Date post: | 20-Jun-2015 |
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Software Delivery ModelsMyth: SaaS is the Software Delivery Model of the future
Confirmed? Plausible? or Busted?
Terms• Software as a Service
(SaaS)• Application Service
Provider (ASP)• Monthly Recurring
Revenue (MRR)• Annual Recurring Revenue
(ARR)
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
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
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
SaaS: The Elevator PitchFee 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
SaaS: The Elevator PitchPlatform
– Single platform facilitates horizontal integration and best of breed partnerships
– You are always on the latest and greatest release
– Highly secure– Scalable and performant
SaaS: The Elevator PitchFocus
– You focus on doing what you do best, allow the vendor to do the same
Keys– Adoption– Retention– Clean AR– Scalability
SaaS: Maturity Levels• Level 1 – Ad-Hoc/Custom (ASP)
Benefit – Server Consolidation
• Level 2 – ConfigurableBenefit – Ease of Program Flexibility
• Level 3 – Configurable, Multi-Tenant-EfficientBenefit – Horizontal integration, Lower Cost of Ownership
• Level 4 – Scalable, Configurable, Multi-Tenant-EfficientBenefit – Scalability and Performance Source: Microsoft
SaaS: Licensing Models• Subscription-Based• Usage-Based• Transaction-Based• Value-Based (DAXKO)• Fixed-Fee
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
SaaS vs. Packaged: RevenueExample: Year over year packaged sales are much higher than SaaS sales, yet SaaS revenue wins out over time
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
SaaS Myths: CostSaaS software costs less than packaged software
Myth busted, right?
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
SaaS Myths: Speed• SaaS can be implemented more quickly than
packaged softwareMyth Result: Confirmed
• SaaS facilitates more frequent improvements / releases
Myth Result: Confirmed• SaaS facilitates faster corporate growth
Myth Result: Busted
SaaS Myths: Security• SaaS software is more secure than packaged
softwareMyth Result: Plausible
SaaS Myths: Customer / Control• SaaS allows customers to focus on their core
missionMyth Result: Confirmed
• SaaS facilitates a better understanding of the customer / user
Myth Result: Confirmed• SaaS provides the customer more control over
the softwareMyth Result: Busted
SaaS Myths: ValuationSaaS companies have a higher valuation
William Blair & Company, 2007
Myth Result: Confirmed
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 SaaSWilliam Blair & Company, 2007
SaaS is the Software Delivery Model of the future
Myth Result: Confirmed