Akamai thinkstrategies

A Whitepaper for Software-as-a-Service

Vendors

How to Survive and Succeed In the

SaaS Marketplace

Why Optimizing Application Performance Is Essential

A Whitepaper Published On Behalf of Akamai Technologies, Inc.

White Paper

Why Optimizing Application Performance Is Essential to Survive and Succeed In the SaaS Marketplace

© THINKstrategies, Inc., 2006 www.thinkstrategies.com p.2

Executive Overview A confluence of business trends are driving organizations across nearly every industry to consider a rapidly expanding array of Software-as-a-Service (SaaS) solutions. However, the rapid growth of the SaaS market has also attracted a proliferation of players that is already producing an industry shakeout which threatens the long-term viability of many aspiring SaaS independent software vendors (ISVs).

Many SaaS ISVs face the duel challenges of escalating competition, making it harder to win and retain customers, along with intensifying financial pressures due to the current economic crisis and credit crunch. In order to withstand these forces and fully satisfy their customers� escalating expectations, SaaS ISVs must not only have clearly differentiated solutions, but also be able to demonstrate superior service delivery capabilities with optimal reliability and response times. With �cloud based� SaaS solutions, this holds true whether your applications are delivered from your own data center, a managed hosting provider, or a cloud based platform.

Degradation in application performance levels can result in reduced sales, poor adoption, low customer satisfaction, and ultimately churn, which adversely impact the SaaS ISV�s reputation, revenues and profits. As a result, application performance optimization must not be viewed as a luxury. It is essential to every SaaS delivery strategy and vital for success.

This whitepaper will examine the reasons why SaaS ISVs, especially small and mid-size firms who are attempting to establish themselves as viable solution providers, must optimize application performance in a cost-effective manner that is also scalable long-term. It will also show how Akamai Technologies is helping SaaS ISVs overcome these challenges, without capital investments in sophisticated technology or specialized staff, and allowing them to not only survive, but flourish.

New Challenges of SaaS Success The SaaS market is experiencing rapid growth in response to the following mega-trends:

• Economic Uncertainty � Driving businesses to reduce spending on traditional software applications and adopt more flexible, pay-as-you-go application services.

• Increasing Competition � Driving businesses to seek applications that are more quickly deployed and easier for employees, customers and partners to use.

• Changing Workplace � Driving businesses to adopt applications accessible by employees, customers, partners, and other authorized users, wherever they access the Internet, encouraging greater productivity, collaboration, and coordination.

SaaS solutions are perfectly suited to respond to these trends because of their pay-as-you-go subscription pricing model, rapid time to value and ubiquitous access. SaaS solutions also permit user organizations to gain greater agility in today�s uncertain times. Rather than make significant capital investments in hardware and software, and hire additional staff to support these ongoing operations, SaaS solutions permit organizations to acquire the functionality they need, when they need it.

As a result, an increasing number of business and IT decision-makers are recognizing that SaaS solutions represent a viable alternative to traditional, �legacy�, on-premise software.

White Paper Why Optimizing Application Performance Is Essential

to Survive and Succeed In the SaaS Marketplace


Due to these adoption trends, IDC forecasts the SaaS market will experience a 24.4% compound annual growth rate (CAGR) and will exceed $15 billion in 2012.

While these adoption and growth rates are certainly good news for SaaS ISVs, they are also creating some new challenges�escalating customer expectations, greater industry competition, and the inherent bottlenecks of delivery over the public Internet.

Customer Expectations Organizations considering SaaS are demanding higher performance to meet their more complex business requirements. They want a solution that performs like it is part of their own infrastructure, but without the associated infrastructure and IT management costs.

A Jupiter Research survey of 572 broadband users in January 2006, found that only 12% of business-to-consumer (B2C) users expected wait-times for sites to be two seconds or less. An August 2009 Forrester Research report entitled, �eCommerce Web Site Performance Today,� showed significant growth in expectations, finding �Forty-seven percent of consumers expect to wait no more than 2 seconds for a Web page to render.�

Business-to-business (B2B) users are even less tolerant of webpage response times than their consumer counterparts. A Quocirca survey in October 2007, of 268 Senior IT managers found that 36% of corporate users expected their B2B Internet services to be delivered in two seconds or less. Business user impatience has likely grown at an even stronger pace than their B2C counterparts, as speed becomes the expectation.

Given that users of web-based services are going to expect even faster response times going forward, SaaS ISVs cannot succeed unless they can meet these higher expectations, from initial sales demonstration to renewal, in this increasingly competitive market.

Increasing Competition Given the rising demand for SaaS solutions, a rapidly expanding array of start-ups and established ISVs are jumping into the SaaS market to capitalize on the new business opportunities and escape the doldrums of the legacy software industry.

It is also likely that the number of new entrants into the SaaS market will continue to grow because of the dropping costs of developing and delivering these web-based solutions. Timothy Chou, the former president of Oracle OnDemand, has written a new book entitled, �Cloud: Seven Clear Business Models�, in which he outlines the significant business implications of cloud computing. Chou points out some traditional installed legacy applications that have a fully loaded cost of delivery of $1,000-$1,500 per user per month. SalesForce.com�s multi-tenant architecture has cut the cost to $7-$10!

Unlike the traditional software business which could �lock-in� customers via the perpetual licenses and enormous sunk costs associated with the deployment process, lower switching barriers and costs make it easier for customers to walk away from SaaS ISVs that don�t meet their needs. This makes it imperative that SaaS ISVs focus on service optimization, quality and cost-effective service delivery as key differentiators so they can minimize customer �churn� and strengthen their position in the market.

Even in the best of economic times, few industries can support this many vendors fueled by these market forces. Therefore, THINKstrategies believes that an industry shakeout is already emerging and will probably be accelerated by today�s tough economic environment.




At the same time, the software titans are asserting themselves in the SaaS and cloud computing market. A number of early entrants in the SaaS market are facing severe financial pressures building out their infrastructures, scaling their operations and expanding their businesses.

Given today�s tough economic climate, many of these SaaS companies are having a hard time convincing various funding sources to invest another round of capital into their fledgling operations. As a result, a growing number of young SaaS companies are being forced to close their doors, including some with strong name recognition like LucidEra, a SaaS-based business intelligence and sales analytics company which stopped operations in June, 2009. Among the many issues which factored into the company�s demise is the fact that it was unable to generate sufficient sales to offset its high �burn� rate, fueled by operating expenses.

Application Delivery Challenges Another significant challenge is that SaaS applications must be delivered over the public Internet, which is an unreliable network of networks that was not designed as a dependable business platform. This can result in degraded reliability and performance levels, especially as users get further away from the point of origin. Performance problems can result in lost sales, poor adoption, lower customer satisfaction, costly customer support calls and complaints, and higher customer defection rates.

Many SaaS companies have made the strategic mistake of trying to address this by building their own service delivery infrastructures, or attempting to cut corners when it comes to performance optimization. As a consequence, they have been unable to scale their operations and achieve their sales objectives, and been forced to withstand greater capital expenditures and operating costs than they anticipated.

In sum, aspiring SaaS companies, both start-ups and established ISVs migrating to SaaS, will only survive and succeed if they can deliver a scalable and reliable software solution in a cost-effective fashion, which not only satisfies their customers� requirements and expectations, but also fits within a reasonable operating budget from the SaaS ISV�s point of view.

How Managed Application Delivery Services Can Help Vendors Fulfill the Promise of SaaS

Given the competitive pressures and the financial challenges facing SaaS players of all sizes, THINKstrategies believes these vendors must focus on their core business of software design, put the bulk of their energies into their marketing efforts and drive more rapid customer acquisition and higher retention rates.

Therefore, THINKstrategies recommends that SaaS ISVs team with best-of-breed vendors, like Akamai Technologies, to ensure service quality and optimized application performance.

Akamai Application Performance Solutions provide managed application delivery services that leverage the largest distributed, Internet-based application delivery network to enable fast and reliable SaaS delivery. Akamai�s network consists of tens of thousands of secure servers deployed in over 1000 networks and over 70 countries. By employing Akamai Application Performance Solutions, SaaS ISVs leverage a delivery platform positioned within a single network hop of over 90% of the world�s Internet users.




By delivering dynamic, non-cacheable content over the Akamai platform, performance and availability improvements can be gained through a variety of optimizations in the routing, transport, and application layers. These optimizations improve protocol efficiency and dynamically avoid problem spots on the Internet. Akamai�s approach to Web acceleration does not require any hardware changes, additional software, or changes to your code. They provide a complete �end-to-end� acceleration solution capable of optimizing Web application delivery all the way from the application server to the end user.

By leveraging third-party managed application delivery services, like those offered by Akamai, SaaS ISVs can more cost-effectively scale their operations without having to expand their data centers or build out their own service infrastructures. They can also achieve better application performance. This helps ensure ISV viability with more new deals closed, higher customer satisfaction, greater adoption and user growth, lower support costs, and improved renewal rates, resulting in higher revenues and profits.

For example, Phase Forward Inc. is a leading provider of integrated data collection and data management solutions for clinical trials and drug safety used by over 290 life sciences companies, medical device firms, regulatory agencies, and public health organizations in more than 110 countries. By deploying Akamai Application Performance Solutions, Phase Forward experienced immediate performance impacts. The dotted line in Figure 1 below shows when they deployed the Akamai solution and the immediate impact on Phase Forward�s service performance. Not only did they achieve a 10x improvement in application throughput and a 3.5x reduction in network latency, but they also saw a major impact on both end user satisfaction and the company�s operations, including a 50% reduction in performance related help desk tickets.

Deployment on Akamai Platform

3.5x Reduction in Network Latency

10x Increase In End User Throughput Efficiency Over the Internet

Figure 1 - Impact of Akamai Application Performance Solutions on Phase Forward




Figure 2 shows how applications which are powered by Akamai Application Performance Solutions are delivered more consistently and faster, with a much tighter distribution and lower page load time compared to the fluctuating rates that are more common on the public Internet. Speed and consistency are both critical in driving adoption of your application and ensuring a positive end user experience to grow user base and minimize churn. It means sales people are able to demonstrate high performing solutions that sell more quickly. They avoid spending time replacing lost customers, and instead, help grow your business.

Akamai Application Performance Solutions also eliminate the need to build-out multiple data centers, which are expensive and CapEx intensive. This means SaaS companies can increase their data center capacity to support customer growth and expansion into new markets, without the added capital expense of data center build-outs.

SaaS availability and performance-related problems can drive high customer support call volumes. Akamai Application Performance Solutions can improve availability and performance levels, enabling SaaS companies to reduce their call volume by 35-95%, eliminating the need for additional support staff and reducing the risk of customer churn.

Even if a SaaS ISV�s data center infrastructure is hosted externally by a third party, similar benefits can apply. For

instance, Allan Leinwand, a venture partner at Panorama Capital, recently published a blog post examining the hidden bandwidth costs of cloud computing and SaaS. He points out that all of the leading cloud computing and hosting vendors are charging their customers to upload and download data at rates which can generate potential gross profits of over 50% based on average bandwidth charges.1 Given these additional charges, it is important for SaaS ISVs to optimize the performance and minimize the required bandwidth for their applications to reduce unnecessary operating costs. It also highlights the importance of an optimized application delivery strategy, even when deploying your applications in the cloud. Managed hosting providers or Platform as a Service (PaaS) vendors still must deliver applications over the public Internet to a widely distributed user base and are subject to the same delivery bottlenecks as SaaS ISVs who manage their own data centers.

Akamai Application Performance Solutions enable SaaS companies to utilize less infrastructure and bandwidth to support their web-based applications. Performance and availability issues, caused by latency, packet loss and other Internet bottlenecks over long distances between global end users and the hosting facility, can also be resolved using Akamai Application Performance Solutions.

1 �The Hidden Cost of the Cloud: Bandwidth Charges,� By Allan Leinwand, Friday, July 17, 2009. GigaOm, http://gigaom.com/2009/07/17/the-hidden-cost-of-the-cloud-bandwidth-charges/.

Figure 2 - Response Time Improvements Using Akamai Application Performance Solutions




Case Study Examples of the Business Benefits of Akamai Application Performance Solutions BullHorn BullHorn is an on-demand staffing and recruitment application provider. The company needed to deliver more consistent performance across its global customer base and selected Akamai Web Application Accelerator. Akamai�s solution reduced BullHorn�s performance-related help desk calls by 95%, which allowed Bullhorn to focus on its core business services. As a result, BullHorn was able to increase its international sales by 1000% quarter-over-quarter, and eliminate costly expenditures on infrastructure build-out.

Genius.com Genius is an on-demand, real-time sales and marketing application provider which was facing challenges scaling its operations worldwide to achieve its corporate growth objectives. The company adopted Akamai Web Application Accelerator, and improved global application performance 5 times on average. It was also able to scale its business to meet aggressive growth goals in Europe without additional infrastructure build-out. Satuit Technologies Satuit Technologies offers on-demand salesforce automation (SFA) and customer relationship management (CRM) software services. The company needed to improve its service delivery capabilities to satisfy the needs of its globally distributed subscribers. It selected Akamai Web Application Accelerator and reduced performance related call center complaints by 40%, increased APAC page-views by 59% and 30% in the U.S., offloaded application server traffic by nearly 66%, doubling subscriber capacity per server, and eliminated the need to build-out its international data centers.

Summary and Conclusions Today�s escalating economic and competitive pressures are driving organizations of all sizes, across nearly every industry, to seek new methods to leverage technology and business applications. This is fueling the rapid growth of the SaaS marketplace.

However, escalating demand is also attracting greater competition which is already producing the first wave of SaaS company failures which could lead to a broader industry shakeout in the near future.

SaaS ISVs, including small and mid-sized firms, must optimize the performance of their on-demand applications. A variety of case studies was shared to demonstrate how Akamai provides immediate impacts and can be used to boost new sales, increase adoption and customer footprint, satisfy customers� rising performance expectations, and maximize renewals. This is vital, in order to offset intensifying competition and to remain viable as an industry shakeout continues.

Akamai Impact on SaaS

BullHorn • 95% reduction in helpdesk calls • 1000% quarter-over-quarter

international sales increase • Avoided infrastructure buildout

Genius.com • 5X global performance increase • Aggressive European growth

without infrastructure buildout

Satuit Technologies • 40% reduction in helpdesk calls • 30% increase in U.S. page-views • 66% offload of application server

traffic, doubling subscriber capacity• Avoided infrastructure buildout

AppRiver • Help maintain a 97% retention rate




Rather than make the significant infrastructure investments necessary to meet key business objectives, THINKstrategies believes SaaS ISVs should leverage the proven service performance optimization capabilities of companies such as Akamai Technologies, even if their infrastructure is hosted by a 3rd party in the cloud or on a PaaS platform.

In addition to the technical capabilities and business benefits of Akamai Application Performance Solutions, the company�s managed application delivery services also help SaaS companies differentiate their offerings in the marketplace.

Leveraging these capabilities is no longer a luxury, but a necessity, for SaaS companies that want to remain in business and achieve long-term success.

This whitepaper was sponsored by Akamai Technologies, Inc.

About Akamai Technologies, Inc. Akamai is the leading global service provider for accelerating content and business processes online. Thousands of organizations have formed trusted relationships with Akamai, improving their revenue and reducing costs by maximizing the performance of their online businesses. Leveraging the Akamai EdgePlatform, these organizations gain business advantage today, and have the foundation for the emerging Web solutions of tomorrow. Akamai is "The Trusted Choice for Online Business." For more information, visit www.akamai.com/aps.

About THINKstrategies, Inc. THINKstrategies is the only strategic consulting services company formed to specifically address the unprecedented business challenges facing IT managers, solutions providers, and investors as the technology industry shifts from a product-centric to a services-driven orientation. THINKstrategies has also founded the Software-as-a-Service Showplace (www.saas-showplace.com), the largest and highest ranked, online directory and resource center of SaaS solutions and industry best practices. For more information regarding our consulting and strategic marketing services, visit www.thinkstrategies.com, or contact us at [email protected].

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