting includes used by different cloud service providers. Such an managing: integration engine could be embedded into the customer’s SaaS offering so that the customer • Social networking campaigns does not need to know the integration is driven • Online ads and ad words by the engine. • E-mail campaigns The benefits for users include reduced cost of • Trials and demos ownership, fully automated self-service, improved This contextual information can also help ISVs data conversion and a common platform for all provide tailored access, pricing or usage terms integrations, as well as easier and faster customer for employees within the end-user company’s deployment and a faster return on ownership. ISVs business partners that need only sporadic, very would benefit through links between their SaaS specific or time-limited provisioning systems and their legacy accounting, Contextual access to the SaaS offer- billing and financial systems. information can also ing.present the application to It also allows the ISV Moving Forward help ISVs provide in the form best-suited to The move from license-based software purchasestailored access, pricing devices other than PCs, to SaaS will only grow, driven by the lower cost and increased flexibility it provides customers. or usage terms for such as smartphones,mobile computers or other tablet Market researcher IDC predicts that SaaS will employees within the devices with memory, grow at more than five times the projected rate end-user company’s display, bandwidth, security of growth for traditional IT products.2 However, or other constraints. tapping this market will require transformationalbusiness partners that change for ISVs that have become accustomed need only sporadic, All of these factors make to the high profit margins of traditional software up the context within which very specific or time- the applications, and the licenses and maintenance fees. ISVs need to take a holistic view of the change required, taking limited access to the data associated with them, into account everything from their development SaaS offering. are provided to a specific processes, to budgeting, customer support and user at various times. A internal IT capabilities, as well as their partner context solution as a service would apply semantic relationships. principles to properly tailor the information a user receives and the functions and workflows they A great potential exists for ISVs to provide may access to the context of their current role, complete SaaS services based on new business location and access device. To replicate, scale processes, integrated Web services and robust and integrate interaction patterns for different infrastructure support. In this way, an ISV common user types, the solution would be based can transform into a utility provider, enabling on a context delivery architecture (CoDA). Such continuous recurring revenue growth. The next contextualized enrichment may be applicable two to three years are a key timeframe in which across various cloud and online applications. to develop this non-linear business model. The benefits of such a context service include Well-qualified cloud brokers can ease the move to improved data security and access control for a profitable SaaS strategy with everything from the ISV, as well as increased ease of use, higher strategic business consulting, to specific cloud- user adoption rates and increased productiv- based services and tools. By using a broker-lev- ity for users. Such a service should be flexible eraged model, an ISV can drive faster revenue and scalable, with reusable components and growth, while maintaining margins, respond to out-of-the-box adapters for most existing SaaS market demand more quickly and optimize their applications. It would also require little to no feature development. cognizant 20-20 insights 4
  5. 5. Footnotes1 Charles Goldenberg, “The Business Implications of SaaS,” Cognizant Business Consulting, June 2011.2 ”Worldwide and Regional Public IT Cloud Services 2010-2014 Forecast,” International Data Corp., June 2010, the AuthorDharmesh Mistry manages Cognizant’s ISV practice, which provides product engineering and IT servicesto the software industry. He has directed multiple SaaS initiatives and brought many of them to marketjointly with clients. He has worked in the software industry for the past 20 years at companies suchas Oracle, Netscape and VeriSign. He is a graduate of Cornell University. Dharmesh can be reached CognizantCognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process out-sourcing services, dedicated to helping the world’s leading companies build stronger businesses. Headquartered inTeaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industryand business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50delivery centers worldwide and approximately 111,000 employees as of March 31, 2011, Cognizant is a member of theNASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performing andfastest growing companies in the world. Visit us online at or follow us on Twitter: Cognizant. World Headquarters European Headquarters India Operations Headquarters 500 Frank W. Burr Blvd. Haymarket House #5/535, Old Mahabalipuram Road Teaneck, NJ 07666 USA 28-29 Haymarket Okkiyam Pettai, Thoraipakkam Phone: +1 201 801 0233 London SW1Y 4SP UK Chennai, 600 096 India Fax: +1 201 801 0243 Phone: +44 (0) 20 7321 4888 Phone: +91 (0) 44 4209 6000 Toll Free: +1 888 937 3277 Fax: +44 (0) 20 7321 4890 Fax: +91 (0) 44 4209 6060 Email: Email: Email:© Copyright 2011, Cognizant. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any form or by anymeans, electronic, mechanical, photocopying, recording, or otherwise, without the express written permission from Cognizant. The information contained herein issubject to change without notice. All other trademarks mentioned herein are the property of their respective owners.