SaaS – Why Does it Matter? And How Do I Get There?

A panel discussion

Definition of SaaS – Software as a Service

Gartner definition:

Delivery model:

Pure SaaS model:

Examples:

• Software that’s owned, delivered and managed remotely by one or more providers

• 12+ years old• Previously called “application services provider”

• Single set of common code and data definitions that are consumed in a one-to-many model by all contracted customers anytime, on a pay-for-use basis or as a subscription based on use metrics.

• Does not mean that use of the product is not customizable

• Salesforce.com, LinkedIn, Dropbox

• SaaS share of global software vendor revenues:• 2013: $81 billion (17% of $476 billion)• 2010: $25 billion (7% of $354 billion)

• SaaS will be disruptive in products that comprise about 25% of the worldwide software market (CRM, HR Mgt, IT Mgt, Security).

• Examples of projected market share (2013):• >90%: blogs, wikis, web conferencing, talent mgt, compensation mgt• 50% to 90%: electronic invoice presentment and payment, expense

reporting• 26% to 50%: sales force automation, HR mgt, customer service and

support

• But SaaS is unlikely to replace all categories. For some, SaaS might just complement traditional software.

SaaS Disrupts – How Does it Affect You?

(Source: “Which Software Markets Will SaaS Disrupt?”, Forrester Research)

373% growth

Recent SaaS Acquisitions (sample)

Company Acquisition & Date Amount

Intuit Demandforce (04/12) $424 Million

Facebook Instagram (04/12) $1 Billion

Dell Wyse Technology (04/12) Undisclosed

SAP SuccessFactors (02/12) $3.4 Billion

Oracle Taleo (02/12) $1.9 Billion

LinkedIn Rapportive (02/12) $15 Million

Salesforce Desk (02/12) $50 Million

Recent SaaS Funding (sample)

Company Funding Amount & Date Valuation

Evernote $70 Million (05/12) $1 Billion

SugarSync $15 Million (02/12) Unavailable

SendGrid $21.6 Million (01/12) Unavailable

Zinio $20 Million (11/11) Unavailable

Dropbox $250 Million (10/11) $5 Billion

Box $81 Million (10/11) $600 Million

Spotify $100 Million (06/11) $1.1 Billion

2012

2012

2012

Announced April 24, 2012

Freemium model

Announced April 24, 2012

2012

2012

2012

What’s Driving SaaS – Customer’s Perspective

•Total cost of ownership (TCO)

•Low startup / low fixed costs

•Faster

–delivery of features and functions from SaaS vendors

–time-to-market from ease of implementation

And other factors like:

•Increasing trust in the Cloud

•Connectivity for mobile and other devices

•Consumerization of IT

What’s Driving SaaS – Vendor’s Perspective

• Recurring revenue

• Disrupt industry incumbents

• Lower cost of service delivery or customer acquisition allows addressing new markets (SMB, etc.)

• Complement traditional software

• Consumerization of IT (bypass centralized selling)

• Growth in connected devices

• Funding and valuations (5x Rev vs. 2.5x Rev)

SaaS Changes How You Run Your Business

Metrics• Lifetime Customer Value (LCV)• Churn Rate (Retention)• Upgrade/Up-sell/Downgrade Rates

Billing• Frequency and complexity • Average Order Value (AOV)• Annual value

Customer Relationship• Sales and marketing automation • Analytics• Customer lifecycle management

Product Development & Revenues• Agile development• Open architecture• Smoothing of revenues

Consider the implications of Freemium or other subscription models

How Do I Evolve to SaaS?

Examples:

• Pure SaaS offering (Salesforce.com)

• Sell download as a subscription (Antivirus, etc.)

• Perpetual license + SaaS (QuickBooks Pro Plus, Autodesk 360)

• Hybrid (Dropbox, Adobe Creative Cloud)

• Partnering / white-label

cleverbridge & SaaS

• Growing roster of SaaS clients

• 30% of transactions are already subscriptions

• Most business models supported, including:• Freemium • Upgrades, downgrades, proration• Multi-line subscriptions• Usage-based billing• Microtransactions

• Merchant of Record (you or cleverbridge)

Panel Discussion

Jim Kinlan, CEOTemplateZone

Stefan Utzinger, CEONovastor

Alisher Ishanov, Partnership Manager, FlippingBook

In the Old Days, when Men were

Men we sold it in a box or a big

downloadable file and charged a one

time fee

Thank you

END OF DECK

Why companies select SaaS vs. traditional

What’s preventing more SaaS penetration?

SaaS Models vs. Traditional

Traditional:• 1,000 orders buy again when new product released• Quickbooks example $199 per year

Subscription:• 1,000 monthly subscriptions equals 12,000 yearly invoices• Quickbooks example $24.95 per month, $299 per year

Billing (usage):• 1,000 monthly subscriptions, all different amounts

SaaS Models vs. Traditional

Traditional – download and boxed product • Free trial (30 day limit)• One-time transaction • Success or failure tied to product release and sales cycle• Limited knowledge of consumer’s use of product • Typically limited direct contact or communication with user

SaaS • Freemium or trial (objective is tied to user engagement)• Subscription or other recurring billing that is tied to use• Agile development and smoothing out of revenue stream• Hone analytics (understand and drive use / consumption and upsell)• Sales and marketing automation. • Customer lifecycle management• Network effect and “Winner take all”