Software As A Service (SaaS)

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Information about Software As A Service (SaaS)

Published on June 25, 2009

Author: SmartManQ8


Slide 1: Software As A Service – SaaS The Future of Flexible Software Model Rami Al-Sahhar Overview : Overview What is SaaS? What does it promise? The SaaS Market Opportunity SaaS for Microsoft and Oracle SaaS Model vs ASP Model Why SaaS is important? SaaS Market Challenges SaaS Business Benefits SaaS Technology Readiness Approach The Impact of SaaS The Challenges of SaaS SaaS Requirements Transition to SaaS Conclusion What is SaaS? - Wikipedia : What is SaaS? - Wikipedia Software as a service (SaaS) is a software application delivery model in which customers pay to access and use software functionality over a network through a hosted, web-native platform operated by the software vendor (either independently or through a third-party). Not just a change in delivery model Requires significant shift in thinking Forces fundamental changes in thinking across the business Changes many assumptions about being a successful software vendor Software as a service (SaaS) : Software as a service (SaaS) Traditional Software Build Your Own On-Demand Utility Plug In, SubscribePay-per-Use Product vs. Service : Product vs. Service SaaS Key Characteristics : SaaS Key Characteristics Network-based access to, and management of, commercially available (i.e., not custom) software Activities that are managed from central locations rather than at each customer's site, enabling customers to access applications remotely via the Web Application delivery that typically is closer to a one-to-many model (single instance, multi-tenant architecture) than to a one-to-one model, including architecture, pricing, partnering, and management characteristics. What does SaaS promise? : What does SaaS promise? The Promise of SaaS : The Promise of SaaS Surveyed over 300 members of the IAMCP (International Association of Microsoft Certified Partners) and also partners at an unnamed major IT distributor 76% said that SaaS will “dramatically impact” the partnering landscape 70% view SaaS as a “big” opportunity (not a threat) Many firms already engaged in SaaS-related activities SaaS has the potential to change the way business is done 2008 brings increased vendor participation in the SAAS space from SAP, Microsoft, Cisco Systems, IBM and others SAAS Capabilities and Opportunities (December 2007) The Promise of SaaS : The Promise of SaaS McKinsey finds that SaaS is a growing priority for CIOs and VCs Multiple factors are spurring the growth Decreasing cost of bandwidth Customer frustration with traditional software buying cycle (license + maintenance contract + upgrades) Perceived increase in control over the vendor relationship Early SaaS success stories --, WebEx, etc. demonstrate broader value proposition Delivering Software as a Service (June 2007) The Promise of SaaS : The Promise of SaaS The most “impactful” trend in software The “SaaS shift” is in full swing Over the next several years it will become pervasive in almost all areas of the software market Making SaaS Savvy Investments (November 2007) The Promise of SaaS : The Promise of SaaS 23% projected annual growth $21.4 billion industry by 2011 Representing 14% of addressable market Making SaaS Savvy Investments (November 2007) The Promise of SaaS : The Promise of SaaS By 2009 40% of new business software vendors will offer a SaaS model 100% of Tier 1 consulting firms will have a SaaS practice By 2010 15% of large companies will begin projects to replace their ERP backbone (financials, HR, and procurement) with SaaS solutions. 85% of SaaS vendors will offer performance SLAs in standard contracts By 2012 More than 66% of independent software vendors (ISVs) will offer some of their applications optionally or exclusively as SaaS Predicts 2008: SaaS Gathers Momentum (January 3, 2008) The Promise of SaaS : The Promise of SaaS We expect more customers to opt for term or subscription based licensing versus the traditional perpetual model and move toward outsourced solutions. Very simply put, software in an On Demand world will change the way customers buy, vendors sell, and investors invest. It is clear that the traditional software business model is unwinding. ‘On demand’ is becoming the preferred method for licensing and deploying software. The impact on valuations and creating sustainable shareholder wealth are enormous. The SaaS Market Opportunity : The SaaS Market Opportunity WW Software On Demand Revenue 2005-2011: Comparison Of May 2006 And March 2007 Forecasts Worldwide Software On Demand Revenue, 2006 and 2011 Source: IDC Worldwide Software on Demand 2007-2011 Forecast Update and 2006 Vendor Shares: Sky's the Limit for On- Demand Providers," Doc # 207491, July 2007 But here is the question should be really asking : But here is the question should be really asking While the SaaS Market grows by $11.2B in the next 5 years The overall Software Applications market will be growing by $51B Your target customer is much bigger than their Web Browser What if you could SaaS model to deliver what your customers want both inside and outside the browser? IDC: US Hosting 2007-2011 : IDC: US Hosting 2007-2011 Source: IDC, ”Web Hosting Services 2007 – 2011 forecast” Important Customer Factors : Important Customer Factors SaaS Inhibitors : SaaS Inhibitors Primary reasons companies are not considering SaaS : Primary reasons companies are not considering SaaS SaaS is Disrupting the Channel : SaaS is Disrupting the Channel SaaS ISVs want to own the customer relationship VARs and SIs must move from integration and support to business consulting and service bundling New Reseller / Aggregator models emerging Online SaaS Catalogs are coming Combine selection + provisioning Some will include unified billing / presentment The SaaS ‘Value-Add’ Network : The SaaS ‘Value-Add’ Network Key Trends for Hosters : Key Trends for Hosters 70% of all growth comes from complex hosting scenarios By 2011 the market for SaaS will be almost as large as the entire hosting market As fast as the hosting business is growing, SaaS is growing over twice that fast SaaS growth is across all broad classes of enterprise software SaaS is not limited to simple apps – SaaS ERP adoption is brisk Hosters and Platform Providers must partner to deliver better solutions for complex application hosting SaaS Value Proposition : SaaS Value Proposition SaaS promises to shift operational expense (OpEx) and capital expense (CapEx) from the end-customers to the SaaS provider while reducing time to deployment and improving accessibility. SaaS According to Microsoft : SaaS According to Microsoft Software PLUS services -- not so much software as a service. This is not software in a cloud. It is a model in which the platform and delivery model are optimized around the solution. Work on an application online, go offline, then back online. Necessary to coexist and ‘work with’ on-premise applications “If SaaS is the right model, we have the tools to help you migrate. If you would like to stay on premise or go hybrid, we’ll support you in that.” Key benefit to the ISV being a pure play (hosted only) is the opportunity to be environment-agnostic To support SaaS as well as on premise requires additional costs to support multiple platforms SaaS Maturity Levels : SaaS Maturity Levels Oracle and SaaS : Oracle and SaaS Statements made by Charles Phillips: Interview Aug 8 2007, with Stuart Lauchlan of mycustomer. On-demand has been around at Oracle for 9 years, 2 Million users Offering a choice: on premise or on-demand On demand customers need to replicate their data Multi-tenancy is a liability Customers often need to own software SaaS is more or less a hosting option Oracle SaaS Platform : Oracle SaaS Platform SaaS Model vs ASP Model : SaaS Model vs ASP Model What’s Driving SaaS Viability? • Increasing broadband penetration • Improvements in remote access technologies • General increases in computing capacity and corresponding cost reductions • Virtualization technologies • Improvements in technologies for development of web-based applications Comparison of business model : Comparison of business model Traditional packaged software Software as a service Designed for customers to install, manage and maintain Designed from the outset up for delivery as Internet-based services Architect solutions to be run by an individual company in a dedicated instantiation of the software Designed to run thousands of different customers on a single code Comparison of business model : Comparison of business model Company name Traditional packaged software Software as a service Version control Upgrade fee Fixing a problem for one customer fixes it for everyone Streamlined, repeatable functionality via Web services, open APIs and standard connectors Infrequent, major upgrades every 18-24 months, sold individually to each installed base customer Frequent, "digestible" upgrades every 3-6 months to minimize customer disruption and enhance satisfaction May use open APIs and Web services to facilitate integration, but each customer must typically pay for one-off integration work. Why is SaaS Important : Why is SaaS Important 30% of all software sales by 2010 78% of businesses either have SaaS or are considering SaaS $ $ SaaS Market Challenges : SaaS Market Challenges Lack of quality distribution channels for ISVs Finding the right SaaS applications challenging for customers No certification process Lack of integration between applications Lack of providers with enterprise application and integration experience Repository of selected applications Application Directory Thorough certification process Suite of integrated applications Distribution channel that works , with buyers looking to find highly relevant solutions Leverage relationships of other providers and ISVs in enterprise and midmarket Customer Trust Customer Confusion Hidden Cost : Hidden Cost SaaS Business Benefits : SaaS Business Benefits INCREASE REVENUE Effective Packaging, Positioning and Pricing Strategies Improve Demand Generation Increase Sales Direct Indirect Online DRIVE DOWN COSTS Reduce Customer Acquisition Costs Lower Customer Support Costs Accurate Financial Projects SaaS Technology Readiness Approach : SaaS Technology Readiness Approach 8 Technology Key success factors Identification & Authorization Organizational Effectiveness Ordering, Provisioning & Configuration Service Customization & Integration Reliability, Manageability & Serviceability Scalability & Resource Management Environment Model Tenancy Model INFRASTUCTURE ORGANIZATIONAL EFFECTIVENESS CUSTOMER EXPERIENCE Assessment Remediation Validation Operation SaaS Technical Readiness Benefits : SaaS Technical Readiness Benefits QUICKEN TIME TO MARKET IMPROVE INFRASTRUCTURE REDUCE COSTS SaaS Purchasing Trends by Market : SaaS Purchasing Trends by Market Successful SaaS Offerings: : Successful SaaS Offerings: Are full function products, customizable to address customers’ specific business needs; Target specific customer subsets rather than broad markets; Achieve economies by sharing server and storage resources and operations management; Deliver to browsers or web-aware clients and; Use specialized partners for hosting and service delivery management. The SaaS GTM Framework : The SaaS GTM Framework The SaaS GTM Framework has been developed as a result of dozens of engagements with Service Providers and Independent Software Vendors of all shapes and sizes The factors were developed by analyzing what was working and not working at these companies SaaS GTM Framework : SaaS GTM Framework Impact of SaaS : Impact of SaaS SaaS will result in significant changes in three key areas: Business Model Technical Model Marketing and Sales Impact of SaaSBusiness Model Changes : Impact of SaaSBusiness Model Changes SaaS will impact the core business models for Software-Vendors: Annuity-based revenue All-in-one offering 24 x 7 service delivery Sales force profile Partner ecosystem Impact of SaaSTechnical Model Changes : Impact of SaaSTechnical Model Changes SaaS Drives Important Changes from a Technology perspective: New vs. Existing Code-base Multi-Tenancy Operational Expertise Scalability and Resource Management Reliability, Manageability, Supportability Ordering, Provisioning, Billing Customization, Configuration, & Integration Continuous Release Cycle Impact of SaaSMarketing and Sales Changes : Impact of SaaSMarketing and Sales Changes SaaS drives changes in the end-to-end go-to market strategy/tactics as well: Messaging & Positioning Packaging & Pricing Web-Driven Business Model Demand Generation Online Customer Experience Direct/Indirect Sales Processes Organizational Effectiveness Benefits of SaaS to ISVs : Benefits of SaaS to ISVs New Market Opportunities New Distribution Channels New Revenue Streams Predictable Recurring Revenue and Cash Flows Lower Total Cost of Ownership (TCO) Positive Customer Experience Benefits of SaaS to End-Customers : Benefits of SaaS to End-Customers Faster Time To Value Ease of Use of SaaS Applications Cost Savings Accelerated Payback and Higher Return on Investment (ROI) Reduced Risk More Efficient Utilization of Human and Capital Resources Increased Flexibility in Responding to Changes in Demand Seamless Product Enhancements and Upgrades Reduced System/Network Downtime Reduced Complexity Increased Focus on Core Business Accountability of SaaS Vendor Advantages : Advantages No large upfront costs - usually free trials High levels of security – physical, power, pipes No install costs – low one-time costs Minimal training Anywhere, anytime, anyone - mobility Operating costs only; can be terminated; re-sized – No capex hoops. Disadvantages : Disadvantages Core functionality out-sourced Broadband risk Limited personalisation/tailoring No competitive uniqueness advantage Not suited to high volume data entry New Business Models : New Business Models Mobile models – any PDA Deliver to screen format in use Working out-of-office – Real Estate Agents Salespeople who visit the client Build the plan and place the order there Hot-desking Virtual Organisations Franchise models. Enhancements : Enhancements Introduced silently Only when multiple clients clearly want them In a way which does not impact other users No “roll-out” Simple conversational interface Irrelevant if all users not on same OS Minimum development costs – test on single O/S. Ease of Maintenance : Ease of Maintenance Because there is only one copy of the software maintenance is substantially eased The software only runs in one environment – an environment totally controlled by the supplier IE and Mozilla Reduced operating costs. Reduced Hardware Costs : Reduced Hardware Costs A single server handing multiple customers can be optimised – no extra peripherals – no CRT Mass storage optimised No need for virtualisation Rack mounts Minimum cabling - at both ends. The Challenges of SaaS : The Challenges of SaaS CHALENGES SOLUTIONS Minimize financial risk Organizational changes to support SaaS Effective sales channels for SaaS Pricing approaches Ideal target segments Business Readiness • Technical Readiness The Challenges of SaaS : The Challenges of SaaS CHALENGES SOLUTIONS SaaS architecture options • Cost effective re-architecture approach • Minimize additional head count • Don’t have SaaS technical expertise Technical Readiness • Outsourced Application Development • Application Security The Challenges of SaaS : The Challenges of SaaS CHALENGES SOLUTIONS Generate demand • Increase awareness • Keep costs low • Prove SaaS model Incubation Hosting • Sales Acceleration • Application Security • Vulnerability Assessment The Challenges of SaaS : The Challenges of SaaS CHALENGES SOLUTIONS Generate demand Increase awareness Keep costs low Maintain high level of reliability and support w/ limited staff Application & data security Reliable Hosting • Sales Acceleration • Application Security • Vulnerability Assessment The Challenges of SaaS : The Challenges of SaaS CHALENGES SOLUTIONS Scale • Quality Customer Service • High Availability • Focus my resources • Application & data security HA - Scalable Hosting • Application Acceleration • Application Security • Vulnerability Assessment • Outsourced Tier 1 Support The Challenges of SaaS : The Challenges of SaaS CHALENGES SOLUTIONS Stay ahead of competition • Focus my resources • High Availability • Quality Customer Service • Scale • Application & data security HA - Scalable Hosting • Application Acceleration • Application Security • Vulnerability Assessment • Outsourced Tier 1 Support Whose doing SaaS? : Whose doing SaaS? Google – complete Java library Writely and spreadsheet and CRM are hot Oracle and SAP have web interfaces BI to have web interfaces Web shopping sites are SaaS now Most mobile apps are actually SaaS now SaaS Requirements : SaaS Requirements ITS satisfies this requirement Transition to SaaS - Steps : Transition to SaaS - Steps Decide the business model – Target Market, Pricing, GTM Strategy Decide the delivery model – Virtualization, Multitenancy, Hybrid Make Application changes according to the delivery model Host the Application – Identify Hosting Partner Enable Billing, Provisioning, SLA Management, Integration Go To Market Conclusions : Conclusions SaaS is a very different model than the traditional software license and maintenance and client server model SaaS will be the way most apps will be delivered Technology innovations are the primary driver for SaaS adoption. All but high-volume data entry for large corporates and specialized apps Much higher proportion of staff will have only PDAs or small footprint notebooks SaaS is an attractive delivery model for high-volume and commoditized business processes in back-office banking SaaS does not have to be an all or nothing value proposition , you can operate in a hybrid model Conclusions : Conclusions Primary reasons for deploying SaaS vary by region. While Europe, the Middle East and Africa (EMEA) respondents cited total cost of ownership (TCO) as the main motivator, North America and Asia/Pacific participants focused on ease and speed of deployment Most SaaS deployments for large companies begin without CIO knowledge or involvement SaaS value propositions will vary greatly based on application market maturity SaaS is not guaranteed to be less expensive than on-premises software Low risk – try before you buy Recommendations for CIO : Recommendations for CIO Step 1 : Determine whether SaaS has already entered your company Step 2 : Discover the requirement that drove the business unit to turn to SaaS Step 3 : Evaluate which applications are good candidates for SaaS Step 4 : Create an application strategy if you don't have one Step 5 : Determine whether SaaS makes sense for your organization Step 6 : Develop a SaaS strategy and incorporate it into your application strategy and portfolio management

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