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Entire contents © 2009 Saugatuck Technology Inc. All rights reserved. Blue Skies? Clearing the Air on Cloud Computing and SaaS Parallels Summit Mandalay Bay, Las Vegas, Nevada Bill McNee Founder and CEO February 4, 2009 Strategic Advisor to Leading IT Vendors Westport, CT Phone:
Entire contents © 2009 Saugatuck Technology Inc. All rights reserved. Cloudy Language WALL STREET JOURNAL BIZTECH BLOG –“Overuse of the Term 'Cloud Computing' Clouds Meaning of the Tech Buzz Phrase” (September 23, 2008) –“Microsoft Comes up with Yet Another Meaning for ‘Cloud Computing’ ” (October 2, 2008) The “ubiquitous buzzword... that everyone seems to interpret as a different animal.” Forbes According to Gartner, Cloud Computing is “creating a lot of confusion in the market” “There is a clear consensus that there is no real consensus on what cloud computing is.” Irving Wladawsky Berger, Chairman Emeritus – IBM Academy of Technology Page: 2
Entire contents © 2009 Saugatuck Technology Inc. All rights reserved. CIOs on Cloud Computing Recent Saugatuck interviews with CIOs revealed: “Cloud computing is anything the user wants it to be. OK, that's probably more facetious than you wanted to hear. But it really is true – cloud computing means the availability of IT, delivered as a service, from a provider unknown to or unseen by the user. It can be us in house; it can be IBM; it can be SalesForce.com…” Divisional CIO, Top-5 US brokerage / financial services firm “Cloud computing is the outsourcing of IT infrastructure. I see the cloud including SaaS and computing, Storage, etc. I don't know that we would outsource IT management to a cloud provider…” CIO, mid-sized US manufacturing firm (with 7 small subsidiaries) “When I think of “Cloud Computing, I think of it as the ability to dream software solution dreams. I then think of rendering it in a language of my choice. And finally, being able to somehow magically "push" code into the "Internet Cloud", without fore-knowledge or regard for any of the layers underlying my code (DBMS, OS, connectivity or Computer)… The leading vendors are Google, Facebook, Amazon.com, and Salesforce.” CIO, Global Retailer “Cloud Computing is about on-demand infrastructure that can be flexibly deployed based on my computing needs. Longer-term, it is all about building and deploying new apps in the cloud – as we shift the way we deploy IT from internally-managed datacenters to centralized utilities... Amazon and Google are the early compute-focused players, but Cloud Computing will cross the entire ecosystem of providers within a short time…” SVP Fin/HR Apps at Top-5 US Bank Page: 3 Source: Saugatuck Technology
Entire contents © 2009 Saugatuck Technology Inc. All rights reserved. Beyond Software-as-a-Service Page: 4 Source: Saugatuck Technology Wave III: Workflow-Enabled Business Transformation Beyond Software-as-a-Service: Cloud Computing Wave I: Cost-Effective Software Delivery Adoption Low High Wave II: Integrated Business Solutions SaaS 1.0 Early SaaS Adoption Stand-alone Apps Multi-tenancy Limited Configurability Focus on TCO / rapid deployment Mainstream SaaS Adoption Integrated w/ Business SaaS Integration Platforms Business Marketplaces and SaaS Ecosystems Customization Capability Focus on Integration SaaS 2.0 Ubiquitous SaaS Adoption Focus on Business Transformation ISV to SaaS Enablement Server and Application Virtualization SaaS Development Platforms (PaaS) Public Cloud Infrastructure (IaaS) Cloud Collaboration Platforms Customized, Personalized Workflow Cloud Computing Post-SaaS Adoption End-to-End Cloud Business Processes Intelligent Hubs Linking Platforms Virtualization on Mobile Devices Elastic Cloud Infrastructure Standards for Workload Portability SLAs for Composite Service Offerings Support at Business Process Level Wave IV: Measured, Monitored, Managed Business Processes The focus of SaaS shifts over time from cost-effective delivery of stand-alone application services (Wave I), to integrated business solutions enabled by web services APIs and ESBs (Wave II), to workflow- and collaboration-enabled business transformation (Wave III), leading to measured, monitored and managed business processes (Wave IV). By 2012, Cloud Computing will capture at least twenty five percent of IT spending growth.
Entire contents © 2009 Saugatuck Technology Inc. All rights reserved. Key Findings – Recent Saugatuck SaaS & Cloud Research Saugatuck Insights: Despite the economic meltdown, purchase plans for SaaS and Cloud Computing remain strong in 2009 and for 2010 – across all geographic and customer segments. A new ecosystem is forming around Cloud Computing that will transform the IT sector. This inevitable transformation will result in a multi-level ecosystem, ranging from technology suppliers through Cloud Computing providers to business services providers. While Cloud Computing is emerging (Wave IV), SaaS adoption has clearly moved “beyond the tipping-point” (Waves I-III) – Accelerating “mainstream” adoption of SaaS shifts demand to core business systems, not only among SMBs but also Large Enterprises. Hybrid application architectures emerge – SaaS increasingly linked with on-premise data, applications and processes through Web Services-based Integration APIs. SaaS Analytics, dashboards and BI/performance management tools driving a metrics- based approach to business services. A new SaaS-based business services delivery model is emerging – as onshore and offshore BPO providers are forced to rationalize their one-to-one outsourcing models, reduce costs and bring greater process efficiency to their clients. The most aggressive adopters of SaaS are low-to-midsized SMBs with employees. A small, emerging group of SMBs, labeled by Saugatuck as “The New SMB,” forego traditional IT and immediately establish themselves with SaaS- and cloud-based IT. Cloud Computing, SaaS and Mobility are helping to make the “boundary-free enterprise” a reality. Page: 5 Source: Saugatuck Technology
Entire contents © 2009 Saugatuck Technology Inc. All rights reserved. SaaS Technology Considerations by Geography Page: 6 Technology ConsiderationsUnited StatesEuropeAsia Robust backup/recovery capabilities 69.8%61.0%73.5% Robust disaster recovery capabilities 67.8%57.6%71.8% Software development platform & tools 51.4%49.9%63.5% Web Services API 49.0%46.6%61.7% SLA compliance data 45.5%47.8%59.1% SOA architecture 40.6%42.5%56.0% Display data on mobile devices 37.7%46.7%53.7% Multi-tenancy based solution 32.4%42.1%55.9% Support for Web 2.0 mashups 37.2%41.4%55.0% Update data via mobile devices 34.3%45.1%52.4% Appliance form factor 24.9%41.9%53.0% Saugatuck Insight: Notable differences in the key technology considerations driving demand across geographies, especially among Asian executives. Mobile device support, multi-tenancy, Web 2.0 mashups and appliances are more important in Europe and much more important in Asia than in the United States. Source: Saugatuck Technology Inc., 2009 SaaS Survey (Dec ‘08), N=1788
Entire contents © 2009 Saugatuck Technology Inc. All rights reserved. Post-Crash Business Drivers for SaaS Purchases Page: 7 Saugatuck Insight: Far and away the most important business driver of SaaS solution purchases is Implementation Cost. Given this global survey was taken 8-10 weeks after the start of the economic collapse (in mid-September 2008), it is not surprising to see this result. At the same time, it is interesting to note that buyers rank the relationship with existing channel / implementation partners and brand name vendors at the low-end of business drivers, along with multi-year pricing incentives and billing flexibility. Key Drivers Cost Support Speed Source: Saugatuck Technology Inc., 2009 SaaS Survey (Dec ‘08), N=1788, TOP THREE so results equal more than 100%
Entire contents © 2009 Saugatuck Technology Inc. All rights reserved. Chart: 8 In 2009: Top 3 SaaS Solutions by Company Size >5000 CollaborationProcurement & Sourcing CollaborationTreasury & Cash Management Mobility Management Time & Labor Management Customer ServiceBI & CPMCustomer ServiceTalent & Performance Mgt Collaboration Mobility Management Sales Force Automation Mobility Management CollaborationERP / Manufacturing BI & CPM Thru 2011: Top 3 SaaS Solutions by Company Size >5000 CollaborationTreasury & Cash Management Collaboration Customer ServiceCollaborationCustomer ServiceHR/BenefitsCustomer ServiceTime & Labor Management Finance/ Accounting E-CommerceFinance/ Accounting Finance/ Accounting HR/Benefits Saugatuck Insight: In 2009, Collaboration, Mobility Management, Customer Service and Talent & Performance Management are top priority SaaS purchases. However, through 2011, Collaboration, Customer Service, Finance / Accounting and HR Benefits are the top priority SaaS solutions – reflecting a growing shift in demand over time to core business systems. Source: Saugatuck Technology Inc., 2009 SaaS Survey (Dec ‘08), N=1788 Top 3 SaaS Solutions by Company Size
Entire contents © 2009 Saugatuck Technology Inc. All rights reserved. Chart: 9 SaaS and Core Between 2009 and 2012, at least 40 percent of upper mid- to large-enterprises will seriously evaluate SaaS-based “core” financial solutions, as well as broader operational systems and requirements (e.g., order management, procurement, ERP, HR). Chart: 9 SaaS and Core Business Systems Source: Saugatuck Technology Low Key catalysts that will drive mid-to-large enterprises to migrate to SaaS-based financial systems (“Core” and “Non-Core”) Dramatically lower costs Simplification of the upgrade / release management process Powerful integration tools (apps / data) Advances in SaaS application customization capabilities to support personalized workflows Easier access to next-gen technology and architectural advances High Broad SaaS Adoption Curve “Upper-Mid” to “Large” Enterprise Early Adoption Early Mainstream Adoption Mainstream Adoption SaaS “Tipping-Point” (General Market) Adoption of SaaS for “Core” and “Non- Core” Financial Systems / Operational Processes “Small” to “Mid” Enterprise Adoption of SaaS for Collaboration, Self-Service, CRM and SFA
Entire contents © 2009 Saugatuck Technology Inc. All rights reserved. Saugatuck Cloud Ecosystem Model Level 4; BPO / Managed Services. Specialized expertise often delivered in conjunction with a Cloud- based solution, e.g., Mobility as a Service, Cloud-based security. Level 3: SaaS (Waves I-III) and related services. Business solutions delivered from the Cloud, typically in a multi-tenant architecture, and billed under subscription model. Level 2: Cloud development, PaaS, SaaS integration, Service Hubs, including billing, administration, aggregation, security and mobility solutions, systems and infrastructure management, data warehousing, data access and analysis, and related professional services. Level 1: Cloud-based On- Demand infrastructure providers and platforms that host SaaS and other on-demand solutions and provide service offerings to manage infrastructure platforms (collocation); Level 0: Suppliers of hardware, system software and utilities, data center management software, networking equipment, hardware and software, and associated services Page: 10 Source: Saugatuck Technology
Entire contents © 2009 Saugatuck Technology Inc. All rights reserved. “... –as-a-Service” Taxonomy Page: 11 Saugatuck Insight: IaaS providers (Level 1) serve as channels for integration, security, mobility, billing & payments, and other Level 2 providers. PaaS providers (Level 2) may also refer or offer Level 1 hosting services, either through partnership, portability or platform capabilities of their own. SaaS providers (Level 3) may partner with Level 2 billing and payments or security providers or with Level 4 BPO / MSP providers. ITaaS providers may offer the full range of ecosystem services. Hardware, Software, Networking and Services Software as a Service, and Related Services Cloud Development, SaaS Integration, Services Hubs, e.g., Billing, Security, Mobility, and Related Services Cloud Infrastructure, e.g., Hosting, Execution and Storage, And Related Services Business Process Outsourcing, Managed Services, Business & Information Services Level 4 Level 3 Level 2 Level 1 Level 0 Hardware, Software, Networking and Services Software as a Service, and Related Services Cloud Development, SaaS Integration, Services Hubs, e.g., Billing, Security, Mobility, and Related Services Cloud Infrastructure, e.g., Hosting, Execution and Storage, And Related Services Business Process Outsourcing, Managed Services, Business & Information Services Level 4 Level 3 Level 2 Level 1 Level 0 Hardware, Software, Networking and Services Software as a Service, and Related Services Cloud Development, SaaS Integration, Services Hubs, e.g., Billing, Security, Mobility, and Related Services Cloud Infrastructure, e.g., Hosting, Execution and Storage, And Related Services Business Process Outsourcing, Managed Services, Business & Information Services Level 4 Level 3 Level 2 Level 1 Level 0 Hardware, Software, Networking and Services Software as a Service, and Related Services Cloud Development, SaaS Integration, Services Hubs, e.g., Billing, Security, Mobility, and Related Services Cloud Infrastructure, e.g., Hosting, Execution and Storage, And Related Services Business Process Outsourcing, Managed Services, Business & Information Services Level 4 Level 3 Level 2 Level 1 Level 0 IaaS Infrastructure-as-a-Service PaaS Platform-as-a-Service SaaS Software-as-a-Service ITaaS IT-as-a-Service Source: Saugatuck Technology
Entire contents © 2009 Saugatuck Technology Inc. All rights reserved. The Three Legs of “Platform-as-a-Service” Cloud Infrastructure ISV / SaaS Enablement Cloud Development Page: 12 Source: Saugatuck Technology
Entire contents © 2009 Saugatuck Technology Inc. All rights reserved. Cloud / “SaaS-mic” Shift” For the Channel Page: 13 Channel Partner Value Propositions Risk of Disinter- mediation Type I: Low- Support Focus on delivery of vendor hardware, software and/or hosting services with minimal support, including implementation and integration servcies. These partners compete primarily on price. H Type II: High- Support Focus on delivery of vendor hardware, software and/or hosting services – with heavy reliance on support services, competing primarily based on a high- touch, customer-service value proposition. M Type III: Software Solution & Support Form A: Developer / provider of applications – an ISV. Form B: Services provider who partners with one or more application developers. In each case, the channel partner is packaging additional application software and support along with the vendor‘s hardware, OS, middleware and/or hosting services. These partners compete on the basis of overall solution value. L/M Focus Traditional Channel Partner Model Cloud / “SaaS-mic” Shift Cash Flow Upfront Fees Recurring Revenues Contract Size LargeSmaller Volume Low-to-Mid Volume High Volume Role TechnicianBusiness Partner Sales Emphasis Line Item / Product Holistic Business Solutions / Services Support Emphasis From Break / Fix to “Above and Beyond” SLA-driven support with additional wrap- around services Source: Saugatuck Technology Value PropositionBusiness Model
Entire contents © 2009 Saugatuck Technology Inc. All rights reserved. Chart: 14 Saugatuck Planning Positions (SPPs) By 2013, at least 20 percent of enterprise IT workloads – that historically would have operated on-premise – will be run in the Public Cloud, providing significantly enhanced functionality, lower costs, fewer staff, and reduced carbon footprint. Through YE 2012, Private Cloud deployments by enterprises will equal or exceed enterprise adoption and utilization of Public Cloud infrastructure solutions. By 2013, up to 60 percent of mid-to-large size enterprises will invest in Private Clouds. Cloud-based security and mobility solutions will be broadly accepted in the mainstream and by enterprises of all sizes by Through YE 2009, less than half of enterprises adopting cloud computing will see cost savings of 20 percent or more – especially when considering not just compute resources, but total IT management costs. By 2012, 70 percent or more of all businesses with greater than 100 employees will have deployed at least one SaaS application. By 2012, half the companies considered “Cloud Master Brands" will be pure-play Cloud or SaaS providers; the remaining will be traditional Master Brands who have repurposed and extended their businesses to be relevant in the new IT order. Through 2012, best-of- breed SaaS providers with pre-built integration capabilities enable de facto suites that challenge the market share of pure-play SaaS suites, except for SMBs. By YE 2010, 30 percent or more of SaaS and Open Source start-ups that currently have annual subscription revenues streams of $5 million or less will fail, along with 50 percent or more of those focusing on Enterprise Social Computing. The dual impact of a crippling economy and a changing business model drives significant industry consolidation in the channel – with 20 percent of ISV channel partners and 15 percent of hosting providers ceasing to be viable or acquired by YE Source: Saugatuck Technology
Entire contents © 2009 Saugatuck Technology Inc. All rights reserved. How to Contact: Regional Sales Offices US OFFICES Headquarters Saugatuck Technology Inc. 49 Riverside Ave. Westport, CT USA (P) Regional Sales: Silicon Valley Saugatuck Technology Inc Great America Parkway, Suite 320 Santa Clara, CA USA (P) Regional Sales: INTERNATIONAL Germany Saugatuck Technology Inc. Bluecherstr. 4 D Eltville am Rhein Germany (P) Regional Sales: Are you getting the best research, insight, and advice on disruptive IT? Register to receive Saugatuck’s complimentary Research Alerts, and browse our comprehensive Research Library on topics such as SaaS, Open Source, Web 2.0, SOA and Utility Computing (among other). To Register: To Browse the Library: To Learn About Saugatuck’s CRS Subscription Research Service:
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