Microsoft PowerPoint - Profitability SaaS Versus On-Premise ...

Profitability: SaaS Versus On-Premise Solutions

Panelists:

Amy WohlPresident, Wohl Associates

Alex GingerProduct Development Director, Active Operations Management

Moderator:

Janaki JayachandranBusiness Manager – SaaS Specialization, Aspire Systems

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Date : Thursday, June 25th , 2009

11:00 AM ET/ 08:00 AM PT

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� 1050+ product releases to date

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About Aspire

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Amy Wohl

President, Wohl Associates

• Amy Wohl is a computer industry analyst and has over 30 years of experience in the

Information Technology Industry.

• Her specialties include SaaS, Cloud Computing, SOA, and commercialization of new

technologies

• Author of “Succeeding at SaaS: Computing in the Cloud”

Panelist

Agenda

� The Move to SaaS

� The difference in development costs

� The difference in operational costs

� The difference in marketing costs

� The need for a different business model

� SaaS ISVs can be Profitable

The Move to SaaS

� It’s the new Software Distribution Paradigm

� Nearly all new SW is being developed as SaaS

� VC investment in SW is in SaaS

� Customers of every size are looking at SaaS

� Yes, some markets are protected

� Traditional SW in a small niche market

� Very entrenched mainframe applications for existing customers

� Applications that don’t make sense on SaaS

� Everything else is a potential candidate

The Difference in Development Costs

� Is this a new application or the move of an existing application?

� Will you migrate the existing application entirely or support both forms?

� Development for SaaS can be just as efficient (if not more so) with skilled staff -- but it is an additional cost if you are also maintaining an existing application

� Born to the web developers go the other way –they develop for SaaS but may plan to allow the application to be offered as an appliance or traditional SW

The Difference in Operational Costs

� ISVs don’t have many operational costs for their SW except for some initial Support

� Maintenance/Support is a Revenue Stream

� Implementation is a Revenue Stream

� Customization is a Revenue Stream

� SaaS ISVs are entering a permanent relationship with their customers

� Running a platform or (better) paying for a partner to run a platform

� Providing maintenance/Support as part of the subscription fee

� Providing upgrades (and much more frequently)

The Difference in Marketing Costs� ISVs of traditional SW have to market their software through� Sales Force� Telemarketing� Partners

� SaaS ISVs sometimes mistakenly think that they don’t need to market

Put it on the Web and customers will come. – They Don’t

� Internet Marketing – Ads, Email, Blogs� Sales Force� Telemarketing� Partners� And maybe, if you’re lucky, Viral Marketing

The Need for a Different Business Model

� SaaS ISVs can be profitable, but they need a Business Model that takes all these differences into account

� The extra cost to develop, especially if you will maintain multiple versions of your SW

� The cost of running the SW and supporting it

� The cost of marketing – and the length of the marketing cycle

� Competitors already in the traditional and SaaSmarkets and their prices

Considering a SaaS Business Model

� http://smoothspan.wordpress.com/2009/05/19/why-do-saas-companies-lose-money-hand-over-fist/

� http://blog.kashflow.com/2009/03/19/saas-business-model/

� http://www.mfauscette.com/software_technology_partn/2008/09/saas-can-pure-p.html

� http://www.mfauscette.com/software_technology_partn/2009/02/a-few-more-thoughts-on-saas-profitability-and-saas-channels.html

SaaS ISVs can be Profitable

The trick is not just building a great product but

� Building a product for an identified customer need

� Pricing the product to the market

� Providing superlative service

� Not leaving any money on the table

Much luck to you

Panelist

Alex Ginger

Director, Active Operations Management

• Alex Ginger is the Product Development Director of Active Operations

Management International (AOMi) LLP

• He is responsible for the complete Product Management of AOMi’s Product -

Workware from defining the Product Map to ensuring the development of

marketable version of the product.

• Prior to the establishment of AOMi, Alex worked in Management Consulting with

EDS, Impact Plus and the Lanner Group focusing on process and performance

improvement projects in the financial services sector.

About AOMi

Suppliers of Operations Management

Solutions to the service operations

industry.

“Active Operations Management”

methodology delivered via Training,

Consulting and Software.

• Back-office planning and control application

• “Microsoft Project for Operations Managers”

• Web-based application with SaaS and traditional installations

• 25,000 – 30,000 customer employees

have their time planned and managed

by Workware™ each day

• Client base: major banks, insurance

companies, Business Process

Outsourcers

• Workware™ deployed as SaaS solution since 2005

• Also deployed in a traditional in-house installation model

• 70 % SaaS, 30% customer installation

• Service hosted in the UK, Australia, United States and South Africa

• SaaS application deployed using local hosting providers

• Standard product, with extensive configurability

Workware™ SaaS Deployment

Source: August 14, 2008 “Forrester’s SaaS Maturity Model” report

SaaS

Maturity

level

Forrester’s SaaS Maturity Model

Workware

• Rapid initiation of projects:

– Virtually no lag time from project approval to application live date

– Far less governance from in-house IT

• Compelling business case:

– Avoidance of capital expenditure

– Predictable future costs

– No charge until benefits proven

– Highly competitive cost of hosting versus in-house delivery

SaaS as an Enabler of Profitability

…results in a positive ROI inside the first 12 months

• Pricing model is key:

– Must differentiate the SaaS offering

– Options: SaaS as a revenue stream in itself, or an enabler

– Our utility based approach:

• Licenses billed monthly based on number of staff managed using Workware

• Additional ‘hosting’ charge for SaaS customers

• Sales and Marketing:

– Consistent approach for SaaS and non-SaaS

– Sell the product, in our case the performance improvement outcomes

– SaaS offering can accelerate the process

• Opportunity for value-added-services:

– Availability of customer data presents a range of options for additional services

– E.g. cross-company or cross-sector benchmarking

Managing SaaS Profitability: Revenue

• Development:

– Once product is well developed to support SaaS, development cost can

reduce:

• “Standard product with configurability”

• Simplified range of versions to support

• Simpler and more cost effective deployment of new versions

• Support:

– Different relationship with SaaS and traditional customers

– Not always less labour intensive to support traditional customers where many

variables are outside your control

• Infrastructure:

– Potential for significant periodic costs

– No “upgrade fees” for new versions to offset these costs

– Potential to smooth these costs through use of third party providers

Managing SaaS Profitability: Costs

Time

Rev

enue

Managing Revenue and Cost: New Customer

Pilot Multi-phased roll-out Steady state

Cos

ts o

f pro

vidi

ng s

ervi

ce

Using own infrastructure

Outsourced infrastructure

Outsourced infrastructure (exploiting virtualisation)

• SaaS has clearly been important to our growth

• The principle value of SaaS has been as an enabler of sales /

delivery

• Creative business models can deliver a compelling value proposition

• Profitability is influenced by many factors – the management of which

may not be core competences

• Develop with SaaS in mind – but having a well designed product

which meets an acknowledged need is still all important

Summary

Questions

Amy Wohl

President

Wohl AssociatesE-mail: [email protected]

Website: www.wohl.com

Ph. No: +1-610-667-4842

For more details

Alex Ginger

Product Development Director

Active Operations ManagementE-mail: [email protected]

Website: www.activeops.com

Ph. No: +44 (0)20 7831 9500

For more details

Janaki Jayachandran

Business Manager – SaaS Specialization

Aspire SystemsE-mail: [email protected]

Website: www.aspiresys.com

Ph. No: +91-44-67404000

For more details