making the saas decision: the threats, opportunities, and

© 2008 Mural Consulting Corporation, All Rights Reserved

Making the SaaS Decision: TheThreats, Opportunities, and

Challenges of Moving to SaaSJeff Hagins, CTO and Founding Partner,

Mural Ventures Corporation

2 © 2008 Mural Consulting Corporation, All Rights Reserved

Three Years Ago …

• Limited SaaS Competition for Most Traditional Software Vendors. Manystartup SaaS businesses focus on SMB first

• No real distribution channels for SaaS – Direct to the customer

• Infrastructure and Hosting Options driving higher up-frontcapital/operational costs for SaaS vendors

• Shrinking IT budgets, but SaaS market growing and taking additionalmarket share


Today

• Significant Competitive Threats from Pure-Play SaaS Providers in virtuallyevery market/vertical from small business to enterprise

• Emerging Channels for the Distribution of SaaS offerings (e.g. SF.comAppExchange)

• SaaS Version 2.0 Business Launching using Cloud ComputingInfrastructure which significant lowers their COGS

• Financial Market Impacts: Capital and Operational Budgets will beconstrained – SaaS Alternatives with NO commitments will be attractive toCIOs


Why is Now the Right Time for SaaS?

SaaSNow is the right time.

Pervasive broadband access for SMBs and Consumers

Economic models are in sync – tight IT budgets aredriving demand for more economically efficient solutions

CIOs need to deliver strategic, mission-critical value,and will outsource other functions to allow a more strategicinternal focus

Improved security and acceptance of secure data centersby customers

Greater Depth and Breadth of SaaS offerings, includinggreater alignment with customer needs (e.g. SMBs needlighter-weight applications than Large Enterprise)

Emergence of Platforms for developing SaaS applications• SalesForce.com, Mor.ph, Amazon Web Services• Microsoft CRM 4.0, Google AppEngine


The SaaS Opportunity

31% Growth(CAGR) for

On-Demand CRM

$2 Billion

2004 2010

61% Growthin Enterprise Adoption

61%

25% Penetrationof $220 Billion

Software Industry by 2011

25%


The Long Tail© of the SaaS Market

(Currently) (Currently) ““Non AddressableNon Addressable”” Customers Customers

$ / C

usto

mer

$ / C

usto

mer

Your Typical CustomersYour Typical Customers

What if you lower your cost of sale (i.e. lower barrier to entry)What if you lower your cost of sale (i.e. lower barrier to entry)and you also lower cost of operationsand you also lower cost of operations

Your Large CustomersYour Large Customers

Newly Addressable Market

Copyright © Anderson, ChrisThe Long Tail: Why the Future of Business Is Selling Less of More | Hyperion Books 2006


Examples of the “Long Tail”


Software-as-a-Service Defined

Software Delivery Models

Traditional Software Software-as-a-Service (SaaS)

On Premise On-Demand

Software Service

CAPEX+OPEX OPEX (Subscription orUsage-Based)

Software-as-a-Service Models

Hosting of Traditional Applications Net-Native Software-as-Services

License + Subscription Subscription

Single-Tenant Multi-Tenant

Dedicated Infrastructure Shared Infrastructure


Software-as-a-Service is …

• SaaS is a new way to deliver and consume softwareover the Internet

• SaaS is a new pricing/financial model for the payment ofsoftware

• SaaS does compress the supply chain for software andeliminates IT responsibilities for the end-customer

• But … The MOST important thing to understand aboutSaaS is that it is …


Software-as-a-Service is …

BEHAVIORAL


Buyer Behavior SegmentationBusiness-Centric Buyer

Technology/Feature-Centric Buyer

Web-C

entric Buyer

Web

-Agn

ostic

Buy

er Best Opportunity Buyers forSaaS

Best Opportunity Buyers forSaaS


We are are TOO OLD to Really Get IT


The Decision

Exi

stin

gO

fferin

gs

New

Offe

rings

Existing Customers

New Customers


The Threats

Exi

stin

gO

fferin

gs

New

Offe

rings

Existing Customers

New Customers


The Risks

Exi

stin

gO

fferin

gs

New

Offe

rings

Existing Customers

New Customers


The SaaS Challenge

ISVs

The road to SaaS is fraught withchallenges. ISVs are faced withnew business and marketdynamics as well as “black box”factors that cloud their path.

??

??!!!

!


O TWS

SaaS SWOT Analysis from ISV perspective

- Web-Centric Sales & Marketing- Web 2.0 Usability/User Experience- Infrastructure & Operations- Web 2.0 Customer Service- Internet-scalable Applications- Service Level Management

- Incremental Revenue Opportunity in New Market Segments- Annuity-like Recurring Revenue- Higher Total Revenue Opportunity- Alignment with economic climate

- Domain knowledge- Customer Relationship- Customer Understanding- Existing Applications and Solutions

- Pure-Play SaaS Competitors- Traditional Competitors with SaaS offerings- Traditional Competitor acquisition of SaaS Startup in Your Market


5 Key Process Areas…

Copyright © 2008 | Mural Consulting, LLC– A Division of Mural Ventures

Technology OperationsBusiness

Based on over 300 engagements with service providers and ISVs,Mural has developed 40 SaaS Key Success Factors™ that form a basis

for continuous improvement across 5 Key Process Areas.


Technology, and, …




User Accessibility

End-User Performance

Reliability & Availability

Computing Platform

Storage Management

Security

Database & Integration Management

Facilities

Organizational Effectiveness

Tenancy Model

Environment Model

Identification & Authorization

Ordering, Provisioning & Billing

Performance, Scalability & Resource Mgmt

Reliability & Supportability

Service Customization & Integration

Technical Track


Operations …




Self Management/Support

Product/Support Integration

Service Responsiveness & Visibility

Help Desk/Problem Management

Configuration/Change Management

Capacity & Cost Management

SLA & Business Continuity Management


Operations Track


Organized into different Tracks for Business …





Persona-Driven Offerings

Competitive Differentiation

Messaging & Positioning

Demand Generation

Sales Process

Customer Service & Support

Web-Centric Customer Experience

Business Planning & Budgeting

Financial Modeling

Financial Analysis & Reporting

Talent Recruitment & Management

Employee Performance Management

Business Process Management

Org. Structure & Responsibilities

Decision-Making Authority & Accountability

Business Track


Which Factors Impact the User Experience?


Continuous Improvement Methodology

23Copyright © 2008 | Mural Consulting, LLC– A Division of Mural Ventures

23

Technology OperationsBusinessSales & Marketing

FocusedApplication and HostingArchitecture Focused

Operations & SupportFocused

The continuous shift towards the web, from both a user and a technologyperspective means that continuous assessment, planning, and

improvement is required to maintain “best practices” across all disciplines


Why Do You Need to Act Now?


Buyer Behavior is PolarizingBusiness-Centric Buyer

Technology/Feature-Centric Buyer

Web-C

entric Buyer

Web

-Agn

ostic

Buy

er

Buyers whoare primarilyinterested inOn-Premise

Software

Buyers whoare primarilyinterested in

SaaS


What does this mean?

• Economic pressures will create increased opportunityfor SaaS

• Subscription-based Licensing, even for On-Premisesoftware may be an attractive alternative to SaaS

• The SaaS challenge is cultural, organizational, andbehavioral – not technical. You need to understand yourreadiness for this shift – you may be closer than youthink – OR farther away


What is the Right Offering?


Assess Your Readiness

Are You Ready for SaaS?

Go to selfassess.muralconsulting.comto complete the SaaS Readiness Self-Assessment now

http://www.muralconsulting.com

making the saas decision: the threats, opportunities, and

Business

opportunity

long tail

centric buyer

reliability

service providers

continuous

entric buyer

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