©2008, THINKstrategies [www.thinkstrategies.com]
Slide 1
THINKstrategies Strategic Consulting Services
Software 2008:The Convergence of Open Source & SaaS
Presented by,
Jeff Kaplan
Managing Director
THINKstrategies
781-431-2690
©2008, THINKstrategies, Inc. www.thinkstrategies.com
Slide 2
The World Is Changing
� Changing Competitive Environment
� Changing Workers/Work Environment
� Changing Economic Climate/Pressures
� Changing Technology Environment
©2008, THINKstrategies, Inc. www.thinkstrategies.com
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Business Can No Longer Be A Slave To Technology
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Slide 4©2008, THINKstrategies, Inc. www.thinkstrategies.com
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The Shortcomings of Legacy, On-Premise Apps
� Deployment Challenges
• 31.1% of SW projects cancelled before completed.
• 52.7% of projects cost nearly 190% of original estimates.
• 30-50% of SW costs spent on integration.
� Operational Costs
• Maintenance & management costs >10x original license fee.
• Escalating hardware & staff support costs.
• Over provisioning and under-utilization of SW licenses
� Economic/Budgetary Pressures
• Need to reduce IT costs and increase business benefits.
• Need to increase utilization to gain greater ROI.
©2008, THINKstrategies, Inc. www.thinkstrategies.com
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Changing Customer Expectations
Old,
� Capital Investment
� Complexity, Customization
� Reactive Maintenance
� Response Time
� Customer Support
� Limited Responsibility
� Outsourcing Alternatives
New,
� Operating Expense
� Simplicity, Utilization
� Proactive Management
� Ongoing Monitoring
� Automated Delivery
� Higher Accountability
� Out-Tasking Options
Enterprises Seeking to Generate Greater ROI at Lower TCO.
©2008, THINKstrategies, Inc. www.thinkstrategies.com
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The Nicholas Carr Affect
"...Imagine what future generations will see when they
look back at the current time...won't the way corporate computing is practiced today appear fundamentally illogical -- and inherently doomed?”
“The End of Corporate Computing”Nicholas Carr, The MIT Sloan
Management Review, Spring 2005.
©2008, THINKstrategies, Inc. www.thinkstrategies.com
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Converting Software Products Into Services
“A hundred years ago, companies stopped generating their own power with steam engines and dynamos and plugged into the newly built electric grid…Today, a similar revolution is under way.”
- Nicholas Carr
©2008, THINKstrategies, Inc. www.thinkstrategies.com
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The Shift from Outsourcing to Out-Tasking
� Businesses seeking functionality, not technology.
� IT outsourcing deals have failed.
� Selective outsourcing, or ‘out-tasking’ gaining attention.
� SaaS is a form of out-tasking.
©2008, THINKstrategies, Inc. www.thinkstrategies.com
Slide 9©2008, THINKstrategies, Inc. www.thinkstrategies.com
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Software-as-a-Service(SaaS) Defined
� One-to-many SW distribution model delivered and managed by a vendor/service provider.
� Delivered to customers via a network, typically the Internet.
� Customers acquire SW on a pay-as-you-go basis.
� Also referred to as “ASP”, “On-Demand”, “Hosted”, “Managed Services”, etc.
©2008, THINKstrategies, Inc. www.thinkstrategies.com
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SaaS Adoption Today
Source: THINKstrategies/Cutter Consortium © 2007
©2008, THINKstrategies, Inc. www.thinkstrategies.com
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SaaS Deployment Plans
Source: THINKstrategies/Cutter Consortium © 2007
©2008, THINKstrategies, Inc. www.thinkstrategies.com
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SaaS Expands from Business Apps to IT Management
BUSINESS APPLICATIONS
CRM
SFA
…
Collaboration
SCM
…
ERP
Finance
…
Front Office Inter OfficeBack Office
Security
Systems Mgmt
…
Network Mgmt
Remote Access
…
Data Protection
Storage
…
IT Management
©2008, THINKstrategies, Inc. www.thinkstrategies.com
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Shifting Adoption Patterns
Unilateral End-User,
SBU Adoption of
SaaS Solutions
Enterprise-Wide
Acceptance and
Adoption of SaaS
©2008, THINKstrategies, Inc. www.thinkstrategies.com
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SaaS Evolution
SaaS 1.0 SaaS 2.0
• Standalone apps
• Horizontal applications
• Focus on ease of use/price
• One size fits all, minimal customization
• Limited interoperability
• Emphasis on lower TCO
• Multidimensional platforms
• Vertical market solutions
• Focus on new functionality
• Flexible configurations, greater versatility
• Easier integration
• Emphasis on higher ROI
©2008, THINKstrategies, Inc. www.thinkstrategies.com
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Point Solutionsvs. Platforms
Source: THINKstrategies/Cutter Consortium © 2007
©2008, THINKstrategies, Inc. www.thinkstrategies.com
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Competition and Validation
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On-Demand Services &The IT Industry Inversion
Services Technologies
Past
Now
TheIndustryInversion
©2008, THINKstrategies, Inc. www.thinkstrategies.com
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Key Challenges Facing Established ISVs
� Re-architecting applications
� Recasting revenue models
� Repositioning solutions
� Re-orienting sales
� Restructuring channels
� Re-defining support
� Reducing operating costs
©2008, THINKstrategies, Inc. www.thinkstrategies.com
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Implications of Inversion
� R&D focus on service delivery methodologies rather than
product features.
� Marketing focus on packaging and pricing services/solutions,
not technology/products.
� Sales focus on selling economic business value not product
features.
� Customer support focus on provisioning, billing and
automated, remote management.
©2008, THINKstrategies, Inc. www.thinkstrategies.com
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Multiple Layers to the Integration Challenge
On-Premise
Presentation
Middleware
Static Data Sources
Operating Systems
On-Demand
User Interface
APIs
Dynamic Sources
Web Services
And, across multiple SaaS platforms and services.
©2008, THINKstrategies, Inc. www.thinkstrategies.com
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Living in a Hybrid World
� Most enterprises will seek mix of on-premise & on-demand solutions.
� ‘Applets’, Appliances, etc. will permit on-demand/on-premise integration.
� Adobe AIR, Microsoft Silverlight
©2008, THINKstrategies, Inc. www.thinkstrategies.com
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Cash Difference:SaaS vs. Perpetual Models
Cumulative Cash Burn
-30,000,000
-20,000,000
-10,000,000
0
10,000,000
20,000,000
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9
SaaS Perpetual
Monthly payments instead of up-front license fees increase the capital required to build a software company by 50% to 100%
Monthly payments instead of up-front license fees increase the capital required to build a software company by 50% to 100%
$ M
illions
Source: SaaS Capital
©2008, THINKstrategies, Inc. www.thinkstrategies.com
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Channel/Supply Chain Opportunities
Legacy ISVs
New SaaSProviders
EnablingTechnology
Vendors
• Offshore SW Developers• 3rd party SW platforms• 3rd party HW systems
xSPs
• Hosting companies• Carriers
Channel Partners
• Distributors• VARs/Integrators• eCommerce Sites
Corporate Customers
Consumers
©2008, THINKstrategies, Inc. www.thinkstrategies.com
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New Channelsto Market?
� Financial Services
� Insurance Companies
� Retailers
� Web companies
� Professional Service Firms
©2008, THINKstrategies, Inc. www.thinkstrategies.com
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SaaS Ecosystems –The New Channel
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What SaaS Vendors Have Learned from Open Source
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SaaS Building Blocks
Broadband Networks
Grid Computing
Blade Technology
Virtualization
Web Services & SOA
Service Provisioning
Community Building/Tool Sharing
©2008, THINKstrategies, Inc. www.thinkstrategies.com
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Open Source Principles
� Low cost development tools/ infrastructure
� Agile development techniques
� Integrity of the masses
� Tiered packaging/pricing
� Value-added support
� Community-based best practices
©2008, THINKstrategies, Inc. www.thinkstrategies.com
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The Cornerstones of SaaS
Communications Community
Collaboration
©2008, THINKstrategies, Inc. www.thinkstrategies.com
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The Value-Addof SaaS Communities
� Real-time, aggregated data
� Meaningful benchmark studies
� Practical best practices forums
� Continuous updates, new ideas
� Dynamic toolkit clearinghouse
©2008, THINKstrategies, Inc. www.thinkstrategies.com
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Conclusions:SaaS & Open Source
� Gaining broad-based acceptance.
� Customers demanding greater functionality and flexibility.
� Market attracting more players and competition is driving down prices.
� SaaS providers must reduce costs and create new value.
� Open source world creating new tools, techniques, best practices and opportunities.
©2008, THINKstrategies, Inc. www.thinkstrategies.com
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For More Information…
www.SaaS-Showplace.com
www.thinkstrategies.com