Benlian - Visiting Talk Mannheim - 24 11 09

Fakultt fr Betriebswirtschaft Munich School of Management
Software-as-a-Service (SaaS) hype or hope in the software industry?

Visting Talk at the Chair of Business Administration and Information Systems Mannheim, 24. November 2009
Dr. Alexander Benlian (benlian@bwl.lmu.de) Assistant Professor Institute for Information Systems and New Media www.wim.bwl.lmu.de
SOFTWARE-AS-A-SERVICE HYPE OR HOPE?
The basic idea behind Software-as-a-Service (SaaS) The utility analogy

Utility services Companies source electricity through a simple interface, a socket They do not have to care about how to produce and distribute electricity They do not have to invest into powergenerating infrastructure They just pay for utility services as they are used The expense comes out of the operating budget, not the capital budget Software services Why cant software applications be sourced through a simple interface, too? Why do firms have to take care about developing and maintaining software? Why do they have to make large upfront capital investments in HW and SW and hiring full-time IT professionals? Why do they have to purchase perpetual software licenses and pay annual maintenance fees? Why are expenses to a large part CAPEX and not OPEX?
Source: Nicolas Carr: The big switch (2008)
3 popular examples of SaaS applications

Characteristics
Architecture: - Installed on the vendor side (hosted) - No development or maintenance of software on the client side Payment Model: - Subscription model or Pay-as-you-go Economics: - Periodical fees - Low switching costs
On-demand
Traditional
Characteristics
Architecture: - Installed on clients premises - Development and maintenance effort on the client side Payment Model: - License fees (plus upgrades) - Fees for support/ maintenance Economics: - High upfront-costs - High switching costs
Revenues based on SaaS are predicted to surge, while the traditional software delivery model is under pressure
Germany 2007 - 2010 SaaS market volume in Mio. $
700 600 500 400 300 200 100 0
577 447,7 344,9 270,5
Oct 29th, 2009 Handelsblatt
2007
2008
2009
2010
This trend indicates that SaaS will become a serious alternative to on-premise applications. However, will SaaS be also a disruptive technology and have a lasting effect on the software industry?
Source: Gartner (2009); Experton Group (2007), Handelsblatt 3
Agenda
1 2
What is Software-as-a-Service all about? How does it change the traditional software industry?
3 4
How do companies in different (service) industries deal with SaaS?
What are future challenges for software providers and companies?
What is Software-as-a-Service (SaaS)?

Access to application services via Browser
Software user
Software service
Software provider
Periodical subscription fees Remote server farm connected to the Internet
In this form of computing, a customer runs software remotely, via the Internet, using the service providers programs and computer infrastructure. (Campbell-Kelly 2009)
Software-as-a-Service is the provision of application software via the Internet (a Browser interface) Companies source the implementation and maintenance of the application software from a SaaS provider and pay a periodical subscription fees (or ideally per usage) SaaS promises to make software users more flexible in terms of provider selection (less lock-in), technology upgrades and cost variabilization (turning fixed into variable costs)
5
How does SaaS relate to other concepts?

Application delivery SW deployed and maintained on premises at customer site by internal IT personnel Custom or packaged SW Apps managed by an external vendor (e.g., IBM, EDS) on premises at customer site, or remote hosting of custom applications Packaged apps hosted off-premises Single tenant (i.e., dedicated application instance and servers per customer) SW licenses priced separately from hosting contract Third party management of an application
Internal app. delivery
Application outsourcing
Traditional outsourcing
On demand
Packaged applications that are hosted (deployed and managed remotely) and accessed via the Web
Application service providing (ASP)
Software-as-aService (SaaS)
Packaged Apps hosted off- premise Multitenant (i.e., one code base; servers shared across customers) SW license and hosting priced together in periodical subscription fees
What are key criteria to distinguish between Software and Software-as-a-Service (SaaS)?
Pricing Model License Model On Premise Traditional Software

SAP R/3 MS Office Oracle Apps. Blackboard
Subscription Model Hybrid

SugarCRM Appliance
Deployment Model
Hybrid (ASP) Hosted

Oracle On Demand
On-Demand / Software-as-aService
SAP Business ByDesign Salesforce.com
Webex
7
How will software providers and users be affected by SaaS?
The SaaS provider perspective
The SaaS user perspective
Agenda
1 2
3 4
SaaS will transform the software industry in 4 main areas
Architecture
Pricing
Economics
Platform
10
Technology shift from client-server to cloud computing

Cloud computing has been made possible by the shift to Internet technologies that are built on Web-based standards and protocols
Key drivers for cloud computing: Bandwidth has increased, and costs have declined Lower costs, and improved performance, for commodity servers Advances in grid computing and database Diffusion of virtualization technologies
11
Multi-tenant architecture is the major technology enabler for delivering software-as-aservice

(Web) Client (Web) Client
(Web) Client
(Web) Client
(Web) Client
(Web) Client
(Web) Client
Tenant #1
Customer (Web) Tenant Client
Tenant #2
Tenant #3
Tenant #4
Tenant #N
Customer (Web) Tenant Client Meta-data layer
Webserver
Webserver
Tenant Lastausgleich (Load Balancer)

Webserver
Anwendungsserver
Anwendungsserver
Anwendungsserver
Datenbankserver
Datenbankserver
Datenbankserver
Persistenz
Persistenz
Persistenz Gemeinsame Systemverwaltung
Dedizierte Systemverwaltung
Dedizierte Systemverwaltung
Single-Tenant Single Tenancy
(classical on-premise or ASP model)
(Klassisches onPremise- oder ASP-Modell)
Architecture
Multi-Tenant (SaaS-/ OnDemand-Modell)
Multi Tenancy Architecture

(SaaS model)
12
In terms of economies of scale, sharing the same infrastructure is similar to using public transport instead of driving your own vehicle
Shared, provider-owned SaaS solution (Multi-tenancy)
Individual customer-owned on premise or hosted solution
13
However, the cash position of SaaS providers is worse than that of traditional players
Traditional software pricing Traditional software pricing Classical selling of software Classical selling of software licenses and maintenance licenses and maintenance contracts (incl. support) contracts (incl. support) Add-on fees for license Add-on fees for license upgrades (and renewals) upgrades (and renewals) High cash inflows right after High cash inflows right after selling the software selling the software SaaS customers pre-finance SaaS customers pre-finance software usage software usage Vendors can plow that cash Vendors can plow that cash back into sales and back into sales and marketing marketing SaaS pricing model (as of now) SaaS pricing model (as of now) Periodical subscription fees Periodical subscription fees that cover licensing, hosting that cover licensing, hosting and maintenance and maintenance Usually, neither fixed costs at Usually, neither fixed costs at the beginning nor for upgrading the beginning nor for upgrading Rather small recurring cash Rather small recurring cashinflows that have to be tracked inflows that have to be tracked and monitored and monitored SaaS customers pay as they SaaS customers pay as they go, i.e. what they expect to use go, i.e. what they expect to use Vendors have to find a way to Vendors have to find a way to finance the early acquisition finance the early acquisition of customers of customers
Source: Chou, T. (2008)
14
The shift from software licenses to software subscriptions is likely to squeeze traditional software companies profit margins
Breakdown of profit and loss line items as % of top-line revenue (financial data of 2007)
100%
Major changes in the SaaS World SaaS providers have to spend more on customer service and sales models to keep up good customer relationships SaaS providers have higher expenses for application development and maintenance and IT infrastructure management However, if SaaS companies achieve to scale their IT infrastructure and get a leading position in their niches, they can achieve much higher margins (e.g., WebEx: 26%, Digital Insight: 19%)
13% EBITDA1 31%
49%
SG&A2
35%
13% 25% Pure SaaS vendors*
R&D3 COGS4
15% 19%
Big traditional software companies
1 Earnings before interest, taxes, depreciation, and amortization 2 Selling, general, and administrative expenses 3 Research and development 4 Cost of goods sold * Includes the 10 biggest pure SaaS providers such as salesforce.com, Taleo, or WebEx Source: Dubey, A. & Wagle, D. (2007)
15
Some SaaS providers have started to open their platforms to third-party developers in order to push their own technology standard
EXAMPLE SALESFORCE.COM Force-com
It runs in the cloud: Developers just have to log in, build their app, and can share it with other companies via the exchange platform AppExchange It includes a database, security, workflow, user interface, and other tools that step developers through the process of building powerful business applications, Web sites, and mobile applications The cloud infrastructure beneath Force.com has been fine-tuned over the past 10 years. It powers nearly 63,200 businesses running more than 120,000 applications that 1.5+ million users count on every day
Source: http://www.salesforce.com/platform
16
Facebook as role model for future business software markets? Multi-sided markets and network effects
Facebook
Provision of platform
Usage
Provision of APIs and IDEs
Development of apps
Provision of advertising space
Revenue source
User direct network effects
Application developers
Advertisers
indirect network effects
Direct network effect: The more users join the network, the higher the value/incentive of the platform to other people outside the network to join as well Indirect network effects: The more applications you have on a platform, the more users will join and vice versa. The more users join, the more advertising companies are attracted to place their ads on the platform
Source: Hhne, E. / Hess, T. (2009): Plattformstrategien, in: MedienWirtschaft: Zeitschrift fr Medienmanagement und Kommunikationskonomie, 6. Jg., Nr. 2, S. 32-36. 17
If this trend continues, how will the software industry evolve?

On-Premise World
Customer Customer Support & Implementation Integrator // Integrator Consultant Consultant Integration Partner Partner-Network Software Purchase
SaaS / PaaS World

Customer Customer Complimentary applications
Advertisers Advertisers
Platform characteristics
Similar to Facebook or Apples AppStore, thirdparty complementors develop apps for specific platforms Customers gain full transparency on service offerings and prices (market)
Software rental
Integrator // Integrator Consultant Consultant
Provider
Force.com Force.com platform platform
Advertisers may place ads on the platform Platforms partially substitute the customization/support work of system integrators From a market perspective, the software platform with a critical mass of developers, apps and customers will be successful
CompleComplementor mentor
Do business software markets become several parallel existing ecosystems similar to Facebook?
Source: Evans/Hagiu/Schmalensee (2008) 18
Agenda
1 2
3 4
19
Two perspectives on the adoption of and attitude towards SaaS

Adoption of SaaS Macro level Risks and benefits of SaaS Service quality of SaaS
Micro level
20
SaaS adoption in service industries gets a boost in 2010, growth will stagnate afterwards
SAAS ADOPTION 2008-2010
% of IT budget for respective business application CAGR (2008-2012)
35
CCC*
31% 34% 37%
30 25 20 15 10 5 0 2008
CRM Office
ERP SCM
54% 95%
2009
2010
2011
2012
N=922
* Communication, Content, Collaboration Source: SaaS opportunity risk survey 2009, based on companies in service industries including transportation, banking & insurance, telecommunication, and software
21
While security concerns about SaaS are prevalent in customers risk assessments, SaaS is considered as cost saving lever across all core business applications
RISK/OPPORTUNITY ASSESSMENTS ACROSS CORE BUSINESS APPLICATIONS
High Middle Low
N=922 Office suites
CCC* CRM & BI & Procurement ERP& Manufacturing SCM

Cost advantage Quality Focus on core improvements competencies Strategic Access to flexibility resources Financial Strategic Operational Security Social
Opportunity assessment
* Communication, Content, Collaboration
Risk assessment
Source: SaaS opportunity risk survey 2009, based on companies in service industries including transportation, banking & insurance, telecommunication, and software
22
Network availability and security fall below SaaS customer expectations

ASSESSMENT OF THE FULFILLMENT OF KEY SAAS SERVICE QUALITY FACTORS
Low N=312 High
Trust is key in SaaS delivery
Excellence Features Availability Flexibility Security Assurance

Zone of Tolerance between minimum acceptable and desired service quality levels Perceived SaaS service quality
Source: SaaS service quality survey 2009, based on companies in service industries including transportation, banking & insurance, telecommunication, and software
23
SMEs tend to be less risk-averse compared to LEs in the adoption of SaaS and also see higher returns from using it
RISK/OPPORTUNITY ASSESSMENTS OF SMALL-AND-MIDSIZED AND LARGE ENTERPRISES
SMEs (n=695) Large Enterprises (n=227) Risk assessment Scale from 1=low risk to 5=high risk, mean values Financial risk Strategic risk Operational risk Security risk Social risk
1,89 2,03 3,13 3,33 3,33 3,62 2,72 2,99 3,39 3,54
Opportunity assessment Scale from 1=low op to 5=high op, mean values Cost adv. Strategic flexibility Focus on core caps Access to resources Quality improvem. N=922
3,40 3,14 3,29 3,32 2,85 2,65 3,87 3,01 3,31 3,16
N=922
Source: SaaS opportunity risk survey 2009, based on companies in service industries including transportation, banking & insurance, telecommunication, and software
Two perspectives on the adoption of and attitude towards SaaS
Macro level
Case example in the insurance business Case example in the professional services business TCO analysis example
Micro level
25
Case example 1 Allianz: Sales force automation through salesforce.com

Problem Problem SaaS solution SaaS solution Results Results
Allianz UK & Irland (commercial Allianz UK & Irland (commercial assurance) has a strong assurance) has a strong fragmented structure: 2000 fragmented structure: 2000 local brokers have to be local brokers have to be managed via 12 Allianz offices managed via 12 Allianz offices each with different application each with different application and process standards and process standards Goals: Goals: Standardize and optimize Standardize and optimize workflows regarding the workflows regarding the collaboration between Allianz collaboration between Allianz offices and local brokers offices and local brokers Increase transparency Increase transparency Increase productivity of Increase productivity of brokers and sales brokers and sales
Usage of SaaS CRM solution Usage of SaaS CRM solution Salesforce Automation (SFA) Salesforce Automation (SFA) Used for broker relationship Used for broker relationship management (incl. reward management (incl. reward management), customer management), customer lifecycle management lifecycle management Implementation of global Implementation of global promoter-scoring dashboard promoter-scoring dashboard to track the customer lifecycle to track the customer lifecycle and broker activities and broker activities Customization of applications Customization of applications by users (individual fields, by users (individual fields, tabs, options, etc.) without tabs, options, etc.) without technical assistance technical assistance
Implementation of SFA in Implementation of SFA in 12 Allianz offices within 6 12 Allianz offices within 6 weeks weeks Increase of sales-hit-rate Increase of sales-hit-rate by 17,4% compared to by 17,4% compared to previous year previous year result is above industry result is above industry average average High satisfaction scores High satisfaction scores among all users (Allianz among all users (Allianz staff and brokers) regarding staff and brokers) regarding the use of the real-time the use of the real-time dashboard (on mobile and dashboard (on mobile and stationary end-devices) stationary end-devices)
Source: http://www.salesforce.com/de/customers/insurance/allianz.jsp
26
Case example 2 McKinsey: e-learning and team collaboration with WebEx

Problem Problem SaaS solution SaaS solution Results Results
Country offices of McKinsey & Country offices of McKinsey & Company employed different Company employed different standards for e-collaboration standards for e-collaboration software preventing them from software preventing them from providing an international online providing an international online learning and web conferencing learning and web conferencing platform platform Goals: Goals: Enable international e Enable international elearning/training modules learning/training modules Provide pervasive video Provide pervasive videoconferencing technology conferencing technology Reduce travel time Reduce travel time
WebEx is a SaaS provider of WebEx is a SaaS provider of web and video conferencing web and video conferencing technology and online technology and online meetings meetings It combines real-time It combines real-time desktop sharing with phone desktop sharing with phone conferencing so everyone conferencing so everyone sees the same thing while sees the same thing while you talk. you talk. It facilitates It facilitates Online meetings Online meetings Sales presentations Sales presentations Interactive trainings Interactive trainings Customer support Customer support
Extremely high satisfaction Extremely high satisfaction among McKinsey among McKinsey consultants regarding consultants regarding usage of e-learning usage of e-learning modules and videomodules and videoconferencing features conferencing features Significant increase of Significant increase of international online training international online training modules modules Considerable reduction of Considerable reduction of travel time, i.e., in particular travel time, i.e., in particular for travels to (international) for travels to (international) training sites training sites
27
A TCO analysis example Total cost of ownership (TCO) of SaaS compared with the on-premise software model Implementation and deployment
ILLUSTRATIVE
No infrastructure needed Reduced customization effort No detailed tests necessary No personnel costs in service No running costs for IT-infrastructure (electricity, etc.) No backup costs No acquisition costs Periodical (Monthly) fees There is significantly less system failure because of central operations Users can be added or removed as needed
Running costs License fee Costs because of system failure Costs because of unused licenses
Source: Dubey, A./Wagle D. (2007)
28
Agenda
1 2
3 4
29
Short wrap-up: Is SaaS is a disruptive technology?

Characteristics of Disruptive Technologies
Profitability
Generally promise lower margins, not greater profits
Degree of Fulfillment by SaaS

Profitability
Comparably low margins, smaller profits
Customer
Leading firms most profitable customers generally do not want and initially cannot use products based on disruptive technologies Are initially embraced by the least profitable customers in a market
Customer
Many large enterprises do not want SaaS, excluding applications like CRM Midsize enterprise business not highly profitable
Market
Are typically first commercialized in emerging, fringe or low-end / insignificant markets
Market
High adoption rates for Office/CCC CRM systems are an exception to this rule
Product & Technology

Under-perform established products in mainstream markets Products based on disruptive technologies are typically cheaper, simpler, smaller, and, frequently, more convenient to use
Product & Technology

SaaS does not deliver the necessary stability and security for ERP/SCM functionality SaaS is cheaper, simpler, smaller and more convenient to use
Conclusion: High probability that SaaS wont be just a hype

Source: Christensen, C. M. (2003, 1997) 30
Challenges for Software/SaaS providers and companies

Software/SaaS providers Traditional players should take SaaS seriously and answer the question whether to enter this business model or not Entering into the SaaS market will involve different capabilities (e.g., customer service and retention, technical orchestration of globally distributed business services), practices (e.g., tracking monthly recurring revenue, churn, and cash flow) and rules of the game (e.g., platform strategies, partner selection) In the start-up phase, weak profitability and cash-flow shortfalls will prevail at the expense of revenue generation Margins may increase as soon as SaaS is popular enough to have sufficient scale and is able to reduce selling costs User companies User companies should think about whether SaaS is a viable alternative to on-premises software for different application types (e.g., CRM better suited for SaaS than ERP?) and processes (e.g., parcel tracking, billing and payment, credit checks) Sourcing SaaS-delivered applications will entail interoperability/integration, security and availability issues that have to be solved jointly with the SaaS provider Customizing SaaS-delivered applications to company-specific requirements (i.e., either self-developed or acquired through SaaS service platform) might bring along additional costs
Source: Benlian/Hess/Buxmann (2009)
31
Thank you for your attention!
Selected References and Literature

Benlian, A., Hess, T., and Buxmann, P. (2009): Drivers of SaaS-Adoption. An empirical study of different application types. Business & Information Systems Engineering, 1(5): p. 357-369. Buxmann, P., Hess, T., Lehmann, S. (2008): Software as a Service. Wirtschaftsinformatik, 2008. 50(6): p. 357369. Buxmann, P., Diefenbach, H., Hess, T. (2008): Die Software-Industrie: konomische Prinzipien, Strategien, Perspektiven. Berlin. Carr, N. (2008): The big switch, Norton. Campbell-Kelly M. (2009): The rise, fall, and resurrection of software as a service. Communications of the ACM, 52(5): p. 28-30. Chou, T. (2008): Seven business models for software, Active Book Press. Christensen, C.M.(1997): The Innovators Dilemma, Boston. Christensen, C. M., Raynor, M. E. (2003): The Innovators Solution, Harvard Business School Press. Evans, D.S., Hagiu, A., and Schmalensee, R. (2006): Invisible engines: How software platforms drive innovation and transform industries, MIT Press. Dubey, A., Wagle D. (2007): Delivering software as a service. The McKinsey Quraterly, May 2007. Xin, M., Levina, N. (2008): Software-as-a Service Model - Elaborating client-side adoption factors, Proceedings of the Twenty Ninth International Conference on Information Systems, Paper 86, Paris, France. Zencke, P., Eichin, R. (2008): SAP Business ByDesign Die neue Mittelstandslsung der SAP. Wirtschaftsinformatik, 50(1): p. 357-369.
33
BACKUP
What are SaaS origins?

outsourcing contract Various types individual infrastructure hosted on-premise IT-Outsourcing t since 1962 rent model applications individual infrastructure Isolated tenancy ASP since 1997 subscription model big services shared infrastructure multi-tenant service SaaS 1.0 today single transactions granular Services shared infrastructure multi-tenant service SaaS 2.0 tomorrow
Single Tenancy Single Tenancy
Isolated Tenant Isolated Tenant
Multi Tenancy Multi Tenancy
Advantages through SaaS Advantages through SaaS Higher flexibility and Higher flexibility and scalability scalability Economies of scale Economies of scale Lower provisioning costs Lower provisioning costs Mass customization Mass customization More attractive business More attractive business model model
Instance
Instance
Instance
Instance
Instance
Infrastructure
Infrastructure
Infrastructure
Infrastructure
Infrastructure
Infrastructure
Shared infrastructure
Source: Deutsche Bank, Microsoft
35
SaaS is different to ASP due too multi-tenancy and different customization features giving vendors more opportunities for economies of scale
The ASP architecture
Packaged applications are hosted offpremises Single tenant (i.e., dedicated application instance and servers per customer) clientspecific instance of an application is located offsite and delivered over the network Clients can customize their instance of the application on the vendors server A key issue surrounding ASP adoption became the degree of customization desired by the client and the resulting efficiencies lost by the vendor
Single Tenancy Single Tenancy
The SaaS architecture

Packaged applications are hosted offpremises Multitenant (i.e., one code base; servers shared across customers) Only a single instance of the common code and data definitions for a given application exists on the vendors server, and no customization of this code is permitted Customer-specific configuration can be made at the meta-data layer on top of the common code using interfaces provided by the SaaS vendor; however, the customer is responsible for maintaining it Multi Tenancy
Multi Tenancy
Instance
Instance
Instance
SaaS providers are much SaaS providers are much more flexible to scale their more flexible to scale their services and thus leverage services and thus leverage economies of scale economies of scale
Instance
Source: Xin/Levina, N. (2008)
Infrastructure
Infrastructure
Infrastructure
Shared infrastructure
36
Companies have to weigh the risks and opportunities of sourcing SaaS
Financial risks Strategic risks Operational risks Security risks Social risks
Cost advantages Strategic flexibility Quality improvement Focus on core capabilities Access to specialized resources
Risks
Opportunities
37
Overview on opportunities and risks of SaaS

Risk factors
Financial risk The risk that a SaaS customer has to pay more to reach the expected level of service than initially anticipated The risk that a SaaS customer loses critical resources or capabilities as a factor for competitive advantage The risk that SaaS does not deliver the expected level of service by failing to provide application availability, network bandwidth and system interoperability The risk a SaaS customer runs due to giving direct control of (critical) data and thus valuable assets to a provider
Opportunity factors
Cost advantages Cost advantages assume that external vendors can provide application services at lower TCO* than the client company Strategic flexibility assumes that SaaS clients become more flexible in switching the IT provider and in reducing vendor lock-in Assumes that SaaS providers incorporate industry best practices and total quality management procedures to become more responsive to customer needs Refers to the notion that SaaS will make it easier for firms to focus on their core competences because they are able to shift application development and maintenance to the vendor Assumes that SaaS customers can benefit from specialized resources, capabilities and technologies of SaaS providers
Strategic risk
Strategic flexibility
Operational risk
Quality improvement
Security risk
Focus on core capabilities
Social risk
Social risks involve the possibility that the reputation and career of the manager responsible for SaaS will be harmed due to negative press or employee resistance
Access to specialized resources
* TCO = Total cost of ownership

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Fakultt fr Betriebswirtschaft Munich School of Management

Software-as-a-Service (SaaS) hype or hope in the software industry?

SOFTWARE-AS-A-SERVICE HYPE OR HOPE?

The basic idea behind Software-as-a-Service (SaaS) The utility analogy

Source: Nicolas Carr: The big switch (2008)

SOFTWARE-AS-A-SERVICE HYPE OR HOPE?

3 popular examples of SaaS applications

SOFTWARE-AS-A-SERVICE HYPE OR HOPE?

577 447,7 344,9 270,5

Oct 29th, 2009 Handelsblatt

SOFTWARE-AS-A-SERVICE HYPE OR HOPE?

How do companies in different (service) industries deal with SaaS?

What are future challenges for software providers and companies?

SOFTWARE-AS-A-SERVICE HYPE OR HOPE?

What is Software-as-a-Service (SaaS)?

Periodical subscription fees Remote server farm connected to the Internet

SOFTWARE-AS-A-SERVICE HYPE OR HOPE?

How does SaaS relate to other concepts?

Internal app. delivery

Application service providing (ASP)

SOFTWARE-AS-A-SERVICE HYPE OR HOPE?

Pricing Model License Model On Premise Traditional Software

Subscription Model Hybrid

Hybrid (ASP) Hosted

SOFTWARE-AS-A-SERVICE HYPE OR HOPE?

How will software providers and users be affected by SaaS?

The SaaS provider perspective

The SaaS user perspective

SOFTWARE-AS-A-SERVICE HYPE OR HOPE?

How do companies in different (service) industries deal with SaaS?

What are future challenges for software providers and companies?

SOFTWARE-AS-A-SERVICE HYPE OR HOPE?

SaaS will transform the software industry in 4 main areas

SOFTWARE-AS-A-SERVICE HYPE OR HOPE?

Technology shift from client-server to cloud computing

SOFTWARE-AS-A-SERVICE HYPE OR HOPE?

Multi-tenant architecture is the major technology enabler for delivering software-as-aservice

Tenant Lastausgleich (Load Balancer)

Single-Tenant Single Tenancy

(classical on-premise or ASP model)

(Klassisches onPremise- oder ASP-Modell)

Multi-Tenant (SaaS-/ OnDemand-Modell)

Multi Tenancy Architecture

SOFTWARE-AS-A-SERVICE HYPE OR HOPE?

Individual customer-owned on premise or hosted solution

SOFTWARE-AS-A-SERVICE HYPE OR HOPE?

Source: Chou, T. (2008)

SOFTWARE-AS-A-SERVICE HYPE OR HOPE?

13% EBITDA1 31%

Big traditional software companies

SOFTWARE-AS-A-SERVICE HYPE OR HOPE?

SOFTWARE-AS-A-SERVICE HYPE OR HOPE?

Provision of APIs and IDEs

Provision of advertising space

User direct network effects

indirect network effects

SOFTWARE-AS-A-SERVICE HYPE OR HOPE?

If this trend continues, how will the software industry evolve?

SaaS / PaaS World

Integrator // Integrator Consultant Consultant

Force.com Force.com platform platform

SOFTWARE-AS-A-SERVICE HYPE OR HOPE?