Building & Scaling a Profitable SaaS Business In the Cloud November 6, 2014 Accelerate your Ambition 1
Agenda Current state of SaaS transformation Hybrid SaaS Migration Strategies What Public Cloud enables for ISVs Best Practices When Considering a Public Cloud Migration Accelerate your Ambition 2
Current State of SaaS Transformation
Software to SaaS Continuum Business Model Traditional Hybrid Cross Over SaaS Strategic Intent On-Premise focus Drivers: Large onprem customer base. Existing, market, or solution type LT both on-premise and SaaS Drivers: Customer base, new and existing markets or solution LT move to SaaS Drivers: Competition, new markets, products or company value Exclusively SaaS Drivers: Newer business, competition, products or markets Customer Selection Enterprise Enterprise and SMB SMB to enterprise SMB to enterprise Value Capture Strategic Control Deployment Perpetual license Services LT license deals, large switching costs License, subscription Services Managed services Ability to migrate Subscription Lower TCO Subscription Customer experience Control of data Time To Value Months or years Days or months Days to months Minutes to weeks Customizability Complex customizations Customizations and configuration Integration Difficulty Difficult to integrate Moderately complex to integrate Source: Software Continuum Configurable Packaged integrations Highly configurable Product extensions Packaged integrations Accelerate your Ambition 4
Global Market by Solution and Business Model Accounting and Finance 1.2% CRM 3.6% ecommerce 4.2% HCM 0.7% 1.4% Analytics and Business 3.6% Collaboration and Social 4.6% Security Market by Business Model ISV $ 41.8B (2%) ERP 24.8% Platform 26.2% SaaS $ 152.6B (9%) Hybrid $ 1,539.4B (89%) Market by Solution Area Source: Accelerate your Ambition 5
Hybrid SaaS Migration Strategies
SaaS Hybrid Strategies Buy & Fly The Two Step Hub and Spoke Big Data Jump start building a SaaS team, subscription revenues and product platform through M&A Leveraging single tenant platform by building a managed service, while developing a new SaaS platform in the background Surround on-premise products with SaaS applications and Cloud capabilities Business analytics of aggregate data from onpremise and/or Cloud products Balancing both models Source: Accelerate your Ambition 7
Buy and Fly M&A smaller SaaS-based business SaaS Products Experienced Team Subscription Revenues Move Fast SaaS Customers Reduce Time to Break-even Source: Accelerate your Ambition 8
The Two Step Managed Service now and build a new future SaaS platform Near Term Subscription Revenues Leverage Domain Expertise Buy Time to Build Next Generation Platform Defensive Strategy Bridge to the Cloud and SaaS Source: Cautions: Margins will kill you here This cannot be a long-term or permanent strategy Accelerate your Ambition 9
Hub and Spoke Cloud-connected Products Protect Customer Base Near Term Revenue Stream Leverage Core Products Address Competitive Pressures Controlled Product Investment Source: Accelerate your Ambition 10
Big Data Business Analytics Leverage PaaS or M&A Next Gen Platform is BI Oriented Competitive Pressures Add-on to Core Products Ready Access to Data Source: Accelerate your Ambition 11
SaaS Transition Examples Various methods of deploying their Cloud offerings Companies That Have Successfully Transitioned to SaaS Plateau (SAP) Concur (CNQR) Sabrix (Thomson Reuters) SciQuest (SQI) Taleo (Oracle) Kenexa (IBM) Ultimate Software (ULTI) Success factors (SAP) Ariba (SAP) Source: Accelerate your Ambition 12
3 Reasons Why You Must Get To Cloud (before your competitors do)
SaaS Success & Growth is Tied to Public Cloud Usage $30.0 $25.0 $20.0 $15.0 $10.0 $5.0 $0.0 2011 2012 2013 2015 2015 Projected Revenues $22.1B 2013 Revenues $16.7B 2012 Revenues $12.4B 2011 Revenues $12.3B By 2015, one of every seven dollars spent on packaged software, server, and storage offerings will be through the public cloud model. IDC Research Accelerate your Ambition 14
Reason #1: Attracting The Best Technical Talent Unless you are or Attracting talent is expensive and very difficult The very best ones probably don t want to work for you The great people you have are likely to be interviewing The rest cannot easily stay ahead of new technology Huge staff investments come at the expense of sales and R&D Accelerate your Ambition 15
Reason #2: Your Costs Must Align to Revenue How you assume it will work Accelerate your Ambition 16
The Note You Never Want to Send to Your Clients A week ago we requested an additional 10 servers from our host with several of these new machines planned to increase our capacity (Our goal is to add capacity at 50% utilization). Our host has been delayed in providing us with the additional hardware. How it usually turns out Copyright 2014 Dimension Data
No One Gets Forecasting Perfectly Right How it usually turns out Accelerate your Ambition 18
Aligning Costs to Revenue is Powerful Run your operations with no risk at 95%+ capacity Enter new markets to profitably support a single client Throw hardware at the problem without hurting your back (or needing a new funding round) Cloud Capacity Nirvana Accelerate your Ambition 19
Reason #3: You Will Lose if You Don t Adapt Right now, someone is developing a purely SaaS version of your product (Tip: You should be better at this than anyone else) It is tempting to avoid the investment, because Changing business models will drastically impact your results in the interim But, if you don t, the inevitable is only a matter of time Accelerate your Ambition 20
Best Practices When Considering a Public Cloud Migration
Considerations When Moving to the Cloud To vendor: How much would it cost to replicate <> in the cloud is the wrong approach Referred to as an our mess for less migration Harness the Power of Consumption Economics You no longer purchase on a 3-5 year depreciation schedule factoring for <x%> growth If you get the numbers wrong, you can always scale back Accelerate your Ambition 22
Considerations When Moving to the Cloud Understand the security implications of moving to the Cloud Compare Performance Among clouds it is time-consuming, but very necessary Minimize customization requests of the public cloud vendor standardization is key Enforce an approval process to maintain visibility of new deployments Automate whatever you can Take the time to evaluate the SLA your business requires, and read the fine print Copyright 2014 Dimension Data
Considering an RFP for Cloud Services? Does your procurement department understand how to evaluate cloud providers? Most RFP templates are 10+ years old and were originally designed for colocation You don t need a list of people (with resumes) delivering the solution Asking for contract length discounts rarely makes sense Asking a provider to commit pricing levels 5 years into the future will cost you money You probably don t qualify for MFN pricing Trying to limit contact with the vendor during the evaluation is a significant mistake Price this configuration will not yield the results you want Only ask the questions you intend to read (please) J Accelerate your Ambition 24
Conclusion
Considerations When Moving to the Cloud Harnessing consumption economics will generate significant savings in Cloud Moving to the cloud without changing your business model or architecture leaves money on the table Focus investment in your core competencies and leave the rest to dedicated providers Never send your clients a note telling them you re out of capacity You do not want a multiyear committed cost public cloud contract Invest in tomorrow s architecture today, someone else already has Accelerate your Ambition 26
Thank You Contact Info & Resources Jason Cumberland @JCumb3r VP, SaaS Solutions Dimension Data Cloud 512-535-5958 jason.cumberland@dimensiondata.com Blog on all things Cloud & SaaS: http://cloud.dimensiondata.com/saas-solutions/blog