Making the SaaS Decision: The Threats, Opportunities, and Challenges of Moving to SaaS

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1 Making the SaaS Decision: The Threats, Opportunities, and Challenges of Moving to SaaS Jeff Hagins, CTO and Founding Partner, Mural Ventures Corporation 2008 Mural Consulting Corporation, All Rights Reserved

2 Three Years Ago Limited SaaS Competition for Most Traditional Software Vendors. Many startup SaaS businesses focus on SMB first No real distribution channels for SaaS Direct to the customer Infrastructure and Hosting Options driving higher up-front capital/operational costs for SaaS vendors Shrinking IT budgets, but SaaS market growing and taking additional market share Mural Consulting Corporation, All Rights Reserved

customer Infrastructure and Hosting Options driving higher up-front capital/operational costs for SaaS

3 Today Significant Competitive Threats from Pure-Play SaaS Providers in virtually every market/vertical from small business to enterprise Emerging Channels for the Distribution of SaaS offerings (e.g. SF.com AppExchange) SaaS Version 2.0 Business Launching using Cloud Computing Infrastructure which significant lowers their COGS Financial Market Impacts: Capital and Operational Budgets will be constrained SaaS Alternatives with NO commitments will be attractive to CIOs Mural Consulting Corporation, All Rights Reserved

0 Business Launching using Cloud Computing Infrastructure which significant lowers their COGS Financial Market Impacts: Capital and

4 Why is Now the Right Time for SaaS? Pervasive broadband access for SMBs and Consumers Economic models are in sync tight IT budgets are driving demand for more economically efficient solutions CIOs need to deliver strategic, mission-critical value, and will outsource other functions to allow a more strategic internal focus Improved security and acceptance of secure data centers by customers SaaS Now is the right time. Greater Depth and Breadth of SaaS offerings, including greater alignment with customer needs (e.g. SMBs need lighter-weight applications than Large Enterprise) Emergence of Platforms for developing SaaS applications SalesForce.com, Mor.ph, Amazon Web Services Microsoft CRM 4.0, Google AppEngine Mural Consulting Corporation, All Rights Reserved

mission-critical value, and will outsource other functions to allow a more strategic internal focus Improved security and acceptance of secure data centers by customers SaaS Now is the right

5 The SaaS Opportunity 31% Growth (CAGR) for On-Demand CRM $2 Billion 61% Growth in Enterprise Adoption 61% 25% Penetration of $220 Billion Software Industry by % Mural Consulting Corporation, All Rights Reserved

Penetration of $220 Billion Software Industry by 2011 25%

6 The Long Tail of the SaaS Market Your Large Customers $ / Customer What if you lower your cost of sale (i.e. lower barrier to entry) and you also lower cost of operations Your Typical Customers (Currently) Non Addressable Customers Newly Addressable Market Copyright Anderson, Chris The Long Tail: Why the Future of Business Is Selling Less of More Hyperion Books Mural Consulting Corporation, All Rights Reserved

Addressable Customers Newly Addressable Market Copyright Anderson, Chris The Long Tail: Why the Future of

8 Software-as-a-Service Defined Software Delivery Models Traditional Software On Premise Software CAPEX+OPEX Software-as-a-Service (SaaS) On-Demand Service OPEX (Subscription or Usage-Based) Software-as-a-Service Models Hosting of Traditional Applications License + Subscription Single-Tenant Dedicated Infrastructure Net-Native Software-as-Services Subscription Multi-Tenant Shared Infrastructure Mural Consulting Corporation, All Rights Reserved

Hosting of Traditional Applications License + Subscription Single-Tenant Dedicated Infrastructure Net-Native

9 Software-as-a-Service is SaaS is a new way to deliver and consume software over the Internet SaaS is a new pricing/financial model for the payment of software SaaS does compress the supply chain for software and eliminates IT responsibilities for the end-customer But The MOST important thing to understand about SaaS is that it is Mural Consulting Corporation, All Rights Reserved

chain for software and eliminates IT responsibilities for the end-customer But The MOST

11 Buyer Behavior Segmentation Business-Centric Buyer Web-Agnostic Buyer Best Opportunity Buyers for SaaS Best Opportunity Buyers for SaaS Web-Centric Buyer Technology/Feature-Centric Buyer Mural Consulting Corporation, All Rights Reserved

Opportunity Buyers for SaaS Web-Centric Buyer

16 The SaaS Challenge!?!!??!? ISVs The road to SaaS is fraught with challenges. ISVs are faced with new business and market dynamics as well as black box factors that cloud their path Mural Consulting Corporation, All Rights Reserved

17 SaaS SWOT Analysis from ISV perspective S - Domain knowledge - Customer Relationship - Customer Understanding - Existing Applications and Solutions - Incremental ORevenue Opportunity in New Market Segments - Annuity-like Recurring Revenue - Higher Total Revenue Opportunity - Alignment with economic climate W - Web-Centric Sales & Marketing - Web 2.0 Usability/User Experience - Infrastructure & Operations - Web 2.0 Customer Service - Internet-scalable Applications - Service Level Management - Pure-Play SaaS TCompetitors - Traditional Competitors with SaaS offerings - Traditional Competitor acquisition of SaaS Startup in Your Market Mural Consulting Corporation, All Rights Reserved

Web 2.0 Usability/User Experience - Infrastructure & Operations - Web 2.

18 5 Key Process Areas Business Technology Operations Based on over 300 engagements with service providers and ISVs, Mural has developed 40 SaaS Key Success Factors that form a basis for continuous improvement across 5 Key Process Areas. Copyright 2008 Mural Consulting, LLC A Division of Mural Ventures Mural Consulting Corporation, All Rights Reserved

basis for continuous improvement across 5 Key Process Areas.

19 Technology, and, Technical Track Organizational Effectiveness User Accessibility Tenancy Model End-User Performance Environment Model Reliability & Availability Identification & Authorization Computing Platform Ordering, Provisioning & Billing Storage Management Performance, Scalability & Resource Mgmt Security Reliability & Supportability Database & Integration Management Service Customization & Integration Facilities Based on over 300 engagements with service providers and ISVs, Mural has developed 40 SaaS Key Success Factors that form a basis for continuous improvement across 5 Key Process Areas. Copyright 2008 Mural Consulting, LLC A Division of Mural Ventures Mural Consulting Corporation, All Rights Reserved

Integration Management Service Customization & Integration Facilities Based on over 300 engagements with service providers and ISVs, Mural has developed 40 SaaS Key Success Factors

20 Operations Operations Track Self Management/Support Product/Support Integration Service Responsiveness & Visibility Help Desk/Problem Management Configuration/Change Management Capacity & Cost Management SLA & Business Continuity Management Organizational Effectiveness Based on over 300 engagements with service providers and ISVs, Mural has developed 40 SaaS Key Success Factors that form a basis for continuous improvement across 5 Key Process Areas. Copyright 2008 Mural Consulting, LLC A Division of Mural Ventures Mural Consulting Corporation, All Rights Reserved

engagements with service providers and ISVs, Mural has developed 40 SaaS Key Success Factors that form a basis for continuous improvement across

21 Organized into different Tracks for Business Business Track Business Planning & Budgeting Organizational Effectiveness Financial Modeling Persona-Driven Offerings Financial Analysis & Reporting Competitive Differentiation Talent Recruitment & Management Messaging & Positioning Employee Performance Management Demand Generation Business Process Management Sales Process Org. Structure & Responsibilities Customer Service & Support Decision-Making Authority & Accountability Web-Centric Customer Experience Based on over 300 engagements with service providers and ISVs, Mural has developed 40 SaaS Key Success Factors that form a basis for continuous improvement across 5 Key Process Areas. Copyright 2008 Mural Consulting, LLC A Division of Mural Ventures Mural Consulting Corporation, All Rights Reserved

23 Continuous Improvement Methodology Business Sales & Marketing Focused Technology Application and Hosting Architecture Focused Operations Operations & Support Focused The continuous shift towards the web, from both a user and a technology perspective means that continuous 23 assessment, planning, and improvement is required to maintain best 23 practices across all disciplines Copyright 2008 Mural Consulting, LLC A Division of Mural Ventures Mural Consulting Corporation, All Rights Reserved

26 Buyer Behavior is Polarizing Business-Centric Buyer Web-Agnostic Buyer Buyers who are primarily interested in On-Premise Software Buyers who are primarily interested in SaaS Web-Centric Buyer Technology/Feature-Centric Buyer Mural Consulting Corporation, All Rights Reserved

27 What does this mean? Economic pressures will create increased opportunity for SaaS Subscription-based Licensing, even for On-Premise software may be an attractive alternative to SaaS The SaaS challenge is cultural, organizational, and behavioral not technical. You need to understand your readiness for this shift you may be closer than you think OR farther away Mural Consulting Corporation, All Rights Reserved

Evaluating Business Solutions in the Subscription Economy

Evaluating Business Solutions in the Subscription Economy Matthew Woodward President, NextCorp/SMB Suite 1 Winter, 2013 Agenda State of Business Solutions for Small to Mid-Sized Business Sub Fortune 1000