Scaling SaaS Delivery for Long-Term Success

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1 A Whitepaper for Software-as-a-Service Providers for Long-Term Success Critical Cost and Performance Considerations to Ensure Sustainable & Profitable Service Delivery An Independent Analysis Published on Behalf of Equinix.

2 Executive Overview Adoption of Software-as-a-Service (SaaS) solutions is accelerating. Every software industry survey and market forecast says so. This is because SaaS applications are almost always more flexible, versatile, and cost-effective than traditional on-premises solutions. This trend represents a great opportunity for established SaaS companies to expand their customer base. But it also presents challenges for SaaS providers seeking to gain a competitive advantage and to build sustainable businesses over the long-haul. Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS) resources make it easier and more economical for companies to launch SaaS businesses. They eliminate many service delivery and software development barriers to entry. This, in turn, has opened the door to a proliferation of players vying for market share. This Cloud Rush affect is commoditizing many segments of the SaaS marketplace. Competitors are often willing to undercut each other on price to win over customers. At the same time SaaS has made it much easier for customers to switch solutions if they experience availability or performance issues. Savvy SaaS executives recognize that their service delivery requirements increase as their business grows and the demands of their customers expand. Many leading SaaS companies leverage a combination of public and private cloud resources to meet the varying needs of their growing customer base. THINKstrategies believes it is critical for SaaS companies to team with leading data center providers that offer multi-cloud capabilities to meet their mission critical service delivery needs. In particular, they should partner with providers that offer a variety of public cloud and hosted service alternatives on a global scale to ensure the availability and performance of their SaaS solutions. This whitepaper discusses these imperatives, and provides THINKstrategies recommendations for SaaS executives looking for the best service delivery alternatives to capitalize on today s market opportunities. THINKstrategies, Inc., p.2

3 SaaS Success Creates New Market Challenges Application workloads and workforces are becoming increasingly global. As a result corporate executives want solutions that are flexible and easy to deliver. These forces have converged to fuel the accelerated growth of the SaaS market, as the following figure from market research firm IDC illustrates. The growing demand for SaaS has encouraged a wider array of players to enter the market to satisfy a broader assortment of market demands. Vendor proliferation has created a buyer s market and undercut customer loyalty. Corporate end-users and senior level decision-makers have plenty of SaaS solutions to choose from in almost every application category. This is making it harder for SaaS companies to win and retain customers. SaaS companies must not only develop clearly differentiated solutions, but they must also deliver them reliably. Service downtime, latency, and other performance issues can quickly frustrate customers. They are even less tolerant of these issues as they become more reliant on SaaS solutions for their mission critical applications and important enduser workloads. According to an Aberdeen Group survey 1 25% of users will abandon a web application after only three seconds of delay. Word of service quality and reliability issues spreads quickly and can damage a SaaS company s reputation. A lost customer results in immediate revenue loss and long-term business repercussions. To survive and grow SaaS companies must minimize customer dissatisfaction and churn. 1 Aberdeen Group, "Reaching the Top of the Web Performance Mountain" (May 2013) THINKstrategies, Inc., p.3

4 Architecting Your Service To avoid service delivery pitfalls, THINKstrategies recommends that SaaS executives focus on service delivery partners. Working with a data center company that hosts an extensive portfolio of best-of-breed providers helps to ensure service scalability, flexibility, and performance. Partnering to Optimize Service Delivery Too often SaaS companies select a single cloud or managed service provider based on price. They often compound this mistake by selecting basic IaaS offerings while ignoring key factors such as service reliability, security, and performance. THINKstrategies believes it is essential for SaaS companies to work with a service provider that can fulfill the following criteria: 1. Optimal network connectivity to a wide range of providers 2. Service reliability and availability 3. Flexible service delivery 4. Global reach and local presence to ensure good user experience 5. Data security, disaster recovery, and business continuity 6. A broad ecosystem of cloud and content service providers 7. A track-record of success working with SaaS companies & enterprise customers Selecting a data center partner that hosts a wide range of service providers reduces the risk of vendor lock-in. It also increases a SaaS company s ability to respond quickly to changing customer demands or competitive pressures. As the world s largest internet exchange point and hoster of cloud services, Equinix is uniquely positioned to help SaaS companies with their infrastructure delivery needs. Equinix customers can leverage a global ecosystem of more than 450 Cloud and 600 IT service providers across more than 100 data centers on 5 continents. Equinix connects to over 975 networks, including all the tier 1 network routes globally, to enable SaaS companies to select the fastest, most efficient paths to deliver their applications to their customers. Optimized routing can mean 27% fewer network hops and 40% less variability in delivery times, which translates to greater reliability and customer satisfaction. To improve connectivity and provider choice, Equinix has created the Performance Hub (PH). This solution moves enterprise connectivity from corporate locations to carrierneutral, shared data centers and gives SaaS companies the ability to: Deploy small footprints in multiple locations to optimize service performance Access Equinix s Cloud Exchange which provides programmatic high-speed, low-cost connectivity to many of the largest public cloud providers Efficiently connect to a wide variety of network and content providers Eliminate local loops along with associated costs and equipment Connect directly to long-haul providers backbone networks Tune bandwidth, service quality, and costs across different markets and users Tether owned data centers to network and cloud service hubs Peer traffic with a wide range of service providers The Equinix Performance Hub gives SaaS companies plenty of options to construct the right service delivery architecture to meet their unique needs. Equinix Global Solution Architects (GSAs) can also provide in-depth technical support to optimize SaaS network and application performance. Equinix also provides a marketplace portal to their more than 4,500 corporate customers - many of whom also represent potential SaaS customers. THINKstrategies, Inc., p.4

5 Summary and Conclusions The rapid growth of the SaaS marketplace has produced exciting new business opportunities along with significant challenges. Escalating customer expectations and intensifying competition make it imperative that SaaS companies focus on service quality and user experience. SaaS executives should leverage the proven service capabilities of leading interconnection and data center providers for scalability, reliability, flexibility and security. This allows them to quickly and economically respond to continuously changing customer demands and competitive pressures. Equinix interconnects a global network of service providers to enable the flexibility and scalability required by SaaS companies. Equinix customers can access a wide array of network, cloud, and content services to meet the varying requirements of SaaS companies seeking to position themselves for the long-haul. This independent analysis was published on behalf of Equinix. About Equinix Equinix, Inc. (Nasdaq: EQIX), the global interconnection and data center company, connects more than 4,500 companies directly to their customers and partners inside the world's most networked data centers. Today, businesses leverage the Equinix interconnection platform in 32 strategic markets across the Americas, EMEA and Asia-Pacific. For more information, go to About THINKstrategies, Inc. THINKstrategies is the only strategic consulting services company formed specifically to help our clients better understand and capitalize on the business implications of the transformation of the technology industry from a product-centric to a services-driven business model. The company s mission is to help our clients re- THINK their corporate strategies, and refocus their limited resources to achieve their business objectives. THINKstrategies also founded the Cloud Computing Showplace ( the largest online directory and resource center of SaaS, PaaS and IaaS solutions divided into over 90 Application, Industry, Service and Enabling Technology categories. THINKstrategies also hosts a series of executive forums focused on the latest Cloud issues and business opportunities, called the Cloud Innovators Summits, For more information regarding our unique services, visit or contact us at info@thinkstrategies.com. THINKstrategies, Inc., p.5