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August 2012 So4ware  As  A  Service  (“SaaS”)    And  the  importance  of  Marketplaces  &  Ecosystems  for  business    API’s,  Applica-ons,  So1ware  Developers  are  crucial  ingredients  to  commercial  success  

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An Industry undergoing shifting

Global  Purchases  of  IT  Product  &  Services    2011  by  Forrester  Research  

$212  

$43  

$30  

$95  

$0  

$50  

$100  

$150  

$200  

$250  

$300  

$350  

$400  

IT  Services  Strategy  &  other  Services  

IT  Applica0on  Outsourcing  

So4ware  Custom  build  

So4ware  Applica0on  Development  

Total  $380  billion  

$19    billion  

5%  dedicated  to  Mobile  Exicon  Es-mates  

OS    $28     Servers  $62    

PCs  $177    

Storage  $48    

Peripherals  $57    

Other  $18    

Strategy  &  other    consulGng    services    $95    

Systems  integraGon    project  work  

 $214    

Enterprise  &SMBs  $152    Telcos  $183    

ApplicaGons  outsourcing              $30    

Mainframe  outsourcing  $34    

Network  outsourcing  $32    

Desktop  outsourcing  $30    

Distributed  environment  outsourcing  $65    

Computer  hardware    support  services  $63    

Middleware  $148    

Custom-­‐built  soSware  by  contractor  and  consultants  

$43    

ApplicaGons    $212    

$1,690  IT  services  $309  

Communica0ons  equipment  

$335  

US$ 1.7T Global Technology Industry With US$ 20B going to mobile from the US$ 380B dedicated to applications

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It’s about the shift to Marketplace & Ecosystems

-­‐75%  

-­‐69%  

-­‐52%  

-­‐45%  

Resisting the Shift is futile

And those who embraced it have benefited

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Driven by Cloud and Mobility

Cloud spending to hit US$ 40B as the Enterprise moves IT spending

While more people access the internet using their Mobile devices

The  Rise  in  the  Cloud  2012  by  DeloiKe  

•  500M tablets sold in 2015

•  1.5B Smartphone units sold in 2015

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Moving IT spend to Opex and mobilizing the Enterprise

30% of Enterprise Software budgets for Subscriptions

2011  So1ware  budget  Alloca-on  to  Annual  Subscrip-on  by  Gartner  

Highlighting the rise in Enterprise applications

And the investment in building applications

“By 2017 CMOs will be purchasing more technology than their CIOs” 

hKp://www.forbes.com/sites/onmarke-ng/2012/08/21/five-­‐challenges-­‐for-­‐tomorrows-­‐global-­‐marke-ng-­‐leaders-­‐study/  

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And how that translate into tremendous pressure for all Technology to win the cloud; and this time they are rich in cash!

Client

Mob

ile

PC Clou

d

Stack

Type of Developers

End goal Partnerships Migration

Developer: End User:

Infrastructure

Software Systems Integrators

Cloud

PaaS

IaaS SaaS

SaaS Application Categories

Finance & Accounting

Content & Document

Mgmt. Vertical

Enterprise Social Media

Marketing Analytics

Retail & Ecommerce

Collabora-tion Business Intelligence

Human Resources

Marketing Demand

Generation CRM

•  Cloud  compu0ng  is  the  migra0on  of  PC  onto  the  web.  To  provide  the  same  set  of  services,  the  cloud  has  3  dis0nct  areas  •  IaaS  –  Infrastructure  as  a  Service,  providing  compute  component  requirements  on  a  rental  basis,  ranging  from  Processors,  Storage,  Networking.  

Subscribers  to  this  service  are  Systems  Developers  and  Engineers  in  the  So4ware  companies  and  System  Integra0ons.  Target  for  this  service  is  developers,  par0cularly  those  focused  on  the  So4ware  stack.  

•  PaaS  –  Pla[orm  as  a  Service,  providing  tools  and  access  to  write  so4ware  including  API’s  and  So4ware  Developer  kits.  Subscribers  to  this  service  are  So4ware  Developers  and  Engineers.  

•  SaaS  –  So4ware  as  a  Service  in  contrast  targets  the  end  user  with  Enterprise  applica0ons.  Subscribers  range  from  SMB  to  enterprise  customers  usually  in  the  business  lines  and  not  IT.  

•  Technology  Infrastructure,  So4ware  Vendors  and  Systems  Integrators  are  vying  for  a  role  in  the  cloud  due  to  commodi0za0on  

•  To  succeed  in  PaaS  and  IaaS  it’s  cri0cal  winning  the  developer  to  your  pla[orm.  SaaS  is  enduser  focused  and  will  need  all  the  services  on  the  cloud.    

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And there are a lot of companies across Cloud

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Past and Future outlook of SaaS

• Salesforce.com  • Rightnow  (now  Oracle)  

CRM  • Netsuite  • Saasu  • Freshbooks  

Accoun0ng  

• Successfactor  (now  SAP)  • Kenexa  (now  IBM)  • Taleo  (now  Oracle)  • BambooHR  

HR  (aka  ERP)  

• Buddy  Media  (now  Salesforce.com)  • Wildfire  (now  Google)  • Hubspot  

Social  Media  

• Exicon  • Apperian  • Appdirect  

Ecosystem  and  

MarketplaceManagemen

t  

•  The  first  Industry  to  go  SaaS  was    “CRM”  or  customer  rela0onship  management  to  manage  and  control  remote  sales  leads  and  business  opportuni0es  

•  Therea4er  Accoun0ng,  HR  have  become  key  element  of  SaaS  applying  significant  pressure  on  the  tradi0onal  So4ware  Middleware  companies  and  Enterprise  Applica0on  Vendors.  

•  Google  and  Salesforce.com  have  just  begun  to  move  on  Social  Media  SaaS  companies,  again  providing  a  centralized  management  and  control  across  the  Social  Media  landscapes  leading  to  reduc0on  in  the  Customer  Acquisi0on  Costs  

•  With  the  rise  of  Big  Data  and  the  increasing  influence  of  websites  driving  commerce  transac0ons,  Developer  and  Applica0on  Rela0onship  Management  is  a  natural  evolu0on  in  Marketplace  and  Ecosystem  dominated  environment  

•  Mobility  is  going  to  be  a  cri0cal  element  

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An example of the SaaS business model - S-1 filings for IPO •  Founded  in  2005,  no0ce  that  the  first  record  of  revenue  is  in  2007  and  then  the  subsequent  revenue  growth  once  the  pla[orm  is  

established  and  opera0ng.    

•  The  investment  in  Sales  &  Marke0ng  as  a  percentage  of  Revenue  is  also  extremely  high,  largely  a  result  of  Headcount  and  targeted  online  marke0ng  ac0vi0es  to  SEO,  Key  Knowledge  Leaders  and  Social  Media.  

•  They  are  issuing  10%  of  their  shares  looking  to  raise  US$  400M  off  trailing  Revenues  of  US$  134M  implying  a  valua0on  of  US$  4B  resul0ng  in  a  nearly  30x  revenue  mul0ple.  They  are  running  an  opera0ng  loss  of  US$  80M  in  the  year  ending  Jan  2012.  

•  With  approximately  1,400  employees  managing  325  enterprise  customers  on  a  subscrip0on  model  servicing  a  total  of  200,000  employees  

•  This  sector  of  SaaS,  HR  related  Enterprise  Applica0on,  aka  ERP,  has  a  number  of  compe0tor  including  Successfactor  (now  SAP),  Taleo  (now  Oracle),  Kenexa  (now  IBM).  All  have  reached  revenues  in  excess  of  US$  100M    

•  This  model  is  similar  to  the  Exicon  model.  Exicon  is  specialized  in  Developer  Rela0onship  Management.  

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There is a lot of room for multiple SaaS vendors and the exit opportunities remain strong

Acquirer   Target   Category   Amount  in  US$   Revenue  Mul-ple  

Salesforce.com   Buddy  Media   Social  Media   689M   15-­‐18x  

SAP   Successfactors   ERP   3.5B   12.1x  

Intuit   Demandforce   CRM   423M   11.3x  

HP   Autonomy   Big  Data   870M   11.8X  

Oracle   Rightnow   CRM   1.5B   7x  

Neustar   Targus   650M   4.4x  

IBM   DemandTec   427M   4.8x  

Oracle   Taleo   ERP   1.9B   6.5x  

IBM   Kenexa   ERP   1.3B   4x  

•  Exit  mul0ples  are  in  the  range  of  5x  revenue  up  to  30x  revenue  

•  Poten0al  acquirers  will  be  either  the  big  so4ware  companies,  systems  integrators  or  Cloud  Vendors.  

•  All  of  them  are  looking  to  extend  their  applica0on  and  services  offering  into  their  exis0ng  enterprise  customers  and  have  large  cash  posi0ons  on  their  balance  sheets  

•  Key  drivers  for  valua0ons  are    •  Revenue  •  Number  of  customers  subscribing  to  your  pla[orm  •  Customer  Assets  under  management  •  Features  available  on  the  pla[orm  •  Workflow  and  technologies  •  Management  Talent  •  Physical  presence    

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And the mobile sector focusing on Enterprise is just picking up The mobile sector raised $3.9 billion in venture financing in H1 2012, 610M of which went into mobilizing the Enterprise

Source:  Rutberg   Announced Category Acquirer/Investment Acquired  /  Investee EV/SalesConsideration  

(US$M)Jul-­‐12 Mobile  app  development  platform Funding  round   Meteor -­‐ $11Jul-­‐12 Social  media  marketing Google Wildfire  Interactive 7.0x $250Jul-­‐12 Cloud  analytics  for  software  logs Funding  round   Loggly -­‐ $6Jul-­‐12 Enterprise  collaboration Funding  round   Asana -­‐ $28Jul-­‐12 Cloud  storage  &  sharing  applications Funding  round   Box -­‐ $125

Jul-­‐12 Mobile  App  distribution InMobi MetaFlow  Solutions -­‐ -­‐

Jul-­‐12 Mobile  payment  solutions Apple AuthenTec 5.2x $365Jul-­‐12 Enterprise  Appstores Funding  round   AppDirect -­‐ $8.50Jun-­‐12 Enterprise  Social  Media  solutions Microsoft Yammer 60x $1,200Jun-­‐12 Enterprise  Social  Media  solutions Salesforce BuddyMedia 15x-­‐18x $689

And    alone  during  June  and  July  some  of  the  Enterprise  related  investment  and  acquisi0ons  

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CEO / EXICON Stefan Rust

EMAIL stefan@exiconglobal.com

WEBSITE www.exiconglobal.com

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