Software as a Service (SaaS) Does it make Cents? by Brian Moore

Contents Brief Background information Brief Background information SaaS Architecture SaaS Architecture Financial Consideration Financial Consideration Case Study Case Study Conclusion Conclusion Q & A Q & A

Intro to SaaS - Definition Software as a service (SaaS) is a model of software delivery where the software company provides maintenance, daily technical operation, and support for the software provided to their client. Software as a service (SaaS) is a model of software delivery where the software company provides maintenance, daily technical operation, and support for the software provided to their client.software deliverysoftware delivery It assumes the software is delivered over the internet. It assumes the software is delivered over the internet. Software delivered to home consumers, small business, medium and large business Software delivered to home consumers, small business, medium and large business

Intro to SaaS The web as a platform is the center point The web as a platform is the center point Web-browser acting as a thin-client for accessing the software remotely across the internet. Web-browser acting as a thin-client for accessing the software remotely across the internet. Network-based access to, and management of, commercially available (i.e., not custom) software Network-based access to, and management of, commercially available (i.e., not custom) software application delivery that typically is closer to a one-to-many model (single instance, multi- tenant architecture) than to a one-to-one model, including architecture, pricing, partnering, and management characteristics application delivery that typically is closer to a one-to-many model (single instance, multi- tenant architecture) than to a one-to-one model, including architecture, pricing, partnering, and management characteristics

SaaS - Pros Stay focused on business processes Stay focused on business processes Change software to an Operating Expense instead of a Capital Purchase, making better accounting and budgeting sense. Change software to an Operating Expense instead of a Capital Purchase, making better accounting and budgeting sense. Create a consistent application environment for all users Create a consistent application environment for all users No concerns for cross platform support No concerns for cross platform support Easy Access Easy Access Reduced piracy of your software Reduced piracy of your software Lower Cost Lower Cost For an affordable monthly subscription For an affordable monthly subscription Implementation fees are significantly lower Implementation fees are significantly lower Continuous Technology Enhancements Continuous Technology Enhancements

SaaS - Cons Initial time needed for licensing and agreements Initial time needed for licensing and agreements Trust, or the lack thereof, is the number one factor blocking the adoption of software as a service (SaaS). Trust, or the lack thereof, is the number one factor blocking the adoption of software as a service (SaaS). Centralized control Centralized control Possible erosion of customer privacy Possible erosion of customer privacy Absence of disconnected use Absence of disconnected use

SaaS Architecture Fueled by Fueled by Bandwidth technologies Bandwidth technologies The cost of a PC has been reduced significantly with more powerful computing but the cost of application software has not followed The cost of a PC has been reduced significantly with more powerful computing but the cost of application software has not followed Timely and expensive setup and maintenance costs Timely and expensive setup and maintenance costs Licensing issues for business are contributing significantly to the use of illegal software and piracy. Licensing issues for business are contributing significantly to the use of illegal software and piracy.

High-Level Architecture There are three key differentiators that separate a well-designed SaaS application from a poorly designed one There are three key differentiators that separate a well-designed SaaS application from a poorly designed one scalable scalable multi-tenant-efficient multi-tenant-efficient configurable configurable Scaling the application - maximizing concurrency, and using application resources more efficiently Scaling the application - maximizing concurrency, and using application resources more efficiently i.e. optimizing locking duration, statelessness, sharing pooled resources such as threads and network connections, caching reference data, and partitioning large databases. i.e. optimizing locking duration, statelessness, sharing pooled resources such as threads and network connections, caching reference data, and partitioning large databases.

High-Level Architecture (con’t) Multi-tenancy – important architectural shift from designing isolated, single- tenant applications Multi-tenancy – important architectural shift from designing isolated, single- tenant applications One application instance must be able to accommodate users from multiple other companies at the same time One application instance must be able to accommodate users from multiple other companies at the same time All transparent to any of the users. All transparent to any of the users. This requires an architecture that maximizes the sharing of resources across tenants This requires an architecture that maximizes the sharing of resources across tenants is still able to differentiate data belonging to different customers. is still able to differentiate data belonging to different customers.

High-Level Architecture (con’t) Configurable - a single application instance on a single server has to accommodate users from several different companies at once Configurable - a single application instance on a single server has to accommodate users from several different companies at once To customize the application for one customer will change the application for other customers as well. To customize the application for one customer will change the application for other customers as well. Traditionally customizing an application would mean code changes Traditionally customizing an application would mean code changes Each customer uses metadata to configure the way the application appears and behaves for its users. Each customer uses metadata to configure the way the application appears and behaves for its users. Customers configuring applications must be simple and easy without incurring extra development or operation costs Customers configuring applications must be simple and easy without incurring extra development or operation costs

Saas Financials 4 ways software companies are pricing their products 4 ways software companies are pricing their products Open Source – free basic products but charge a fee for the upgrade to the premium product (i.e. Apache, Linux, etc) Open Source – free basic products but charge a fee for the upgrade to the premium product (i.e. Apache, Linux, etc) License software – main way its being done. Customer like this way because they own the software as an asset License software – main way its being done. Customer like this way because they own the software as an asset Leased Software – deployed at customer site but leased for a time period. Used in the days of the mainframe Leased Software – deployed at customer site but leased for a time period. Used in the days of the mainframe SaaS – subscription pricing. Like leasing is considered and expense but upgrades and maintenance is free and seamless SaaS – subscription pricing. Like leasing is considered and expense but upgrades and maintenance is free and seamless

Saas Financials (con’t) Legal should be involved in the acquisition of mission- critical SaaS software Legal should be involved in the acquisition of mission- critical SaaS software Companies are losing control of their data in the SaaS model Companies are losing control of their data in the SaaS model Depending on the service provider for security and data access. Depending on the service provider for security and data access. Need to setup contractual relationship with the SaaS provider Need to setup contractual relationship with the SaaS provider Setup escrow account Setup escrow account With conditions of being able to run application in house With conditions of being able to run application in house Ability to move data from current provider to new location Ability to move data from current provider to new location Also Service Level Agreements (SLAs) for Also Service Level Agreements (SLAs) for Availability, response times, notifications of outages Availability, response times, notifications of outages Data integrity, data privacy, frequency of backup, support and disaster recovery Data integrity, data privacy, frequency of backup, support and disaster recovery

Saas Financials (con’t) CIO decides if SaaS software will benefit IT while CFO decides if it is economical for the whole firm CIO decides if SaaS software will benefit IT while CFO decides if it is economical for the whole firm Leasing vs Buying Leasing vs Buying Similar to decision of leasing or buying a car Similar to decision of leasing or buying a car Need to compare costs that effect cash flows such as depreciation, interest on financing, tax and opportunity cost Need to compare costs that effect cash flows such as depreciation, interest on financing, tax and opportunity cost Use an experience Accountant Use an experience Accountant

Case Study - Software4Rent.biz Software4Rent.biz provides casual or long term software application rental, enterprise wide software deployment and management Software4Rent.biz provides casual or long term software application rental, enterprise wide software deployment and management Offerings Offerings No contracts to sign - rent for as long as you want No contracts to sign - rent for as long as you want Manage, deploy and track leased software resources more effectively in real-time. Manage, deploy and track leased software resources more effectively in real-time. No cost software upgrades No cost software upgrades Can 'Top up' at minimal cost in times of peak software use Can 'Top up' at minimal cost in times of peak software use Systems administrators can allocate application software to users in real time Systems administrators can allocate application software to users in real time Change the allocation of licenses as required and reduce the number of licenses that the company needs to buy. Change the allocation of licenses as required and reduce the number of licenses that the company needs to buy. Save work to local hard drives, or on their servers if you are a pay by- the-month user. Save work to local hard drives, or on their servers if you are a pay by- the-month user. Allow users to rent software on an hourly, daily, weekly or monthly basis Allow users to rent software on an hourly, daily, weekly or monthly basis

Software offering & Pricing VendorApplicationHourlyDailyWeeklyMonthlyCategory Microsoft Office 2003 Professional Office Suite Microsoft Project Professional Management Microsoft Visio Professional Drawing Microsoft Word Document Microsoft Excel Accounting Microsoft PowerPoint Presentation Microsoft Access Database Microsoft Publisher Drawing Microsoft Outlook Microsoft InfoPath Management R Project R Statistics Programming Statistics Future shop Microsoft Office Word 2007 $309

Cost Per Usage Chart of MS Word Low Usage Medium Usage High Usage Software4Rent $3/day X 10 times/mth = $30/mth X 12 mths= $360/year $9/week X 40weeks = $360/year $22.5/month X 16 month = $360 Buy $360 inc tax

Conclusion Get over initial hurdles Get over initial hurdles Adopting SaaS in the enterprise has to be analyzed for economic and efficiency reasons Adopting SaaS in the enterprise has to be analyzed for economic and efficiency reasons A lot of initial planning and negotiating with the solution provider- security, data access, legal, etc A lot of initial planning and negotiating with the solution provider- security, data access, legal, etc Long term Benefits Long term Benefits Easy Access Easy Access Reduced piracy of your software Reduced piracy of your software Lower Cost Lower Cost Continuous Technology Enhancements Continuous Technology Enhancements

Questions?