the road to “saas-ification” for software vendors

THE ROAD TO “SAAS-IFICATION” FOR SOFTWARE VENDORS

#shifttosaas

Brian K. WalkerPrincipal AnalystForrester [email protected]

Craig VodnikVP of [email protected]

Questions? @cleverbridge


About cleverbridgecleverbridge is a full-service e-commerce partner for companies that sell digital products. Our flexible platform and unrivaled service fuel the performance of B2C and B2B businesses around the globe.

Drawing from years of experience and expertise, cleverbridge provides a customized, multi-channel e-business solution.

International corporations like Avira, GFI, Ipswitch and Quest Software count on cleverbridge to support their SaaS and subscription-based e-commerce needs.

#shifttosaas


#shifttosaas

Brian K. WalkerPrincipal AnalystForrester [email protected]

Craig VodnikVP of [email protected]


© 2010 Forrester Research, Inc. Reproduction Prohibited4 © 2009 Forrester Research, Inc. Reproduction Prohibited

The Road To “Saas-ification” For Software Vendors

Brian Walker

Vice President & Principle Analyst, Forrester Research

July 13, 2011

@bkwalker


Buyers are serious about adopting SaaS software, but why?


Today, 31% of companies are already moderate or heavy users of SaaS software

“Which of the following best describes your company's usage and adoption of SaaS software?"

All of the software our employees use is SaaS based

Most of the software/applications our employee's use are SaaS based; a minority is desktop or internally deployed web apps

We have a mix of SaaS based applications and traditional desktop software/internally hosted web applications

We use a few SaaS applications, but the majority is traditional installed or internally hosted web apps

We don’t use any SaaS software

0%

6%

19%

18%

57%

4%

8%

24%

33%

32%

500 - 9,999 Employees (n=85)

20 - 499 Employees (n=72)

Base: US and EU software purchase decision makers for companies of each size

Source: A commissioned study conducted by Forrester Consulting on behalf of cleverbridge, March 2011


TCO is a key driver of the adoption of SaaS software by enterprise companies

Support regulatory requirements

Support our company's sustainability goals (e.g., green IT, supply chain CO2 reduction, occupational health)

Increase innovation

Improve integration between applications

Support company growth

Be more nimble as the firm changes business processes

Improve collaboration and information exchange (e.g., Web 2.0, portals, workspaces)

Improve business process execution speed

Data security

Reduce costs

0% 10% 20% 30% 40% 50% 60% 70%

1%

4%

3%

16%

6%

17%

12%

12%

27%

7%

6%

4%

9%

9%

9%

9%

13%

12%

15%

3%

10%

12%

4%

16%

9%

11%

18%

13%

Ranked 1 Ranked 2 Ranked 3

“What would you say are the top business goals your internal IT organization considers when choosing SaaS software? Please rank up to 3, in order of importance”


Base: 89 US and EU software purchase decision makers at organizations using SaaS software


SaaS removes the risk of getting “orphaned” on an old or unsupported version of a software platform

SaaS software vendors offer superior customer service and support than vendors selling up-front licensed software

SaaS software is more reliable than internally hosted software/applications

My company has a preference for SaaS software as it allows our employees to access application(s) from any PC / laptop, anywhere

SaaS software has a better 3 year TCO than traditional CPU or license based software

My company's data is at least as secure when using SaaS software as internally hosted software

Acquiring and implementing SaaS software is faster than internally hosted software

Using SaaS software, I am confident that my data is/would be securely backed up on a regular basis

Using SaaS software enables companies to roll out new products to our employees without incurring large upfront acquisition costs

When using SaaS software, my company owns/would own our data

SaaS software enables companies to stay on an up-to-date version easier than internally hosted software

0% 25% 50% 75%

22%

18%

16%

24%

31%

28%

34%

27%

38%

10%

15%

22%

15%

15%

18%

22%

24%

38%

31%

4 Strongly agree - 5

“To what extent do you agree or disagree with the following statements about SaaS?” Rate on a scale of 1-5 where 1=“Completely disagree” and 5=“Completely agree”


Base: 157 US and EU software purchase decision makers


And acquiring and implementing SaaS software is faster than on‐premise software

It was the only deployment option available from software providers

We have a general IT strategy of preferring SaaS over on-premise deployments

Gaining a feature or functionality that is not available in a traditional, licensed software package

Ability to substitute upfront costs with regular monthly payments

We chose the best application for our needs, and were neutral on whether it was SaaS or not

Lack of in-house IT staff to maintain a traditional software solution

To support a large number of mobile and remote users

Speed of implementation and deployment

Lower overall costs

0.0561797752808987

0.0449438202247191

0.134831460674157

0.112359550561798

0.112359550561798

0.101123595505618

0.134831460674157

0.101123595505618

4%

6%

6%

10%

12%

10%

19%

30%

6%

3%

8%

7%

12%

17%

21%

17%


In general, what would you say were the top drivers in your firm’s decision to adopt software-as-a-service (SaaS)? Please rank up to 3 drivers, in order of importance.”




SaaS Is The Holy Grail For Software VendorsSoftware marketers are increasingly turning to SaaS as a faster, less expensive, and less resource intensive way to deploy business solutions for their customers.


SaaS opens the door to new markets, especially SMB


The application was adopted company-wide as part of a formal RFP process

The company switched from a internally hosted/packaged product to an equivalent SaaS product from the same vendor

The application was initially used by a functional department, without IT approval and subsequently grew in popularity until IT adopted it as a companywide application

The application was initially used by a functional department, without IT approval and subsequently grew in popularity but is not a formally IT approved company application

32%

39%

19%

3%

47%

16%

24%

7%

500 - 9,999 Employees (n=58)

20-499 Employees (n=31)

And provides a way to retain existing customers during software replatforming and cost-saving projects

“Thinking about a recent SaaS application that has been adopted within your organization, which of the following best describes the purchase process.”


Base: US and EU software purchase decision makers for companies of each size using SaaS software


SaaS provides very healthy margins

“The beautiful part of SaaS based products is once you have the structure and delivery

set up, your investment is sunk and everything you are receiving off the top is pretty high margin. You have to invest in

the security, performance, bandwidth, etc. but now that we have that, we create greater and greater margin the more

customers we bring on. The level of margin is almost embarrassing, its so high, so I

don’t want to divulge.“

Director of Marketing Provider of software solutions to health ins. industry


Onboarding new customers is significantly easier

SaaS software vendors offer superior customer service and support than vendors selling up-front licensed software

SaaS software is more reliable than internally hosted software/applications

My company has a preference for SaaS software as it allows our employees to access application(s) from any PC / laptop, anywhere

SaaS software has a better 3 year TCO than traditional CPU or license based software

My company's data is at least as secure when using SaaS software as internally hosted software

Acquiring and implementing SaaS software is faster than internally hosted software

Using SaaS software, I am confident that my data is/would be securely backed up on a regular basis

Using SaaS software enables companies to roll out new products to our employees without incurring large upfront acquisition costs

When using SaaS software, my company owns/would own our data

SaaS software enables companies to stay on an up-to-date version easier than internally hosted software

0% 25% 50% 75%

22%

18%

16%

24%

31%

28%

34%

27%

38%

10%

15%

22%

15%

15%

18%

22%

24%

38%

31%

4 Strongly agree - 5

“To what extent do you agree or disagree with the following statements about SaaS?” Rate on a scale of 1-5 where 1=“Completely disagree” and 5=“Completely agree”




Trials are as easier to offer and simple to covert


Additional services and seats are easier to up-sell

“It’s a bit like a Trojan horse. The customer starts small, and then adds more and more bits that we can provide.”

Director, product manager, provider of publishing services solutions


Vendors can react quickly to changing market requirements and innovate at a rapid pace

Support regulatory requirements

Support our company's sustainability goals (e.g., green IT, supply chain CO2 reduction, occupational health)

Increase innovation

Improve integration between applications

Support company growth

Be more nimble as the firm changes business processes

Improve collaboration and information exchange (e.g., Web 2.0, portals, workspaces)

Improve business process execution speed

Data security

Reduce costs

-10% 0% 10% 20% 30% 40% 50% 60% 70%

1%

4%

3%

16%

6%

17%

12%

12%

27%

7%

6%

4%

9%

9%

9%

9%

13%

12%

15%

3%

10%

12%

4%

16%

9%

11%

18%

13%


“What would you say are the top business goals your internal IT organization considers when choosing SaaS software? Please rank up to 3, in order of importance”




SaaS is not always a silver bullet. Limitations and challenges for adoption still exist at many enterprises and government organizations.


Few SaaS products gain enterprise wide adoption without the support of IT. IT still holds a veto

“Regardless of current adoption, when purchasing SaaS software, which, if any, of the following approvals does or would your organization typically require?”


CSO (Chief Security Officer) (e.g. required audit on the SaaS vendors security compliance)

Legal (e.g. required to see that company SLA's are covered in the contract with the SaaS vendor)

Corporate finance (e.g. required to see that the TCO competes competitively with traditional licensed software)

IT (e.g. required review to prove that the SaaS vendor's application meets required integration needs)

32%

41%

67%

76%

34%

40%

57%

90%

IT Buyers (n=91)

Business Buyers (n=66)

Base: US and EU software purchase decision makers in each role


Security concerns with SaaS are widespread

Security concerns

Integration challenges with other applications

Application performance (i.e., downtime, speed)

Total cost concerns (i.e., total cost of ownership)

Complicated pricing models

Lack of customization

Difficulty and risk of migration or installation

We can't find the specific application we need

We're locked in financially with our current vendor

None; there are no barriers preventing us from using SaaS

54%

44%

35%

47%

26%

40%

26%

17%

19%

5%

50%

44%

34%

31%

31%

28%

16%

19%

6%

59%

62%

41%

28%

38%

7%

28%

21%

7%

7%

Germany (n=30) UK (n=32) US (n=95)

“What if any, barriers can prevent your firm from using software-as-a-service (SaaS) when both SaaS and packaged options are available?”


Base: US and EU software purchase decision makers in each country


And integration with existing systems remain a challenge

Security concerns

Integration challenges with other applications

Application performance (i.e., downtime, speed)

Total cost concerns (i.e., total cost of ownership)

Complicated pricing models

Lack of customization

Difficulty and risk of migration or installation

We can't find the specific application we need

We're locked in financially with our current vendor

None; there are no barriers preventing us from using SaaS

54%

44%

35%

47%

26%

40%

26%

17%

19%

5%

50%

44%

34%

31%

31%

28%

16%

19%

6%

59%

62%

41%

28%

38%

7%

28%

21%

7%

7%

Germany (n=30) UK (n=32) US (n=95)

“What if any, barriers can prevent your firm from using software-as-a-service (SaaS) when both SaaS and packaged options are available?”


Base: US and EU software purchase decision makers in each country


Some verticals are better suited to SaaS than others, from categories where it is nascent…


…To categories where it is emerging…


…To categories where it dominates.


Buyers of SaaS software have different needs and vendors must be ready to satisfy them.


“Which, if any, of the following accurately describe your past experience purchasing software for your company on a vendor’s B2B website vs. your own personal experiences of buying similar software online using a B2C site? (Select

all that apply)”


I find it quicker and/or cheaper to call the sales rep, compared to purchasing through a vendor's B2B site

Many vendors’ B2B sites that I use only allow me to submit quote requests; I have to complete my purchase with a sales rep

Many of the vendors I buy software from have a single B2C/B2B site that is tailored according to my personal/company purchase needs

I have found myself so frustrated with a vendor's B2B user experience that I was compelled to purchase software for my company using the vendors B2C online store

None of the above

26%

24%

24%

21%

19%

36%

23%

29%

23%

14%

Business buyers (n=66)

IT buyers (n=91)

Base: US and EU software purchase decision makers in each role

They are frustrated with the complexity of existing B2B purchase channels and workflows


They expect a frictionless online sales channel for SaaS software acquisitions

“Regardless of how your firm purchases commercial software today, how would you most prefer to purchase it in the future?”


Direct from a dedicated vendor account rep

Direct from the vendor's B2B website

Your IT services provider

Direct from the vendor's consumer website

A Value-added reseller (VAR)

A vendor approved solution partner

Your companies ERP software

Online reseller

A local software/computer services company

18%

13%

13%

13%

14%

8%

3%

7%

8%

18%

21%

12%

11%

9%

5%

9%

4%

2%

500 - 9,999 Employees (n=85)

20-499 Employees (n=72)

Base: US and EU software purchase decision makers for companies of each size


Businesses don’t want to depend on IT for day‐to‐day tasks

“When considering the purchase of SaaS software in your company, please rate how important each of the following online features is/would be to you as an administrator/decision maker?” Rate on a scale of 1-5 where

1=‘Not at all important’ and 5=‘Very important’


Ability to purchase in my home currency

Ability for new users to self register online

Ability to pay using my preferred payment / billing method

Ability to view billing information and invoices online

Ability to configure and purchase additional services for users and groups online

Ability to view monthly usage stats online

Ability to add new seats to your account online

Availability of an online account portal for all administration tasks

Ability to manage users online (add/remove/modify accounts)

0% 25% 50% 75% 100%

15%

27%

25%

27%

39%

41%

34%

37%

36%

32%

23%

25%

37%

32%

31%

40%

43%

48%

4 Very Important - 5



Business users are ready for SaaS in the enterprise & SaaS is blurring the line

Personal Work


Recommendations

Pick the right battles, some software categories will always

remain resistant to SaaS

Incumbent software vendors must get on the SaaS bandwagon,

or risk leaving the door open for new upstarts to play on their

turf

Software vendors must re-organize their sales process from the

ground up and get serious about selling their SaaS products.

The transition to a SaaS product portfolio requires much more

than an investment in R&D and technology.

© 2009 Forrester Research, Inc. Reproduction Prohibited

Thank you

Brian K. Walker @bkwalker

blogs.forrester.com/brian_walker

www.forrester.com

DOWNLOAD THE FREE REPORT“SOFTWARE VENDORS: THE SHIFT TO SAAS” www.cleverbridge.com

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