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
For Webinar Audio, Dial in:
Conference Line
US: (866) 581 2411 (Toll free)
UK: 80 00 51 8866 (Toll free)
Audio Conference ID: 13360965
Webinar ID: 647-934-440
Date : Thursday, June 25th , 2009
11:00 AM ET/ 08:00 AM PT
� Thought leader in Outsourced Product Development
� 1050+ product releases to date
� 80+ customers; 475 producteers
� 63% CAGR over the last six years
� Offices in Chennai (India), San Jose, CA, and Branchburg, NJ
� ISO 9001:2000 certified
Awards
Ranked in the top 500 fast growing technology companies in Asia Pacific for 3 years in a row
Ranked 7th in BusinessToday Survey featuringthe Best Companies towork for in India in 2005
About Aspire
Housekeeping Instructions
� All phones are set to mute. If you have any questions, please type them in the Chat window
located beside the presentation panel.
� We have already received several questions from the registrants, which will be answered by
the speakers during the Q & A session.
� We will continue to collect more questions during the session as we receive and will try to
answer them during today’s session.
� In case if you do not receive answers to your question today, you will certainly receive answers
via email shortly.
� Thanks for your participation and enjoy the session!
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
Top Related