1. SaaS and the Third Wave Key findings from Saugatuck’s 2008 SaaS research agenda Bill McNee Founder and CEO bill.mcnee@saugatech.com May 20, 2008 Omni Shoreham Hotel, Washington, D.C. bill.mcnee@saugatech.com Westport, CT Phone: 203-454-3900

2. Entire contents © 2008 Saugatuck Technology Inc. All rights reserved. Chart: 2 Key Takeaways SaaS adoption / penetration continues to grow in enterprises of all sizes –Although collaboration and CRM continue to lead the SaaS charge, “core” systems of record (e.g., finance, HR) and BI / CPM are growing quickly as well. –Acceptance of SaaS for mission-critical business processes – not only with SMB customers, but Large Enterprises. SaaS goes international, especially in key geographies –European SaaS adoption on the brink of exploding, lead by local innovation and strong demand in the UK, Benelux and the Nordic countries – which appear to be following a similar trajectory to the US (albeit with a 12 mo lag). –Adoption in Germany and France, as well as in much of the Asia/Pac region are projected to experience a similar adoption scenario (particularly in the SMB space), but with a 18-24 month lag to US curve. Key SaaS markets in Asia/Pac include Australia, India and China – and secondarily Singapore, Hong Kong and Korea. SaaS customer satisfaction is surprisingly strong –Especially around SaaS Wave I requirements such as solution functionality, response time, availability and pricing. –Satisfaction around SaaS Wave II and III requirements – especially around support for customized, personalized workflows, integration with on-premise data and process, and greater inter-company collaboration is much lower. SaaS becomes more fully integrated with on-premise architectures –The focus of SaaS shifts 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). SaaS Platforms proliferate – and embrace user development / runtimes –Robust SaaS-based software development platforms and run-time environments emerge with a diverse set of supporting service offerings emerge that are viable alternatives to traditional on-premise development. ISVs migrate en masse to SaaS –But transitions prove difficult for most, primarily due to need for substantial cultural (not technical) transformation. SaaS merger & acquisition will accelerate –Through 2010 M&A is fueled by ISVs gobbling up smaller venture-backed SaaS providers (as a important culture- change driver), as well as by mid size -to-large pure-play SaaS vendors seeking to solidify key solution areas franchises.

3. Entire contents © 2008 Saugatuck Technology Inc. All rights reserved. Page: 3 SaaS Evolution Evolution of Software-as-a-Service Wave I: 2001-2006 Cost-effective Software Delivery Adoption Low High SaaS Tipping- Point 2006 Wave II: 2005-2010 Integrated Business Solutions Wave III: 2008-2014 Workflow-enabled Business Transformation SaaS 2.0SaaS 1.0 2007200820092010201120122013200320042005 Early Adoption Stand-alone Apps Multi-tenancy Limited Configurability Focus on TCO / rapid deployment Mainstream Adoption Integrated w/ Bus. Portfolio SaaS Integration Platforms Business Marketplaces and SaaS ecosystems Customization Capability Focus on Integration Ubiquitous Adoption Optimized Bus. Ecosystems IT-targeted Ecosystems SaaS Development Platforms Inter-enterprise Collaboration IT Utility / SaaS Infrastructure Customized, Personalized Workflow Focus on Bus. Transformation 2014 Source: Saugatuck Technology

4. Entire contents © 2008 Saugatuck Technology Inc. All rights reserved. SaaS Adoption By 2012, 70 percent or more of businesses with greater than 100 employees will have deployed at least one SaaS application. By 2010, SaaS becomes interwoven into the fabric of enterprise architecture, as buyers become increasingly comfortable with acquiring SaaS solutions as part of their broader business services portfolio. Worldwide SaaS Adoption: 2007-2009 Source: Saugatuck Technology, SaaS Survey Research 2008 (n=418) Chart: 4

5. Entire contents © 2008 Saugatuck Technology Inc. All rights reserved. Page: 5 SaaS Buyer Motivation Source: Saugatuck Technology, SaaS Survey Research 2008 (n=420) Through 2010, SaaS buyers will continue to seek lower costs, rapid implementation cycles and simplified software management when considering SaaS solutions. By 2010, “Access to next-generation functionality” will be among the top three buyer motivations for acquiring SaaS. Table Stakes Today Tomorrow’s Battleground

6. Entire contents © 2008 Saugatuck Technology Inc. All rights reserved. SaaS Solution Demand Through 2010 Chart: 6 SaaS Enterprise SaaS Solution Demand: 2008-2010 Company Adoption by Region YE 2008YE 2010 SaaS ApplicationWorldwideNorth AmericaEuropeAsiaWorldwide Collaboration (Email, WebConf) 145.0%144.7%146.4%143.1%1 66.8% CRM/SFA236.4%237.4%233.6%239.7%2 58.9% Payroll331.2%332.5%3 325.9%3 45.8% Travel Services428.6%530.1%528.5%425.9%7 39.7% HR/Benefits528.3%430.5%428.5%522.4%4 45.3% Specialized Verticals622.7%621.9%625.5%918.5%5 41.7% Finance /Accounting718.3%716.3%820.7%819.3%8 39.3% BI & CPM817.3%814.8%722.0%1115.5%6 40.7% Procurement & Sourcing916.9%912.8%920.1%720.7%9 38.9% ERP/Manufacturing1013.2%119.7%1014.8%620.7%12 25.9% Supply Chain Mgt (SCM)1112.5%1011.7%1112.2%1015.8%10 27.5% Compliance and Risk Mgt1210.4%129.4%1210.0%1214.3%11 26.0% Source: Saugatuck Technology, SaaS Survey Research 2008 (n=418) Although Collaboration and CRM continue to lead adoption worldwide through YE2010 – demand for traditional “core” systems of record and BI / analytic tools (both stand-alone & embedded into other solutions) experience explosive growth. While SaaS markets continue to remain highly fragmented, three-to-four dominant (best-of- breed) Enterprise SaaS Solution Providers emerge in most major business process areas by 2012; pre-integrated suites grow in importance, but remain concentrated in SME segments.

7. Entire contents © 2008 Saugatuck Technology Inc. All rights reserved. Infrastructure and Personal Productivity Demand Through 2010 Chart: 7 Top-5 SaaS Networking / Personal Productivity Application Demand: 2008-2010 Company Adoption by Region YE 2008YE 2010 SaaS ApplicationWorldwideNorth AmericaEuropeAsiaWorldwide Web Conferencing149.8%151.8%148.7%146.6%167.5% Email243.0%240.9%246.3%241.4%256.6% Calendaring335.4%430.6%343.0%334.5%352.1% Blogs431.9%333.5%434.5%424.1%445.9% Office Suite (e.g., spreadsheet, word proc)525.4%821.8%530.5%522.4%543.3% Source: Saugatuck Technology, SaaS Survey Research 2008 (n=418) Although traditional on demand IT infrastructure capabilities (e.g., Backup/Recovery, Storage & Server Capacity) lead customer demand through YE2010, on demand data warehousing, IT security and performance / problem management as well as complementary managed services become high-priority user investments 2010-12. Aggregation of on demand IT infrastructure services combined with the continued growth of cloud-based infrastructure leads to five-to-six dominant cloud-based platform providers by 2013. Top-5 On Demand IT Infrastructure Solutions: 2008-2010 Company Adoption by Region YE 2008YE 2010 On Demand InfrastructureWorldwideNorth AmericaEuropeAsiaWorldwide Website Operations145.6%139.5%153.7%148.3%166.8% Backup / Recovery236.6%236.1%239.0%334.5%258.9% Disaster Recovery431.9%333.7%831.3%5(t)29.3%354.8% Storage Capacity531.4%530.3%6(t)33.1%432.8%539.7% Server / Processor Capacity630.0%628.2%6(t)33.1%5(t)29.3%445.3%

8. Entire contents © 2008 Saugatuck Technology Inc. All rights reserved. Chart: 8 SaaS Satisfaction – My company is satisfied with… Source: Saugatuck Technology, SaaS Survey Research 2008 (n=420) Despite an accelerating competitive landscape (fueled by massive VC investment and ISVs attempting to transition their business models), customer churn will remain low for SaaS segment leaders through 2013 – who will continue to achieve greater than 85 percent customer renewal rates and better than 100 percent on an annualized contract value renewal basis. My company is satisfied with the overall experience of using SaaS solution (s): Strongly Agree34.3% Agree50.0% Neither Agree nor Disagree 13.0% Disagree / Strongly Disagree 2.8% 84% Important SaaS Wave II and Wave III Customer Requirements Wave I

9. Entire contents © 2008 Saugatuck Technology Inc. All rights reserved. Chart: 9 SaaS and Core Mission-Critical Business Processes Between 2009 and 2012, at least 40 percent of mid-to-large enterprises will seriously evaluate SaaS-based “core” financial systems of record, as well as broader operational requirements (e.g., order management, procurement, ERP, HR). Of these, approximately a third will choose a new next-gen SaaS solution provider, a third will migrate to newer SOA and SaaS-based versions from their existing software vendor and a third will postpone making a decision. Beyond 2012, between only 20 percent and 40 percent of business software will be sold and managed under traditional perpetual software licensing schemes. Source: Saugatuck Technology Low Potential catalysts that would drive mid-to-large enterprises to migrate to SaaS-based “core” financial systems of record Dramatically lower costs Simplification of the upgrade / release management process Advances in SaaS application customization capabilities to support personalized workflows Easier access to next-gen technology and architectural advances High 20062007200820092010201120122013200320042005 2014 Broader SaaS Adoption Curve “Upper-Mid”-to-large Enterprise Adoption of “Core” Financials And ERP Early Adoption Early Mainstream Adoption Mainstream Adoption SaaS “Tipping-Point” (General Market) SME Adoption of “Core” Financials And ERP

10. Entire contents © 2008 Saugatuck Technology Inc. All rights reserved. Chart: 10 SaaS Platforms Evolve While four or five fully-integrated and dominant SaaS Platform stacks emerge by 2009 – 50 percent or more of deployed SaaS Platform capability will be based on complementary partnerships that combine layers to provide the full stack. By 2009, appliances will become a significant form factor for deploying on-demand IT infrastructure and SaaS solutions, including integration with on-premise applications. Source: Saugatuck Technology SaaS Platform Stack Business and Application Services Integration Layer Hosting Services HOSTING PLATFORM / SERVER POOL / NETWORK Multi-site Redundancy, Replication Services, Back-up/Recovery INTEGRATION SERVICES BUSINESS SERVICES SAAS APPLICATION LICENSED APPLICATION HOSTED APPLICATION OPEN SOURCE APPLICATION APIsDevelopment Tools PlatformData Base Management System INTEGRATION LAYER Web Services Management Configuration Management Security / SSO DirectoryEnterprise Service BusAdaptorsAudit Provisioning Monitoring/ Diagnostics Upgrade Management ADMINISTRATIVE SERVICES Billing/ Reporting Administrative Services Integration Services........

11. Entire contents © 2008 Saugatuck Technology Inc. All rights reserved. Platform-as-a-Service (PaaS) Landscape and Trajectory Chart: 11 SaaS Enablement Cloud Development Saugatuck Insight: While the term “Platform as a Service” (PaaS) is used loosely to describe both “SaaS enablement” and “cloud development” – more comprehensively, it is most powerful at the intersection of the two, and over time will broaden to include On-demand Infrastructure Services as well. PaaS By 2010 robust SaaS platforms continue to evolve, going beyond providing critically important integration, application sharing, delivery and mgmt. services to include cloud-based development and runtime capabilities (and that are viable alternatives to on-premise application development and data center services). On- Demand Infra- structur e

12. Entire contents © 2008 Saugatuck Technology Inc. All rights reserved. Enterprise Ready? – Key Vendor and User Requirements Vendors: Responsiveness to Support Requests Security and Privacy Concerns Data Access and Analysis Personalization Capabilities Customization Capabilities Integration Capabilities Workflow Capabilities Build Active User Community Chart: 12 Users: Align Management and IT Expectations Develop Consistent Practices Proactively Manage Contracts and SLAs Create SaaS Architecture Work with SaaS Providers Participate in User Community The jump from stand-alone Wave I SaaS deployments to more fully integrated, process- oriented and functionally rich Wave II and Wave III SaaS environment will demand a fresh and comprehensive look at enterprise IT architecture and management. Source: Saugatuck Technology

13. Entire contents © 2008 Saugatuck Technology Inc. All rights reserved. 29% 22% 17% 8% 24% Who Business and IT Users Think Will Be The Next “Master Brands” Traditional Bus. Apps ISVs Frequently Mentioned: Oracle Microsoft SAP Don’t Know / Not Sure / Too Early To Tell Other Traditional IT Infrastructure Frequently Mentioned: IBM Microsoft Cisco EMC HP Less Frequent - But Mentioned: CA Citrix Unisys Please identify the top three vendors you believe are best positioned to become a leading SaaS “Master Brand”? Less Frequent - But Mentioned: Adobe Sage Intuit SaaS Application and Infrastructure Providers Frequently Mentioned: Salesforce Google Cisco / Webex Amazon Netsuite Less Frequent - But Mentioned: RightNow SuccessFactor Workday OpSource SugarCRM MySQL Zoho Qualys Omniture Source: Saugatuck Technology, SaaS Survey Research 2008 (n=420)

14. Entire contents © 2008 Saugatuck Technology Inc. All rights reserved. Beyond Software as a Service Source: Saugatuck Technology Wave III: 2008-2013 Workflow-Enabled Business Transformation Beyond Software-as-a-Service: Cloud Computing Wave I: 2001-2006 Cost-Effective Software Delivery Adoption Low High Wave II: 2005-2010 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 Optimized Business Ecosystems IT-Targeted Ecosystems SaaS Development Platforms Inter-enterprise Collaboration IT Utility / SaaS Infrastructure Customized, Personalized Workflow Focus on Business Transformation 20062007200820092010201120122013200420052014201520162003 Cloud Computing Post-SaaS Adoption End-to-End Business Processes Integrated w/ Services Anywhere Intelligent Hubs Linking Platforms Mobile Device- and Sensor-Controllable SLAs for Composite Service Offerings Dynamically Scalable Infrastructure Focus on Optimal Business Process Wave IV: 2011-2016 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 2013, at least 20 percent of enterprise IT workloads – that historically would have operated on-premise – will be run in the cloud, providing significantly enhanced functionality, lower costs, fewer staff, and reduced carbon footprint. Chart: 14

15. Entire contents © 2008 Saugatuck Technology Inc. All rights reserved. Thank You! Bill McNee 1-203-454-3900 x223 bill.mcnee@saugatech.com 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: http://research.saugatech.com/cgi-bin/order/signup3.plhttp://research.saugatech.com/cgi-bin/order/signup3.pl To Browse the Library: http://www.saugatech.com/researchbytopic.htmhttp://www.saugatech.com/researchbytopic.htm To Learn About Saugatuck’s CRS Subscription Research Service: http://www.saugatech.com/crs.htmhttp://www.saugatech.com/crs.htm Strategic Advisor for IT Leaders