SaaS:The BusinessOpportunityKarl RoePartner Hosted Services – Middle East & Africa

Microsoft Internationalkarlr@microsoft.com

Agenda

SaaS Opportunity

SaaS Enablement Programs

Connecting The Ecosystems

Q&A

SAAS OPPORTUNITY

Software-as-a-Service Defined

S o f t w a r e D e l i v e r y M o d e l s

Traditional Software Software as a Service

On Premise In the Cloud

Centralized Decentralized

Large Upfront Cost Pay As You Go

S o f t w a r e - a s - a - S e r v i c e B u s i n e s s M o d e l

Application Hosting Net-Native Software-as-Services

Perpetual License Subscription

One-to-Few One-to-Many

Private Infrastructure

Public Infrastructure

Source: Software On Demand’s Impact on the Software Industry: Transformation, Extinction or Rebirth?; July 2005

Source: U.S. Software On-Demand Delivery Model 2005–2009 Forecast; IDC #33493 June 2005

SaaS vs. Software+Services

1st generation “SaaS”:All about the browser

2nd generation “Software+Services”:Weave together hardware, software and services to build a specific solution…

2005 2006 2007 2008 2009 2010 2011 $-

$2,000,000,000

$4,000,000,000

$6,000,000,000

$8,000,000,000

$10,000,000,000

$12,000,000,000

$14,000,000,000

$16,000,000,000

WW Software on Demand Revenue 2005-2011:Comparison of May 2006 & March 2007 Forecasts

May 2006 forecast March 2007 forecast

SaaS Market Opportunity IDC’s position

Source: Worldwide Software on Demand 2007.2011 Forecast: A Preliminary Look at Delivery Model Performance, IDC #206240 March 2007

IDC believes establishing partnering relationships and

focusing on ecosystemdevelopment will be key to maintaining software-on-

demand adoption and growth.

SaaS Application UptakeProminent SaaS applications

Note*: Sample size: 42, Respondents’ profile: Software decision makers at companies of all sizes that are currently piloting or using SaaS, Geography: Europe

Source 1: Forrester The State Of Enterprise Software Adoption In Europe Jan 2006

Companies (incl. SMB’s) using or piloting SaaS software applications, HR , messaging, security and supply chain management all

top customer relationship management (CRM) in adoption.

Last year, respondents were much more likely to adopt SaaS for ERP (31%) and CRM (27%):

CRM has in fact grown by 11% while ERP remained static.

Other

Enterprise resource planning (ERP)

Customer relationship management (CRM)

Supply Chain Management

Security

Messaging (incl. email, calendar, contacts, IM)

Human Resources (HR)

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

Preferred suppliersSoftware on Demand (Worldwide)

Buying SaaS SolutionsISVs are the preferred suppliers

38%

19%

8%

0%

10%

20%

30%

40%

50%

ISV providing software on

demand

System Integrator Business process outsourcer

According to a survey1 conducted by IDC , ISVs are the preferred suppliers for on demand software solutions with nearly 40% of organizations preferring them

System integrators are the second most preferred suppliers with 19% of organizations approaching them for SaaS solutions

Lack of formalized channels in the broad software on demand landscape is a major reason for ISV popularity

ISVsTechnology & connectivity makes it possible

Recurring revenue stream

Single version for all customers

Strong customer feedback loop

Easier to trial

Reach broader target market

End UsersPricing matches economic benefits

Reduced initial outlay; complexity and risk

Reducing IT Operations cost

Shift Capex to Opex

Easier to trial

Focus on core business

Drivers for SaaS Adoption

Ecosystem Opportunity

Many ISVs face challenges with expanding into hosted offerings because they lack the necessary expertise 

Microsoft can help ISVs grow their businesses by providing programs and tools to support the delivery of hosted software

Connecting ISVs with key distribution channels such as hosting providers and telecoms operators creates new business opportunities

SOFTWARE + SERVICES ENABLEMENT PROGRAMS

SaaS Enablement Programs

SaaS Incubation Center ProgramSelected partners to cover strategic marketsDepth engagement from Microsoft Focused on ISV business

Transition from traditional modelsConnecting with ecosystem

S+S Developer MarketplaceAny certified hoster with Windows-based infrastructureBreadth engagement from MicrosoftFocused on developing the Hosters business

Get Hosters up the value chainConnecting with SharePoint ISV ecosystem

Tier 2Certified Hosters with

Windows-based infrastructure

Tier 1

Serv

ice

Prov

ider

Lic

ensi

ng A

gree

men

t (S

PLA)

Catalogue

SaaS Incubation ProgramStructured Engagement focused on accelerating ISVs into the SaaS model using Microsoft technology

The program provides the SaaS ISV with:

Business consultancy (BDS)Infrastructure and architectural consultancy (ADS)Access to Microsoft selected SI partners Hosting expertise from Microsoft Gold Certified hosting partnersAccess to new channels to market

Additional technical & business guidance available outside of standard program

Proof Of

Concept / Launch

Architecture Design Session

Business Design Session

© Microsoft & Mural Ventures Corp 2006, All Rights Reserved

Assessing Go-To-Market Maturity for SaaS

The BDS methodology for assessing Provider maturity with respect to 8 Key “Go-To-Market” Success Factors that are required in selling & marketing Software-as-a-Service offerings:

Competitive DifferentiationMessaging & PositioningPackaging & PricingWeb-Driven Business ModelDemand GenerationOnline Customer ExperienceDirect/Indirect Sales ProcessesOrganizational Effectiveness

Optimized

Competitive

Inhibited

Ineffective

Predictable

Business Design Session

LevelCompetitive

Differentiation

Messaging & Positioning

Packaging & Pricing

Web-DrivenDemand

Generation

Online Customer

Experience

Direct/Indirect

Sales Process

Organizational

Effectiveness

Focus & Behaviour

5(Optimized)

Provider has created true Blue Ocean (aka uncontested market

space) by differentiating along a unique axis that reaches beyond current market boundaries and

existing demand

Vertical (e.g. Real Estate), Horizontal specialization (e.g.

Finance), or other micro-market specific

positioning. User focus groups or surveys are pro-actively used to

incorporate customer feedback into product

life-cycle.

Micro-market specific packaging/bundling of service with vertically

focused add-ons. Market research used to

understand customer price-point sensitivities.

Micro-market sales sites for specific

vertical markets (e.g. real-estate). Fully

integrated PPC/SEO and pro-active analysis

of web-analytics

Micro-market specific demand generation

campaigns with integration across all

forms of demand generation (e.g. PPC, Banner Ads, email, direct mail, print)

Integrated up-sell and cross-sell activities into

customer "control panel". Pro-active and

ongoing customer feedback management (surveys of customer panels by segment to

assess overall customer experience, satisfaction,

and future needs).

Vertical or micro-market focused channel

partners with lead flow integrated into micro-marketing campaigns.

Channel partner branded sales sites.

Integration of channel partner into knowledge

base, live chat, etc.

Organization is designed and

internally aligned for change. Specific

processes for continuous

improvement. Healthy balance of

management (stability) and

leadership (fostering change).

Target Market Focused w/ Continuous

Improvement

4(Competitiv

e)

Provider has differentiated with a vertical market focus

with vertical (or micro-market) specific add-on

capabilities/features.

Best Practice positioning based on a well-defined messaging & position framework

(see template). Customer centric

positioning that blends customer-benefit as the

solution for the customer pain point/problem.

Some type of unique differentiation of

packaging or pricing that sets the provider

apart of the reset of the pack.

Differentiated sub-sites and/or landing pages aligned with

best-practice positioning of value

proposition according to messaging &

positioning framework

Demand generation campaigns drive to a specific sub-site or landing page. All

campaign activities are well coordinated and integrated. Pro-active

PPC/SEO campaign management with

periodic (e.g. bi-weekly) refinement.

Integrated online knowledge-base and

live-chat for both sales support and post-sales

support. Pro-active email communication during first 30-60 days provides training, tips,

tricks, etc.

Integrated lead/opportunity flow for

channel partners. Mature process for lead qualification and routing

of leads. Customer segmentation and

qualification "drives" the opportunity

management. Willing to "walk away" from bad

opportunities.

Strong executive sponsorship for

improving existing offerings and adding

new value-added service offerings.

Proven organizational agility and rapid time-to-market in response

to competitive threats.

Transition Phase - Focused on Competitive

Differentiation & Discrete

Improvements

3(Predictabl

e)

Provider has differentiated from the

competition by bundling additional services or

capabilities not offered by the competition.

Customer centric positioning with

Benefits (e.g. Anytime, Anywhere access), then

supporting benefits points, then features as appropriate. Consistent

application of messaging throughout

ALL collateral.

Small number (2-3) of different customer/user

"plans" that align correctly with end-user or customer personas. Value differentiation

between different price plans is clear and

significant.

Best-practice site that allows customers to 1) Search; 2) Find; 3) Self

Qualify; 4) Try (Free Trial where possible); 5) Make the buying decision; 6) Buy; 7) Activate. Web-site is the focal point of the

business.

Makes use of pro-active PPC/SEO campaigns. All

demand generation activities lead to one place -- the web-site.

Self-guided sales experience, self-admin capabilities, no barriers

to sale via web, or phone. Easy signup and

activation.

Pro-active management of direct sales, inside sales, and channel partners. Focus on

customer segmentation and lead qualification.

Pro-active training. Overlay sales team with deep solution expertise supports all channels.

Organizational alignment around

business objectives and customer needs. Organizational ability to repeatedly follow a relatively short and defined life-cycle for

the successful introduction of new or

revised product offerings.

End-Customer Focused &

Service-Driven

2(Inhibited)

Provider's offering is functionaly equivalent to that of other providers,

resulting in a "my feature X beats your

feature X" competitive differentiation tactic, but ultimately resulting in a price-competitive sale.

Still product and feature centric positioning with

progress towards customer-centric

benefits positioning. Typically a lack of

consistent application of messaging across all

channels and collateral.

Competitive pricing and correct packaging, but

actively working to eliminate other

inhibitors (e.g. contract minimums).

Customers can search, find, and buy. Provider is actively working to ensure that all of the

information required to make a successful

buying decision is on the site and correctly

presented, eliminating any final inhibitors to

selling.

PPC/SEO and other demand generation

capabilities are leveraged, but with

some inhibiting factors that limit their

effectiveness (e.g. mismatch between PPC terms and landing page

positioning). Active progress is being made to eliminate remaining

inhibitors.

Self-guided signup, support, and/or self-administration but

inhibited in some way -- e.g. overly complex registration process, complex activation.

Active progress is being made to eliminate

remaining inhibitors.

Direct Sales, indirect channels, telesales, but

with ineffective processes for lead

qualification and routing of leads to "best

qualified" channel. Provider is actively

working to train sales and revise processes to improve effectiveness.

Good executive leadership in place and committed to drive change and improve business performance by

driving improvements in accordance with the "key success

factors".

Transition Phase - Focused on Initial Change

1(Ineffective

)

Provider is offering the exact same service

offering as other providers (perhaps

based on third-party technologies) with no opportunity for true

differentiation, resulting in a Red Ocean in which

the only remaining competitive

differentiator is price.

Positioning is completely product and

feature centric. Positioning is effective only for customers who already know what they

need and are already familiar with the specific

application domain.

Typically characterized by uncompetitive pricing, minimum contract terms,

minimum # of users, confusing pricing, too many tiers of service,

multiple tiers instead of "add-on" options.

Customers are unable to find offering, presentation is

confusing, no online self-subscription is

available.

No PPC/SEO campaigns. Other demand

generation activities (e.g. Print ads, direct

mail, etc) do not leverage the web-site.

No self-signup capability, direct sales

interaction required. No offering self-

administration.

Direct sales only. No pro-active lead qualification.

No customer segmentation by size or industry. Characterized

by tendancy to focus too far up-market. Long sales cycles. Lack of "solution specialist" capability results in

inability to overcome common objections.

Ad-hoc organizational and departmental

behaviors with a lack of internal alignment towards achieving a common vision or

business objectives.

Product-Dependent

Focus & Ad-Hoc Behaviour

Assessing Go-To-Market 8 Key Success Factors

© Microsoft & Mural Ventures Corp 2006, All Rights Reserved

Self assessment before BDS

After implementing

the actions from the BDS

Business Design Session

Business Development SessionISV feedback… “The Business Design Session helped us to recognize

that there are two key but clearly separate threads

available within our go to market strategy; because of

that input we are now successfully pursuing mid market

opportunities as well as our original Enterprise targets.”

… Sam Nixson, CEO, Sunergeo“The Microsoft SaaS Enablement Program helped us find

answers to questions where we knew we didn’t know

the answer, and identify answers to some questions

where we didn’t know we didn’t know. All in all a very

good program for information, putting us in contact with

the right people, and enabling us to commit with

confidence to a SaaS offering in our next release.”

Robert Hobbs, CEO, INPHASE

“The Business Design Session was a great investment

of our time to get a new perspective of our business

and the future potential of SaaS. It is was great way to

quick start our 2.0 business with competent Partners

helping avoid the pitfalls. “ Soren Krarup, Brixx

Solutions

Architecture Design Session

Help ISVs to understand how to make their SaaS application benefit from the features provided by the Windows-based Hosting for Applications (WBHA) Solution.

This solution offers Hosting Partners and ISVs:Lower TCODecreased management costsImproved securityAbility to deliver an SLA

Provide guidance on how to connect to Microsoft Connected Services Framework

Architecture Design Session

Windows-based Hosting Solution Overview

Flexible Windows-based hosting platformModular components let you deploy what you need Windows platform lets you centralize and automate

Hosted Messaging

and Collaboratio

n

Data Services

ASP.NET Hosting

Web Hosting

Microsoft® Solution forWindows®-based Hosting for Applications

3rd Party Application Hosting

Architecture Design Session

CONNECTING THE ECOSYSTEMS

Taking SaaS Apps To Market“At BT, we’re always focused on extending the breadth and reach of our service portfolio to ensure we are catering for the needs of our end customers.”

“Using our service delivery environment based on Connected Services Framework, our vision is to aggregate these SaaS-enabled ISV applications with our own existing services to create compelling new offers which we jointly take to market.”

Bill Murphy, Managing Director, BT Business

Catalogue

Connecting a SaaS EcosystemTelco 2.0 Application Distribution

SaaS ISV

Telco 2.0 / CSF

SaaS Incubation Center

Self Hoste

d ISV

NTT Europ

e Online

7global

Telco

Telco

Vision-App

Siennax

Telco

SMB Customer

SMB Customer

Telco’s are becoming a platform for distribution of SaaS applications

Microsoft Hosting partners are expert on building and operating the right infrastructure for scale against best TCO

Microsoft Partner Program ISVs benefit from overall ecosystem, getting access to previously unavailable distribution channels

SaaS App

Call To ActionAnyone: Visit our online resources to find more details on our SaaS Enablement programs

http://www.microsoft.com/saashttp://www.microsoft.com/saasincubation

Hosters: Contact your PAM/HSS if you are interested in joining one of our SaaS Enablement programs

http://www.microsoft.com/serviceproviders

ISVs: Sign-up for an engagement in one of our BD/AD Sessions.

EMAIL : karlr@microsoft.com

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Feel free to contact me and share ideas …karlr@microsoft.com