SEIZING THE SAAS OPPORTUNITY A Getting-Started Guide

Progress.com 2

ContentsMarket Overview 3

SaaS vs. On-Premise 4

Delivering SaaS 5

Business Strategies 6

Understanding the Business Model 6

Developing Your SaaS Strategy 7

Getting Started 8

Marketing Strategies 9

Identifying Your Target Market 9

Positioning Your Offering 10

Pricing Your SaaS Offering 11

Pricing Considerations for SaaS Offerings 12

Pricing Examples 15

Architecting for SaaS 19

Understanding the Architectural Requirements 19

SaaS Reference Architecture Elements 20

Transforming Your Application 22

Operating Your SaaS Environment 23

Managing your SaaS Application 23

Operating and Maintaining Your Business Service 24

Checklist for Operations 24

Progress Partner Offerings: SaaS Empowerment

Programs and Resources 24

Business and Market Analysis 25

SaaS Business Planning 25

SaaS Go-To-Market Planning 26

Accelerating Growth via SaaS 26

About the Author 27

Progress.com 3

Market OverviewWhile IT budgets continue to decrease, the demand for innovation and complex systems is increasing, and, as such, the cloud has become a major component of delivering business transformation. According to IDC, organization adoption of cloud technologies has exploded across industries by 137% from 2015 to 2016. Companies that were “light users” of the cloud are now relying heavily on cloud-based solutions, and new adopters are jumping on the bandwagon. This surge in adoption has lessened the need for on-premises customized offerings significantly; cloud vendors are growing business as much as 12x faster than traditional software vendors.

The driving forces behind the adoption of cloud—and in particular, Software as a Service (SaaS)—solutions include:

• Demand placed on IT to deliver line-of-business (LOB) applications is intense and unrealistic. When IT can’t meet the demand, business owners seek alternative solutions. As such, IT organizations have accepted that instead of building and managing apps, they can lend consultative support.

• Applications that drive specific business processes need to scale quickly and efficiently, and cloud-based apps do.

• Open source technology decreases costs and increases innovation.

• The cloud provides much-needed speed and flexibility in app deployment and cost.

In addition to the operational benefits, delivering applications in the cloud provides several benefits for application end users, including improved IT productivity and business agility, reduced IT budget and faster time to market. With the cloud, the ISV can expand its footprint to new customers who previously faced barriers to entry, such as pricing, geographical boundaries, a lack of resources and so on.

Despite the benefits of cloud-based software delivery, SaaS providers must address numerous concerns about security, compliance and integration as they adopt the SaaS model. They must be able to measure and record application usage and customer information in order to satisfy government sanctions for IT systems. And, they must tackle potential difficulties integrating their cloud-based offerings with existing systems as well as other cloud offerings deployed throughout a customer’s organization. Downtime caused by security breaches or other issues affect customer experience and could result in substantial revenue loss, as customers loyalties change quickly and easily.

This eBook explores the development of SaaS models, including marketing, pricing and architectural considerations essential for success.

Progress.com 4

SaaS vs. On-Premise SaaS is an alternative approach to software delivery that incorporates the business application with the utility and value of a managed service offering. The SaaS delivery model is different from traditional on-premises app delivery in the following ways:

• Applications developed for SaaS delivery can accommodate multiple customers within a single production instance (known as multi-tenancy).

• SaaS offerings leverage the Internet to deliver content. Many SaaS offerings require only a Web browser to access and use the application, dramatically simplifying the distribution of the offering.

• SaaS applications are typically offered through a subscription rather than a license fee. The subscription fee is often based on a business value metric, such as the number of subscribers served, number of business transactions processes or usage off the application itself.

• SaaS offerings typically include the use of the application, hosting, ongoing maintenance, and upgrade and update services provided, in exchange for a subscription fee paid by the customer, which is based on the value the service delivers. The industry has seen the SaaS model evolve over the last several years into its current form, and Progress partners have benefited due to the power and reach of Progress OpenEdge.

Progress.com 5

“SaaS shows no signs of decline, with even the poorest SaaS segment seeing a CAGR of 19.7% through 2019”Market Trends: Future Look at SaaS in the Application Markets, Gartner, 25 November 2015

Delivering SaaSMoving forward, the SaaS ISV is no longer creating packaged software products for customers to install. Instead, ISVs create functional software-powered services and applications for customers to use, delivered to agreed-upon performance levels, throughout the life of the service contract/commitment.

Moving from being a software product vendor to a software-powered services provider requires a fundamental change to the business model. Rather than being paid up-front for product sales, the SaaS provider is compensated for service usage.

Progress.com 6

Business StrategiesUnderstanding the Business Model

The software industry has seen constant and dramatic change in its relatively brief history. SaaS has become the new paradigm for the design, sale and delivery of business applications.

The approach is changing the role of ISVs, VARs and other vendors, and promises to create new, more profitable revenue streams.

The objective for these companies is to build, offer and support functional software-powered services at agreed-upon performance levels and deliver these applications as service contracts, instead of products they sell.

The shift from providing products to offering SaaS requires a substantial shift in the business model. Rather than a single sale, SaaS companies draw regular revenue in exchange for providing support throughout the life of the contract. This is a win for the customers as well as vendors, who are encouraged to focus on providing greater value and offering superior customer service.

“The shift from providing products to offering SaaS requires a substantial shift in your business model.”

Progress.com 7

Developing Your SaaS StrategySaaS offerings involve far more than subscription pricing and hosting services. Next-generation, re-architected SaaS application software delivers a greatly reduced cost of ownership and far higher value over time. Fast implementation, included upgrades, increased software flexibility and higher customer responsiveness all combine to greatly increase the software’s value at a fraction of the total cost of ownership.

This revolutionizes the application software cost/benefit equation and fundamentally changes the customer ownership experience for the better. To that end, it requires existing software vendors take a step back and evaluate their current business model, then determine what a successful SaaS business model will entail.

A winning SaaS strategy doesn’t require you to make all changes today and put everything on hold until you’re “SaaS ready.” But it does require you to think things through, as though you were starting a new business—and that means starting with a plan.

Progress.com 8

Getting Started Start with your foundation, and remember these three essential tips:

1. The increase in demand for software-powered services will be the backbone for developing your SaaS strategy.

2. Don’t focus on your existing customers only, or even on your existing target market. Look at what customer requirements exist today in markets that you have been unable to serve in the past. Then develop a strategy to go after that new business.

3. While customers today are struggling to cut software costs and management complexity, you, as a software supplier, are in a great position. You can increase your overall product and services revenue by developing new long-term income streams that are more predictable than the perpetual license fee.

Given the growth and resiliency of the SaaS market, all types of vendors are seeking to seize the opportunity, including Progress ISVs like you, who have the specialized and/or vertical domain expertise to transition smoothly to the SaaS model.

Progress.com 9

Marketing StrategiesIdentifying Your Target Market

Many industry analysts believe the SaaS model makes the most sense for small- to medium-sized businesses (SMBs). The foremost market force affecting the success of these companies is speed. The ability to capture market share quickly is critical—as is the ability to put in place an infrastructure to support rapid growth, quickly. Because the initial investment required of the customer is minimal, and the time to bring an application live is short, the potential for the SMB market for SaaS is vast.

Because SaaS is a subscription-based model, the customer need not come up with substantial investment necessary for all the hardware, operating systems, databases, licenses, IT staff and ongoing overhead. SMBs typically don’t have the luxury of IT support. And by outsourcing a much-needed application to a SaaS provider, SMBs can focus on core business activities, rather than diverting funds and other resources to support advanced applications.

The SMB market already relies significantly on outsourcing. They charge monthly fees per desktop for a number of offerings already, and administer their customers’ entire business applications and network remotely. A SaaS provider can bridge the gap between these organizations and high-performance business applications with a solution that’s easily within reach.

Organizations of all sizes are looking at the benefits of moving to SaaS. Line-of-business (LOB) areas of the Fortune 1000 are leveraging the benefits of providing high-level business process automation at a lower up-front cost, with the value-added service component that a department might not get for the corporate IT organization.

One example is a Progress-based ISV delivering applications to the consumer affairs departments of large consumer packaged goods (CPG) firms. A traditional solution that would have taken 18 months for the internal IT group to just begin was up and running in less than three months, thanks to a SaaS-based solution. That vendor now offers 90% of its large CPG customers the SaaS alternative.

Progress.com 10

Positioning Your OfferingSaaS offerings that have been correctly architected can deliver much higher value than installed application software, because of the following factors:

• Fast implementation: SaaS offerings require less investment for new customers and are completely configurable over the Web. For simpler self-service apps, a customer can start using the software immediately. For more complex business process automation software requiring configuration and data loading, go-live still occurs within a month or two. Customers start achieving benefits within weeks for no up-front cost, rather than spending millions and waiting many months for results.

• High configurability: SaaS offerings should be architected to avoid customization, which prevents high implementation time and cost, and also avoids lock-in. Instead, SaaS software is highly configurable, allowing the customer to implement custom processes, business rules and data, simply by changing switches in the software.

• Continual upgrades: Upgrades are frequent, automatic and free with SaaS offerings. New features are set as “off” until the customer wants to take advantage of them.

Yet customers always have access to the most recent innovations and improvements. In addition, SaaS providers are able to improve continually, primarily because their development resources are not wasted on maintaining many different versions in a multitude of unique customer environments.

• Best practices expertise and content: In addition to building more innovations and value into their software, SaaS providers often create add-ons that build in best practices, such as templates, content and configurable functionality for specific circumstances. Some vendors also provide best practices consulting services and end-to-end implementation services to ensure their solutions achieve high adoption, dramatically improving customer results.

• Faster returns and more long-term value: All these elements add up to much higher value for the customer. Equally important is far lower total cost and risk for customers, which SaaS providers achieve by using fundamentally different business practices than legacy software vendors.

Progress.com 11

Pricing Your SaaS Offering In the days of mainframe applications, there was a single price per module and the pricing was a simple as it gets. There was no concept of user-based pricing—as there were not that many “users” of a mainframe system, and there certainly was no concept of transaction-based pricing. The only thing to do was run batch jobs against a big, old “iron” box. There was the notion of “pay-for-service,” in terms of the original service bureaus, but that was mostly based on a service processing fee and not focused on an application-usage fee.

Throughout the 1990s, we saw the client server versions of pricing, where it was all about concurrent users, named users and capacity-based pricing. However, that brought much more complexity into the pricing mix, as vendors wanted to charge by the user, to get the software out onto the desktops of as many users as possible. That notion added IT costs associated with maintaining desktops, as well as the cost of keeping track of the number of users actually using the software.

Another phrase involved “value-based” pricing, but in the late 1990s, companies weren’t really able to relate the value software was providing directly to an organization.

There were so many other “costs” associated with bringing the software in-house, and getting it to look and act the way you wanted, based on your business processes. By the time you calculated value, it was almost three years later, and users realized they had already paid too much for the software and were simply trying to use all its capabilities.

The SaaS model fundamentally requires vendors to rethink pricing models. In the SaaS model, you’re not delivering anything up-front—you’re delivering continual service. SaaS requires you to set the price based on the service delivered. For example, a customer paying monthly is going to have certain expectations around the vendor’s ability to fulfill commitments, be responsive and reliable, and continuously improve.

Once again, the concept of the value you provide comes into play. Often, there’s a disconnect between the vendor’s perception of value provided, and the customer’s perception of the value they’re receiving.

Progress.com 12

Pricing Considerations for SaaS OfferingsHere are some key considerations when determining the best SaaS pricing strategy for your business.

Target Market: Identify your ideal customer profile, requirements for the business type, and your ability to provide a competitive offering.

When you identify potential market segments to target, build an understanding of your value to that segment, based on your target customer’s business priorities and margins, as well as the capabilities and services you intend to provide. Will you enter the market at the low, mid or high end? For example, if you’re targeting SMBs, pricing should take into account their more modest budgets, whereas an enterprise client may expect a much higher level of attention and service and be willing to pay a premium.

Value of Product: Understand the value of your offering and your customer’s willingness to pay for it.

The amount a company is willing to pay for a product often depends on one of two factors: Cost savings (the application saves a company money) or increased revenue (the application helps companies generate revenue). For example, if your client can save $1 million in payroll costs with your software, it’s a cost saver. If your software generates 15% more leads for your customers and increases conversion rates by 12%, it’s a revenue generator.

Progress.com 13

However, identifying which category an application falls into isn’t always easy. An HR application, for instance, may help to manage employee benefits, resulting in savings that are difficult to quantify. In such cases, you have to understand the competitive landscape to determine the appropriate pricing model.

Fundamental Frameworks: Determine whether your product pricing methodology is centered on value pricing or cost pricing. Value pricing refers to basing your product price on how much perceived gain a client can receive from using your product. Cost pricing involves marking up your product cost by a margin, in order to make long-term profitable sales. While both frameworks can be utilized, value pricing is the preferred method, and generally a more robust reflection of the market’s willingness to pay.

Understanding Operational Costs: Although using a value pricing methodology is usually preferable, ultimately you need to make a profit. There is cost associated with bringing a SaaS application to market, so you must perform a cost analysis prior to launching the offering, just as you would in a traditional application model. Consider all cost of goods as well as potential threats to current revenue streams. You might want to offer discounted annual deals to incentivize clients to lock in a longer contract and reduce churn rate. Some important questions include:

• What is the estimated average contract value? • What is your customer acquisition cost? • What are your general COGS? • Do you need to hire experienced, specialized salespeople (typically for differentiated,

premium products)?

Progress.com 14

Competition: Run a quick competitive pricing analysis to develop a rough industry benchmark for your product pricing. While doing this analysis, you should gauge your product position (lower quality vs. premium) within the market and understand pricing appropriateness, relative to that position. Questions to consider include:

• Are you offering better features than competitors? • What are your product differentiators? • Do those differentiators warrant significantly higher/lower costs? • What are the estimated margins on direct competitors? • Are you running a business that can sustain those margins?

Tiered Pricing: The amount that a customer is willing to spend varies significantly from client to client, so consider various pricing options according to different business needs.

This requires optimal product bundling to meet your customers’ challenges. Understand what product features are “bare minimum,” and create upgrade paths for more advanced capabilities.

Tiered offerings enable your customers to commit minimally and expand that commitment as they become more attached to the offering. Keeping your options clear and simple helps the customers see the upgrade path, without feeling overwhelmed.

Measurable Metrics: Clearly identify the metrics with which you are structuring the pricing plans. Some important metrics may include product usage per user, per department, per storage space or per time spent online. Decide whether you will price your product using monthly, bi-annual or annual contracts. Will you charge based off of a fixed price ($/users/month) or percent on the ROI generated by your client (or a combination of the two)?

Progress.com 15

Pricing ExamplesThe SaaS pricing scheme examples that follow reflect actual discussions and implementation across several industries.

The software industry is going through a phase of dramatic change with the advent and adoption of third-platform technologies. This driver, along with other key drivers, is leading to the obsolescence of traditional pricing models and the development of new pricing models, and making pricing models more important than ever.” Amy Konary, IDC

1 Amy Konary, Worldwide Software Pricing and Licensing 2014 Top Predictions, IDC, March 2014.

Progress.com 16

Pricing Example 1An ISV operates in the bulk commodity market. Normal product licensing has been assessed on a per-user basis, in perpetuity, with a 20% per-year maintenance change.

Option 1: Per-User, Per-Month

How it works: This option aligns the current product-based licensing scheme with the service provision scheme.

Risk is not shared: As the application’s functionality increases the efficiency of the end user customer’s business, fewer users will operate the core software. The ISV will fight to be compensated for elevated service levels—and risk—required to maintain the service.

Result: The ISV has no scalable upside revenue possibility: As the end user’s business turnover and profits increase, the ISV becomes relegated to cost rather than value discussions.

Option 2: Per Ton Shipped Per-Month

How it works: This option aligns the business model between the ISV and the end-user customer, as well as the ultimate consumer of the end user’s product offering.

Both sides share risk: The ISV is motivated to ensure the success of the end-user customer, through competitive advantages gained by the use of the software service.

Result: Because the ISV’s metrics are aligned with those the end user organization uses to judge its own success, the end user organization will be able to predict and identify underlying costs and profit margins.

Progress.com 17

Pricing Example 2An ISV operates in the insurance industry. Normal product licensing has been assessed on a per-user basis, in perpetuity, with an 18% per-year maintenance charge, plus periodic upgrade and customization charges.

Option 1: Per-User, Per-Month

How it works: This option aligns the current product-based licensing scheme with the service provision scheme.

Risk is not shared: As the application’s functionality increases, the efficiency of the end-user customer’s business, fewer users will operate the core software. However, the ISV will fight to be compensated for the elevated service levels—and risk—required to maintain the service.

Result: The ISV has no scalable upside revenue possibility: As the end user’s business turnover and profits increase, the ISV becomes relegated to cost rather than value discussions.

Option 2: Per Endorsement, Policy or Claim, Per-Month

How it works: This option appears to get close to exposing the correct metric choice—that of a business-related metric. This works best where the level and complexity of work performed (on a per-metric basis) is the same across all or most end-user customers, where a flat fee metric will work.

However, this option fails where the end user market has varying characteristics: For example, the ISV may find certain customers have a large number of endorsements requiring little work, while others have a small number of endorsements requiring substantial work.

Option 3: Percent of Value of Endorsement, Policy or Claim, Per-Month

How it works: With this option, there is a clear relationship between the work performed by the service and the value represented by the object of the work.

Progress.com 18

Pricing Example 3An ISV operates in the discrete manufacturing industry and delivers a complete end-to-end application. Normal product licensing has been assessed on a per-user basis, in perpetuity, with an 18% per-year maintenance charge, plus periodic upgrade and customization charges.

Option 1: A Percentage of Per-Invoice Value, Per-Month

How it works: Taking a percentage seems to be a fair shared revenue option.

Customer unfriendly: The target user community in this case violently rejects this option as an invasive “tax” on their business. In addition, low-end competition, characterized by lower functionality and lower cost, was aggressively targeting the same marketplace.

Result: The provider needed to spend more time selling the value of “pay-as-you-go” or “pay-as-you-use” methodology to the client and look at percentage of use as an optional pricing model for some customers. This would be used instead of the “one-way-for-all” pricing strategy. This particular customer segment needed more education on the changing business models of the cloud, and understood it’s not a tax, but a “pay-for-use” business pricing model.

Option 2: Per-User, Per-Month, with Separate Customization Charges Billed as Incurred

How it works: This option clearly spells out specific service charges to the end-user customer, so transparency is preserved throughout the relationship.

Result: This was made financially viable for the ISV, when agreement was reached on separate charges for customization, and certain other customer-specific work was performed.

Progress.com 19

Architecting for SaaSUnderstanding the Architectural Requirements

When using the Web for business applications caught on in late 1995, a distributed application architecture (then sometimes referred to as an N-tiered architecture) emerged. This looked different from the traditional client-server architecture, where the database generally sits on a centralized server, and the thick client containing the user interface and application logic is installed on the desktop of each user.

The distributed application architecture was made possible by two things. First, the Web browser emerged as a ubiquitous tool on the desktop. Second, a class of software known as an application server emerged that enabled rich application functionality to be delivered to the desktop via the Web browser.

The SaaS model further extends the distributed application architecture to include components to facilitate and enhance the business model. A traditional software vendor is primarily concerned with application functionality, and its customers are responsible for operating and managing their respective run-time environment.

A SaaS vendor, on the other hand, is equally concerned with operating and managing the environment that supports all its customers.

Administration of the overall SaaS environment and business is a unique component of a SaaS solution. Because SaaS is about delivering a service, considering administration of the business as a component within the overall architecture becomes necessary.

It’s important to develop an overall SaaS reference architecture outlining specific technical considerations before proceeding with any changes to your application. The topics outlined next are the key areas to be considered as part of a SaaS Reference Architecture.

An overall SaaS reference architecture outlining specific technical considerations should be developed before proceeding with any changes to your application.

Progress.com 20

SaaS Reference Architecture Elements

Application Configuration: This covers configuration of security policies, output formatting and default permissioning (authorization).

Customization and Personalization: Customization and personalization can be thought of as related to configuration.

Security and Privacy: Now that strong standards have emerged around security and privacy of corporate data, it’s easier for customers to do the necessary due diligence to make sure those standards and controls are in place.

The User Interface/Experience: The user interface and experience is where the customer meets the application, so it had better be good!

In fact, in today’s digital world “the user experience of an application increasingly determines its value and success.” Ideas for consideration include navigation, usability, supporting different devices and internalization.

Application Tenancy: The definition of tenancy has a strong connotation of occupancy. The concept of multi-tenancy, or the occupation of a SaaS environment by multiple tenants, is a central concept of SaaS.

Integration: Integration is presented due to the need for organizations to be able to integrate SaaS offerings with existing in-house applications, as well as other SaaS-based applications.

“As a provider of application development tools, it’s our responsibility to continue to deliver innovative solutions to enable our customers and partners to participate in today’s digital economy, and to embrace the opportunities and challenges posed by cloud computing and mobility.” Colleen Smith, from “Turning Disruption into an Asset”

Progress.com 21

Service Provisioning: The ability to quickly and easily provision service once a customer has contractually agreed to use your service is critical to success. Various aspects of service provisioning need to be explored for consideration.

Billing and Metering: Because SaaS services are not offered for free, it’s important to consider how billing is handled and whether or not the service requires metering as part of the pricing model.

Scalability: The fundamental SaaS concept of a single application instance supporting multiple tenants calls for scalability. This applies to each tier as it corresponds to different approaches.

Subscriber Management and Self-Service: The way in which subscriptions are managed and how well customers can get additional services determines how well the SaaS business can scale.

Transforming Your Application

The SaaS approach to deploying software solutions is emerging and evolving. As corporations buy more SaaS solutions, as existing software vendors seek to take advantage of this model and as more new SaaS vendors emerge, it’s helpful to develop an architectural model that encompasses all of the issues a SaaS offering may need to address.

Progress.com 22

Faster implementations, automatic upgrades, increased software flexibility and higher customer responsiveness are all needed to increase value. While on the surface, SaaS offerings look like legacy enterprise software, they have several characteristics that lower costs and increase value significantly, both up-front and over time. Many costs that legacy software providers incur are completely eliminated by a SaaS vendor’s product design and business model, so the SaaS vendor can deploy its resources in ways that provide far higher value to customers.

SaaS solutions are architected to be extremely configurable to avoid customizations. The terms “customization” and “personalization” are sometimes used distinctively and sometimes interchangeably. Personalization can describe presenting content to individual users, based on knowledge of who they are.

Customization can be defined as certain preferences that affect how an application behaves. Providing self-service configuration functionality in a SaaS application, as opposed to code changes, is critical to achieving the goal of providing a single application shared by everyone. This requires careful thought, advance planning and design in the overall application.

The key to success is to provide as much configurability in your application as possible. Thus, code implementation delays can be completely eliminated, both during initial implementation and with each upgrade, removing another significant cost of ownership for customers. Delivery of the SaaS application via the Web lowers the deployment costs associated with the application and expands the reach to more end users.

The key is to keep it as simple as possible for users to find what they need and understand what to do next. The old standard concepts of top navigation to get to the main areas of an application and sub navigation to get to the different functions within a main area have become so well known, virtually anyone with any experience clicking around the Web will feel comfortable following this general paradigm.

Most existing ISVs don’t transform their applications overnight, but instead do so as their SaaS business evolves. Many have developed a “playbook” to guide the evolution of their offerings. The playbook doesn’t start or end with the technology, but rather focuses on the new business opportunities that can be built around cloud-based technology.

Progress.com 23

Operating Your SaaS EnvironmentManaging your SaaS Application

There’s a lot more to delivering a SaaS solution then simply taking an existing application and selecting a hosting provider.

While the application and/or service is obviously critical to a SaaS offering and the datacenter is important, most SaaS providers don’t realize there is another layer that determines the success of a SaaS offering—the service delivery infrastructure. Unlike the traditional software model in which the application is “shipped to” the customer site and the customer is ultimately responsible for maintenance and support, SaaS shifts the burden to the software provider to ensure the software is accessible by the customer and is meeting expectations.

Operational excellence is critical to the success of any SaaS offering. SaaS vendors must not only build best-of breed functional software, they must also create superior operational processes to deliver a consistently high-value SaaS solution to customers over the Internet. Successful SaaS vendors have invested significantly, ahead of customer demand, in technical and personnel capabilities around system monitoring, proactive issue resolution, capacity planning and investment, high-availability and disaster recovery, performance tuning and system integration.

Because SaaS providers both design and operate their own software, efficient operations can be built directly into the product, with features such as active monitoring, performance tracking and easy issue diagnosis. With SaaS, the provider performs all operations and maintenance—as such, the provider is motivated to minimize operations activities, reducing costs for them and cost of ownership for customers.

Progress.com 24

Operating and Maintaining Your Business Service

SaaS creates an entirely new set of operational functions that traditional software vendors haven’t had to deal with in the past. So, while it is obvious there are product considerations for developing a SaaS offering, and the offering must be delivered form a datacenter, introducing the operational services is usually the eye opener when moving to a SaaS delivery model.

While the actual application is what the end user experiences and is a vital component to the SaaS offering, the delivery is equally important, and, in some cases, can be considered more critical to the overall success of the offering. The second “S” in SaaS stands for “Service” and needs to be well understood before the offering is made available to buyers.

One very valuable and compelling aspect of the SaaS model is that it takes many of the aforementioned responsibilities out of the hands of the end customer and places them squarely on the shoulders of the service provider. Service quality is as visible as the application itself, and care should be taken to consider customer requirements and the ability to deliver as part of the overall decision-making process.

Service Level Agreements (SLAs) should be used to help manage key areas of risk by specifying how the service will be measured. The SLAs will require negotiation to match the customer’s goals in specific delivery areas, such as response times, Internet traffic, customer network performance and end-user PC browser performance.

Checklist for Operations

• Will you host in a public or private cloud?• How will you define service performance requirements?• How will you define your SLAs?• How will you map governance, monitoring and support

levels?• Are you ready for service scalability?• What will be your processes/offerings for backup, restore and

disaster recovery?

Progress.com 25

Experience has shown success with a SaaS offering is linked to a thorough understanding and use of fundamental planning techniques covering three critical areas—business planning, market analysis, and technical and application architecture planning—and represent the primary focus of the Progress SaaS Empowerment program for ISVs considering a SaaS offering for their business.

Business and Market Analysis

The SaaS Business and Market Empowerment programs for Progress ISVs focus on the early stage fundamentals of market strategy and planning before significant efforts and monies are spent re-architecting applications, building datacenters, hiring support staff and more. The Business and Market Expansion category includes content to address the following elements related to planning for SaaS.

SaaS Business Planning

A critical component to the decision-making process surrounding a SaaS offering is the actual business plan itself and is very much a custom engagement. While the engagement is custom, the agenda often includes:

• A well-articulated market opportunity (why) and the offering (how)

• Market sizing and addressable market

• High-level go-to-market strategy, including channel to market

• Estimated costs for development, implementation, delivery, support, marketing, sales and so on

• Full financial—pro-forma P&L, cash flow and an understanding of the impact to the financial performance of an existing business, if applicable

• The ultimate deliverables of this engagement can vary widely, based on the experience and resources available from the ISV, but in general, a business plan document should be expected. It should be ready to be reviewed by executive management and action taken based on the results.

Progress Partner Offerings: SaaS Empowerment Programs and Resources

Progress.com 26

SaaS Go-To-Market Planning

Tightly coupled with the target market and business planning completed in earlier stages, this session is intended to fill in the executable details necessary to reach the target customers and markets with your message and value proposition. This custom engagement will be driven by the ISV’s unique requirements, but in general, will touch on the following elements:

• Messaging and positioning to the target buyers and influencers

• Competitive positioning• Direct sales and channel sales training• Marketing material and sales tools• Press and analyst relations• Website development and maintenance• Search optimization and Web marketing• Readiness of internal teams, critical systems and processes• The service launch itself• Lead generation• The objective of this session will be a prioritized, written plan.

Accelerating Growth via SaaSImplementing a SaaS offering is an excellent strategic alternative to accelerate the growth and valuation of the company for the long term. However, multiple alternatives exist for accelerating revenue growth of existing product or services, or the development of new products or services. Topics explored in more detail include:

• Current product and service analysis, with the goal of understanding the current state of affairs and looking for things that appear broken or less than optimal

• Innovation and scaled growth opportunities through product upgrades

• New market opportunities: vertical considerations, up/downstream markets and geographical expansion

• Sales channel or partnership opportunities to drive additional growth

Contact us

Progress.com 27

About the Author

Colleen Smith is the Vice President and General Manager of the OpenEdge business unit. Frequently asked to speak on the impact of cloud computing and mobile on software development, Colleen is in part responsible for assisting Progress ISVs in the execution of their SaaS businesses. A former AMR Research Analyst, Colleen joined Progress Software in 2005 with more than 20 years of software and technology experience. Colleen was named a CRN “Channel Chief” four years in a row (2007-2010) and one of the top 100 Women in the Channel by CRN in 2009 and 2010.

1Gartner, “Future Look at SaaS in the Application Markets,” November 25, 2015.

2Nathan Wilson, Gartner, “Modernizing Application Development Primer for 2016,” January 14, 2016.

Worldwide HeadquartersProgress, 14 Oak Park, Bedford, MA 01730 USA Tel: +1 781 280-4000 Fax: +1 781 280-4095 On the Web at: www.progress.com Find us on facebook.com/progresssw twitter.com/progresssw youtube.com/progresssw For regional international office locations and contact information, please go to www.progress.com/worldwide

Progress and OpenEdge are trademarks or registered trademarks of Progress Software Corporation and/or one of its subsidiaries or affiliates in the U.S. and/or other countries. Any other trademarks contained herein are the property of their respective owners.

© 2016 Progress Software Corporation and/or its subsidiaries or affiliates. All rights reserved. Rev 09/16 | 160901-0056

Progress (NASDAQ: PRGS) is a global leader in application development, empowering the digital transformation organizations need to create and sustain engaging user experiences in today’s evolving marketplace. With offerings spanning web, mobile and data for on-premise and cloud environments, Progress powers startups and industry titans worldwide, promoting success one customer at a time. Learn about Progress at www.progress.com or 1-781-280-4000.

About Progress