scaling a saas business in the cloud - sys-con...

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Building & Scaling a Profitable SaaS Business In the Cloud

November 6, 2014


Agenda

Current state of SaaS transformation

Hybrid SaaS Migration Strategies

What Public Cloud enables for ISVs

Best Practices When Considering a Public Cloud Migration

Current State of SaaS Transformation


Software to SaaS Continuum

Business Model Traditional Hybrid Cross Over SaaS

Strategic Intent

•  On-Premise focus •  Drivers: Large on-

prem 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 •  Perpetual license •  Services

•  License, subscription

•  Services

•  Subscription •  Subscription

Strategic Control •  LT license deals,

large switching costs

§  Managed services §  Ability to migrate

•  Lower TCO

§  Customer experience §  Control of data

Deployment

Time To Value •  Months or years •  Days or months •  Days to months •  Minutes to weeks

Customizability •  Complex customizations

•  Customizations and configuration •  Configurable §  Highly configurable

§  Product extensions

Integration Difficulty

•  Difficult to integrate •  Moderately complex to integrate

•  Packaged integrations

•  Packaged integrations

Software Continuum

Source:


Global Market by Solution and Business Model

Source:

Market by Solution Area

ERP 24.8%

eCommerce 4.2% CRM 3.6%

Accounting and Finance

1.2%

Platform 26.2%

4.6% Security

3.6% Collaboration and Social

1.4% Analytics and Business

HCM 0.7%

Market by Business Model

ISV $ 41.8B (2%)

SaaS $ 152.6B (9%)

Hybrid $ 1,539.4B (89%)

Hybrid SaaS Migration Strategies


SaaS Hybrid Strategies

Source:

Buy & Fly

Jump start building a SaaS team, subscription

revenues and product platform through M&A

The Two Step

Leveraging single tenant platform by building a

managed service, while developing a new SaaS

platform in the background

Hub and Spoke

Surround on-premise products with SaaS

applications and Cloud capabilities

Big Data

Business analytics of aggregate data from on-

premise and/or Cloud products

Balancing both models


Buy and Fly

Source:

Experienced Team

SaaS Customers

Reduce Time to Break-even

Subscription Revenues

Move Fast

M&A smaller SaaS-based business SaaS

Products


The Two Step

Source:

•  Margins will kill you here •  This cannot be a long-term or permanent strategy

Near Term Subscription

Revenues

Defensive Strategy

Buy Time to Build Next

Generation Platform

Leverage Domain Expertise

Bridge to the Cloud and SaaS

Cautions:

Managed Service now and build a new future SaaS platform


Hub and Spoke

Source:

Cloud-connected Products

Near Term Revenue Stream

Address Competitive Pressures

Protect Customer

Base

Leverage Core Products

Controlled Product

Investment


Big Data

Source:

Business Analytics

Competitive Pressures

Ready Access to Data

Leverage PaaS or M&A

Add-on to Core Products

Next Gen Platform is BI Oriented


SaaS Transition Examples

Source:

Companies That Have Successfully Transitioned to SaaS

Concur (CNQR)

Plateau (SAP)

Sabrix (Thomson Reuters) SciQuest

(SQI)

Taleo (Oracle)

Ultimate Software

(ULTI) Success factors (SAP)

Ariba (SAP)

Kenexa (IBM)

Various methods of deploying their Cloud offerings

3 Reasons Why You Must Get To Cloud (before your competitors do)


“By 2015, one of every seven dollars spent on packaged software, server, and storage offerings will be through the public cloud model.” – IDC Research

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

2011 2012 2013 2015

2015 Projected Revenues $22.1B

2013 Revenues $16.7B



SaaS Success & Growth is Tied to Public Cloud Usage


Reason #1: Attracting The Best Technical Talent

•  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

Unless you are or Download 200,000+ brand logos in vector format for free

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Reason #2: Your Costs Must Align to Revenue

How you assume it will work…

Copyright © 2014 Dimension Data

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…


How it usually turns out…

No One Gets Forecasting Perfectly Right


•  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)

Aligning Costs to Revenue is Powerful

Cloud Capacity Nirvana


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

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

Copyright © 2014 Dimension Data


Minimize customization requests of the public cloud vendor – standardization is key

Understand the security implications of moving to the Cloud

Compare Performance Among clouds – it is time-consuming, but very necessary

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


•  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

Considering an RFP for Cloud Services?

Conclusion



Harnessing consumption economics will generate

significant savings in Cloud

Invest in tomorrow’s architecture today,

someone else already has

Moving to the cloud without changing your business

model or architecture leaves money on the table

Never send your clients a note telling them

you’re out of capacity

You do not want a multi-year committed cost public cloud contract

Focus investment in your core competencies and

leave the rest to dedicated providers

Thank You

Contact Info & Resources Jason Cumberland @JCumb3r

VP, SaaS Solutions Dimension Data Cloud 512-535-5958 [email protected] Blog on all things Cloud & SaaS: http://cloud.dimensiondata.com/saas-solutions/blog

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