On-premise To On-demand

On-premise to on-demand The hidden benefits for businesses of software as a service

Thursday 11th October 2007

The reasons businesses invest

– To add value – To reduce risk – To reduce costs

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Evolution of IT delivery

    

Mainframe PC Client-server Internet/Web Service based computing/on-demand

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Figures on SaaS use…  ...are hard to tie down  Niche usage  Low visibility  Specialist areas Specialist Applications Email Content security CRM Collaboration ERP Supply Chain Human Resources Slide 4 of 16

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SaaS specialists

And wannabes…

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Doing the sums  5-year cost of ownership o £50/user/month o 100 users o £5000/month o £60,000/year o £300,000/5 years  A lot of money for a 100 user application Hidden costs of on-premise Infrastructure costs Management costs Cost of failed deployments Slide 6 of 16

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The total value of SaaS

 Need to look at o Business risk reduction o Business value creation alongside o Cost management

 Put all three together and the case can become overwhelming Slide 7 of 16

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Reducing business risk

 When a critical application fails, business stops  SaaS mitigates through – Enterprise class data centres – Enterprise class communications – Enterprise class IT management – Enforceable service level agreements

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Increasing Business value  New and enhanced business models – Mobile and flexible working – Collaborative working – Virtual teams – Cross organisational business processes

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Bonus business value

Environmental

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Socio-economic

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Managing business cost  Capex to opex  Shared infrastructure  Flexible payment – Subscription based – Usage based – Volume based – Even FREE

But cost is also the biggest challenge for application vendors making the move to SaaS

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Technical challenges of SaaS

Enterprise class application software Splitting management functions

Multi-tenancy delivery

Application level security

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Commercial challenges of SaaS

Pricing

Service level agreements Compensating sales staff

Cash flow

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SaaS cash flow for the supplier

On-premise (20% maintenance)

SaaS (monthly subscription)

Y1 Q1 Y1 Q2 Y1 Q3 Y1 Q4 Y2 Q1 Y2 Q2 Y2 Q3 Y2 Q4 Y3 Q1 Y3 Q2 Y3 Q3 Y3 Q4

“The initial drop in profits has been more than recouped” – Digital Union (3 years after implementing SaaS) Slide 14 of 16

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Help at hand  Software infrastructure vendors o Microsoft o IBM Software o Open source o Oracle/BEA/VMware  Managed service providers o Leverage software vendor offerings o Monthly fees o Deferred billing o Usage base pricing

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Conclusions • Businesses should consider SaaS because there are tangible benefits

• Moving to SaaS will fundamentally change the relationships you have with your key IT suppliers Thank you Bob Tarzey Quocirca www.quocirca.com Slide 16 of 16

Copyright 2007 Quocirca Ltd