THINKstrategies Software Business 2008 Presentation

Overcoming the Organizational Barriers to Transforming Your Software Business into an On-Demand Company Presented by, Jeff Kaplan Managing Director THINKstrategies [email_address] 781-431-2690

Agenda State of SaaS Key Market Drivers/Trends Market Opportunities/Challenges Migrating to SaaS Key Operational Challenges Industry Best Practices

Primary Drivers of SaaS Changing competitive forces Changing workplace requirements Changing economic & ecological conditions Changing technologies Changing priorities & sourcing policies

An Equation for Greater Market Opportunities Economy Uncertainty Tighter Budgets Greater SaaS Opportunities + =

SaaS Evolution SaaS 1.0 SaaS 2.0 Standalone point apps Focus on ease of use/price One size fits all, minimal customization Horizontal applications Limited interoperability Emphasis on lower TCO Multidimensional platforms Focus on added functionality Multiple configurations, greater versatility Vertical/industry solutions Easier integration Emphasis on higher ROI

Shifting Adoption Patterns Unilateral End-User, SBU Adoption of SaaS Solutions Enterprise-Wide Acceptance and Adoption of SaaS

SaaS Expands from Front- to Back- to Inter-Office Apps BUSINESS APPLICATIONS CRM SFA … Collaboration SCM … ERP Finance … Front Office Inter Office Back Office SaaS Market ‘Gold Rush’

Top Ten Showplace Application Categories Source: SaaS Showplace 44 Messaging 46 eCommerce 47 Human Resource Management (HRM) 49 Marketing 55 Enterprise Resource Planning (ERP) 62 Project Management 67 Document Management 78 Accounting/Financial 80 Collaboration 103 Customer Relationship Management

Top Ten Showplace Industry Categories Source: SaaS Showplace 42 Software 43 Telecommunications/xSPs 55 Professional Services 63 Government 69 Retail 72 Healthcare 80 Technology 91 Manufacturing 102 Banking/Financial Services 110 SMBs

SaaS Expands from Business Apps to IT Management BUSINESS APPLICATIONS CRM SFA … Collaboration SCM … ERP Finance … Front Office Inter Office Back Office Security Systems Mgmt … Network Mgmt Remote Access … Data Protection Storage … IT Management

Changing Competitive Landscape & & & AimNet Solutions ever dream

Cloud Computing: Today’s New Enablers

New Challenge: Cloud Computing Outages “ Amazon S3 Outage Rains On Cloud-computing Parade” “ Outages Force Cloud Computing Users To Rethink Tactics”

Open Source: The Good, Bad and Ugly The Good Proliferation of tools/solutions Accelerated Development Concepts of Community The Bad and Ugly Lower barriers to entry Escalating price competition

Ad-Supported SaaS “ iTunes of IT” 250K users 50,000 new users in last 2 months Advertisers has grown from 4 to 40 Market Opportunity, SMB IT pro = $125,000 annual budget. 250k users = $32B in annual spend Growing at more >$3B per month!

The Meaning of Community in the SaaS Market Real-time, aggregated data Meaningful benchmark studies Practical best practices forums Continuous updates, new ideas Dynamic toolkit clearinghouse

Key Customer Concerns & SaaS Industry Responses Concerns , Reliability Security Customization Compliance Integration Customer Support Responses , SLAs Certifications User Configurations DR/BC Connectors Online/Pro Services

Enterprise Expectations & Challenges for SaaS Can you provide a better user experience? Can you create a different type of community? Can you support hybrid environments? Can you permit rapid on-boarding? Can you track service usage levels? Can you measure performance levels? Can you identify & resolve service issues? Can you verify SLA compliance?

On-Demand Services & The IT Industry Inversion Services Technologies Past Future The IT Industry Inversion

Key Challenges Facing Established ISVs Re-architecting applications Re-structuring revenue models Repositioning marketing Re-orienting sales/support staff Reducing operating costs

SaaS Lifecycle Requirements User Centricity Agile Development Transaction Mgmt System Security Certifications Service Orientation Professional Services Online Procurement Try & Buy Trials Tele-Sales Web/Search Marketing Service Delivery Infrastructure Ecosystem of Partners Web Support SLAs

SaaS vs. Legacy SW Economics Cost of Goods Sold (COGS) R&D SG&A EBITDA Source: McKinsey, May 2007

No One Likes to Sell Services Raises concerns about the product. Complicates the sale/extends sales cycle. Seldom properly incented. Weak value proposition. Poor track record.

Living in a Hybrid World Most enterprises will seek mix of on-premise & on-demand solutions. Users prefer choice. Users seeking on-demand/on-premise integration. ‘ Applets’, Appliances, etc. will permit off-line use and synchronization.

Hybrid Model Pitfalls Balancing, Multiple Offerings Multiple Codes/Versions Differing Buyers Multiple Sales Channels/ Compensation Plans Differing Revenue Recognition

Channel/Supply Chain Opportunities Legacy ISVs New SaaS Providers Enabling Technology Vendors Offshore SW Developers 3 rd party SW platforms 3 rd party HW systems xSPs Hosting companies Carriers Channel Partners Distributors VARs/Integrators eCommerce Sites Corporate Customers Consumers

SaaS Ecosystems – The New Channel Jamcracker

New Channels to Market? Banks Insurance Companies Retailers Web companies PS Firms

Corporate Positioning Roadmap Technical Features/ Solution Differentiators Strategic Vision/ Business Benefits Competitive Advantages Success Factors: Compelling Value Proposition Effective Mktg. Messages Defined Market Focus Unique Technical Competencies Strong Products/Solutions Solid Customer References Articulate Spokespeople Targeted Press/Analysts Consistent Internal/External Communications Continuous/Aggressive Effort

THINKstrategies’ SaaS Balanced Scorecard Target Market Segmentation Competitive Landscape Corporate Management Functional Capabilities & Features Solution Packaging Pricing & Revenue Realization Service Delivery Platform & Architecture Security and Availability Assurance Service Provisioning, Billing and Metering Contracting, SLAs and Reporting Sales Strategies and Skills Strategic Partnering/ Ecosystem Strategies Marketing and Positioning Customer Support Capabilities Financing and Capital Structure

Key Characteristics of a Winning SaaS Team CEO – Visionary, but disciplined CFO – Disciplined, and flexible CMO – Thought-leader, but focused CTO – Knowledgeable, yet practical VP, Sales – Persistent, and creative Product Development – Agile, and service-oriented Sales – Service-oriented, not product-centric Support – Business-oriented, not technical

Can You Take Your Team Into The Future? Software Services Business Services Information Services Market Evolution

For More Information… www.SaaS-Showplace.com www.thinkstrategies.com [email_address]

THINKstrategies Software Business 2008 Presentation

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