Moving to Web-Based Delivery:What are the financial, business, and legal

implications?

Presenters

PanelistsAllen Angell, CEO, HAIKU Learning SystemsJamie Candee, Vice President, PLATO LearningJeffrey Fromm, Partner, Dorsey & Whitney

ModeratorKaren Coe, President, Key Curriculum Press

PLATO Learning Background• 40+ years in Education Technology• 7 Acquisitions from 2000-2004; 9+ Technology

Platforms• Set SaaS Strategy in 2005 and Launched New

SaaS Platform, PLE, in July 2006• Currently Serving over 1.3M students online at

3200 schools (1300 districts, 50 states)– Adding 22,000 users/month – Delivers full K-12 content on single platform– Over $50 million new subscriptions sold

PLATO’s Story4 Lessons LearnedLesson #1: Be realistic about your pace of change.

Lesson #2: Product & Development must focus on market differentiation plus business intelligence within lifecycle.

Lesson #3: The K-12 market does not see SaaS through the eyes of your business lens. Plan accordingly.

Lesson #4: Legal Considerations – It’s more than just software now. What you need to protect, and protect against, has now expanded.

PLATO Learning SaaS Evolution

8%

92%

25%

75%

53%

47%

70%

30%

0%

20%

40%

60%

80%

100%

FY05 FY06 FY07 FY08

SaaS Perpetual

Lesson #1: The Realities of Change• Pace of change

– Too quickly • Risk alienating current customers• Financial disaster without adequate capital• Not enough subscription value to justify migration (yet)

– Too slowly – risk never getting there• Customer investments need time to burn off • Culture conflict

– Sweeping changes required - some will feel threatened as old processes go away and new ones need to get created

• High cost supporting both business models– Depending on your size, consider running separately

Lesson #2: Product & Development • Product Requirements Mix

– Design with the future in mind (adjacent markets, SIF, SCORM)– Consider agile development (SaaS value is speed to market)– Balance market trends with lifecycle business intelligence

• Pricing and Subscription Differentiation– The value of the subscription vs. legacy product– Raising maintenance plans aggressively won’t help migration

• Consider special programs for existing customers (pilots, free trials, trade-in credits), but – Avoid heavy discounting to drive migration. Remember, it’s a recurring

revenue model….

Lesson #3: SaaS in the K-12 Market• Customer Urgency to Migrate is Mixed

– Don’t plan to rely on your existing base of customers – transition will take longer than you think

– Be prepared to take new ground (new acquisition)

• Sell to curriculum and IT staff– Bandwidth considerations

• Acquire, expand, renew – a life-cycle relationship– Build everything around this paradigm– Opportunity for continuous dialogue with customer – a great asset in

difficult times – Eventually plan to evolve sales to a mix of hunters and farmers

Lesson #4: Legal Requirements and Risks• Terms of Use vs. End-User License Agreements

– Similar: license grant, no copies, no reverse engineering, limitation of liability

– Different: registration, COPPA, privacy, responsibility for end-user content, ownership of end-user content, infringement, service level, metadata

• Open Source: copyleft• Managing IP: copyright, domain names, international• Everybody’s a Lawyer Now: your contracts are read by social

networkers• New Economics: financial statements; raising capital; M&A; sales

taxes

Q&A