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Slide 1: Software as a Service (SaaS) Strategies for Hosting Providers Douglas Johnson, SWsoft Steve Merkel, Data393 Tuesday, May 8, 2007
Slide 2: What is SaaS? Software deployed as a hosted service and accessed over the Internet Traditional Deployment Customer Site Server Client PC Application 1 Server Application SaaS Deployment Hosting Provider Site Server Application 1 Internet • What has changed from ASP model of a few years ago? – Customer readiness – Improved network capacity – Improved software delivery platforms 2 May 2007 Software as a Service (SaaS) Strategies for Hosting Providers
Slide 3: SaaS – The Opportunity* • 2005 – 5% of new business software deployed as a service • 2011 – 25% of new business software deployed as a service • Opportunity – $8B (2006) -> $40B (2011) – 50 million SMB customers SaaS % of Business Software Market opportunity: $8B increasing to $40B 25% 20% 15% 10% 5% 0% • Types of applications – CRM, web conferencing, web content management, HR, supply chain, collaboration, email, and others * Gartner Release, September 2006 3 May 2007 2005 2011 Software as a Service (SaaS) Strategies for Hosting Providers
Slide 4: SaaS – The Track to Higher Revenue Revenue Opportunity (SMB: 20 Users/Month) $1,000 SaaS Business-Class E-mail (i.e. Hosted Exchange) $150-$300 Add Business Collaboration (i.e. SharePoint, LCS, VoIP) $200-$500 Dedicated & Managed Server $100-$500 Advanced Apps (CRM, ERP, vertical) $250-$1500+ $100 Virtual Private Servers $15-$100 Infrastructure Domain Registration $1-$3 Shared Static Web Hosting $3-$10 Shared Dynamic Web , DB, Apps $5-$20 $10 Email Web Presence E-commerce Collaboration Application Mgmt Customer Needs 44 May 2007 Software as a Service (SaaS) Strategies for Hosting Providers
Slide 5: SaaS – The Benefits End User Benefits • Budgeting - predictable recurring fees • Easy to evaluate – online demos • No involvement with software deployment and maintenance • Higher level of service and better scalability • 24x7 support – without waking the IT guy ISV Benefits • New channel for software distribution • New market reach – SMBs • Lower costs for software distribution and deployment • Upgrade all customers in an environment • Recurring revenue • Faster release cycles Hosting Provider Benefits • Additional revenue • Higher average revenue per customer • Provides stickier services • Attracts new types of customers 5 May 2007 Software as a Service (SaaS) Strategies for Hosting Providers
Slide 6: SaaS – Applications Most software (including IIS/Apache) can be installed or hosted Hosting Infrastructure • Shared web hosting • Database hosting • Streaming Email / Collaboration • Exchange • SharePoint • OpenXchange Business Admin • NetSuite • Hosted Quickbooks Web Conferencing • WebEx • LiveMeeting • Spreed E-commerce, E-marketing • Miva, OScommerce • ExactTarget CRM • Salesforce.com • SugarCRM • Microsoft CRM HR Portals • Employease • Taleo • Workstream Traditional Apps Deployed in Virtual Environments • Accounting, business administration, remote desktops, inventory management, document management, games, CAD/CAM, statistics, publishing, media editing, more … think customized line of business applications 6 May 2007 Software as a Service (SaaS) Strategies for Hosting Providers
Slide 7: Hosted Application Opportunity … • Step 1: Google “plumber inventory management software” • Step 2: Navigate to software solutions • Step 3: Think … do plumbers want to install and manage software? 7 May 2007 Software as a Service (SaaS) Strategies for Hosting Providers
Slide 8: Hosted Application Opportunity … • Step 1: Google “dental patient management software” • Step 2: Navigate to software solutions • Step 3: Think … do dentist offices have IT experts? 8 May 2007 Software as a Service (SaaS) Strategies for Hosting Providers
Slide 9: Hosting Requirements for SaaS Stepping up from Traditional Hosting to Software as a Service Software as a Service Migration • Onsite to hosted • Hosted to hosted Back office support • Billing and accounting • Inventory management • Customer service Service Management • Self service • Non-technical • Single sign on to all services Provisioning • Rapid • Driven by workflow • Automated or manual Platform and Service Delivery • Services delivered as soon as users requests them • Standards based • Multiple installations per server Licensing and • Application isolation Applications • Pay based on•usage of service parameters Quality • Pay based on accounts • Pay based on resources • Quality of service parameters Traditional Hosting 9 May 2007 Software as a Service (SaaS) Strategies for Hosting Providers
Slide 10: Reducing SaaS Costs Note Converting traditional applications to multi-tenant applications is more expensive than virtualizing. Virtualization effect Cost Drivers: • Hardware • Licensing • Maintenance • Management Automation effect Traditional Configurable SaaS Deployment Types Multi-Tenant 10 May 2007 Software as a Service (SaaS) Strategies for Hosting Providers
Slide 11: SaaS – SWsoft Delivers Solutions Categories of SaaS Applications Configurable applications - Guest books, polling, chat, blogs, photo galleries, site builders - Ecommerce solutions - Content management systems SWsoft Delivers Automation and Billing Automated ordering and provisioning Automated domain registration Automated workflow management Automated billing and account management Customer Self Service Multi-tenant applications Email (Exchange with HMC) Collaboration (SharePoint with HMC) VoIP Web conferencing - Self service control panels - Self ordering and upgrades - Self service application installation Resource Management & Licensing - Management of application servers and resources - Standards for ISVs for hosted service delivery Traditional applications - Accounting packages, photo editing software, etc. - Other stand-alone software not converted to multi-tenant Automation and Self Service - All features provided above Isolated Environment - Environment variables (memory, CPU, disk space, directories, processes, etc.) 11 May 2007 Software as a Service (SaaS) Strategies for Hosting Providers
Slide 12: SaaS Application Type – Multi-Instance (Configurable) • Lightweight web applications can be deployed on demand directly into the customer’s web environment • Deployment can be from internal or external mirrors • Applications can be configured as they are deployed • Upgrades initiated by users • Application standards provided by OPEN FUSION • Automation provided by PEM 12 May 2007 Internet Customer 1 Customer 2 … Customer n Hosting Provider Site Customer Web Directories User 1 Directory User n Directory … PEM Management Node Application Repository Web Application Web Application Web Application External Application Site Web Application Application Repository Software as a Service (SaaS) Strategies for Hosting Providers
Slide 13: Demo – SWsoft Delivers Web Applications • Step 1: Select Application (automatic) Options 3: Manage Application 2: Install Application to Install 4: Configuration 13 May 2007 Software as a Service (SaaS) Strategies for Hosting Providers
Slide 14: SaaS Application Type – Multi-Tenant • Larger applications can be deployed by providing access rights to a single app instance • Requires multi-tenant application and security • Centralized upgrades • Fault tolerance • Application standards provided by OPEN FUSION • Billing, provisioning, and maintenance orchestrated by PEM 14 May 2007 Internet Customer 1 Customer 2 … Customer n Hosting Provider Site Customer Configuration User 1 Directory User x Directory … PEM Management Node Config 1 n x Application Server Application 1 … Application n C1 Storage Cx Application Storage Storage Area Network Software as a Service (SaaS) Strategies for Hosting Providers
Slide 15: Example: Multi-Tenant Architecture Deployment Example – Hosted Exchange • 12 server deployment – – – – – – – 2 Exchange front end servers 2 Exchange back end servers 2 DNS servers 2 Active Directory servers 1 Provisioning server 1 PEM front end server 2 PEM back end severs • 3 optional servers • • Capacities – 1 BlackBerry messaging server – 1 SharePoint front-end server – 1 SharePoint back-end server – 5,000 mailboxes – 500 BlackBerry users Redundant and scalable 15 May 2007 Software as a Service (SaaS) Strategies for Hosting Providers
Slide 16: Hardware Costs • The cost of a fully redundant, fully automated Exchange architecture should be split among multiple users Architecture - 11 servers + SAN ~5,000 users Server Type Active Directory Servers Microsoft Provisioning Server Exchange Front End Servers Exchange Back End Servers PEM Operations Support System PEM Business Support System DNS Servers SAN Quantity 2 1 2 2 1 1 2 1 Unit Price $3,168.00 $3,768.00 $3,168.00 $3,888.00 $3,908.00 $3,908.00 $2,734.00 $20,000.00 Total Price $6,336.00 $3,768.00 $6,336.00 $7,776.00 $3,908.00 $3,908.00 $5,468.00 $20,000.00 Total 11 $57,500.00 16 May 2007 Software as a Service (SaaS) Strategies for Hosting Providers
Slide 17: SaaS Application Type – Single Instance (Traditional) • Traditional applications require an isolated operating environment • Issue: one application, one server • Solution: Virtualization • Issue: manual application provisioning, high service costs • Solution: Automation End User Customers Website transaction Phone call Service Provider Provision application Hosting Provider Site Application Server VE1 Application 1 Instance 1 VE 2 Application 1 Instance 2 Application VE n PEM Management Node Automated provisioning and maintenance 17 May 2007 Software as a Service (SaaS) Strategies for Hosting Providers
Slide 18: Case Study Case Background: Data393 is a premier provider of Managed Infrastructure Solutions, that owns and operates its own state-of-the-art data center in Englewood Colorado.  18,000+ Sq. Ft. Raised Floor Colocation  Full, Half, Third Cabinets  Highly Redundant Power Options Dedicated Hosting  Linux and Windows  Plesk Tools Managed Services  Firewall  Application Management (Powered by API)  Advanced Monitoring  Load Balancing  SAN/NAS  WAN Connectivity  Data Protection 18 May 2007  24/7 Staffing  23gbps to the backbone  Private Cage Space  High performance hardware options Software as a Service (SaaS) Strategies for Hosting Providers
Slide 19: Case Study – The Problem Data Protection: Using EMC’s Avamar backup software, Data393 provides a super efficient, and highly reliable off-device backup service to servers located within the data center, or at any remote site that has some type of Internet connectivity. We needed a way to bill our customers for their overages, and provide their different ‘users’ with meaningful notifications based on their role within the company. 1. Avamar did not have any charge-back support when we purchased the software back in January of 2005. (This has subsequently changed). Billing And Customer Online Notification Engine The Problem: Known Issues: Our Solution: 19 May 2007 Software as a Service (SaaS) Strategies for Hosting Providers
Slide 20: Case Study 20 May 2007 Software as a Service (SaaS) Strategies for Hosting Providers
Slide 21: Case Study – The Analysis Realization: Although we had built in some features to enable us to have a reseller program, we quickly saw that resellers (and large enterprises) would want direct access to the tool so they could tweak settings/pricing/notifications often. • More robust authentication/authorization system. • Mechanisms for handling data for multiple tenants: • Restoring single customer’s data. • Purging single customer’s data. • eDiscovery issues. • Mechanisms to ensure customer separation. Possible Solutions: 1. Redesign and rewrite from the ground up to allow multiple tenants on a single instance of the software. 1. Deploy multiple instances using IP based, or Name based hosting facilities within Apache. 1. Virtualization. Required Considerations: 21 May 2007 Software as a Service (SaaS) Strategies for Hosting Providers
Slide 22: Case Study – The Solution We have chosen to deploy an instance of the software for each customer within a Virtuozzo virtual environment. Immediate Benefits: 1. With virtualization now mainstream, the questions about customer isolation tend to go away. And even if they do arise, there is significant documentation on how virtualization technology maintains environment isolation. 1. Management tools included with Virtuozzo simplify day-to-day operations of our service. 1. We were able to go to market immediately with our service, without having to re-write any of the existing code. 1. We have the ability to move an entire environment (OS, Application Frame Work, Apache, etc.) from Build to QA to Production - practically eliminating initial release issues related to the configuration of the ancillary services within the “environment”. 22 May 2007 Software as a Service (SaaS) Strategies for Hosting Providers
Slide 23: Case Study – The Wrap Up Observations: 1. There are a significant number of things a developer must consider when looking to extend their application to support multiple end-user organizations. This process is non-trivial, and may require an extensive rewrite. 1. When speaking to ISV’s about our own SaaS experience, they tend to take a long, hard look at this type of approach. (Service providers: This increases revenue and increases customer stickiness). 1. For certain applications, some companies *may* not be ready to intermingle data with other organizations. Virtualization is a great approach to provide “isolation” between customers and seems to squash many customer concerns. 23 May 2007 Software as a Service (SaaS) Strategies for Hosting Providers
Slide 24: Sample Product Offerings for Traditional Applications Option 1 (provide VE and deploy applications) Option 2 (provide applications with environment) Step 1: Server Environment Silver Server - $49 / month 1GB RAM, 200GB disk space, 200 CPU units Gold Server - $99 / month 2GB RAM, 400GB disk space, 500 CPU units Application Application 1 100MB disk space per mailbox Cost Users Total $10 $15 $140 5 10 1 $50 $150 $140 Application 2 Step 2: Select Applications to Deploy Application 1 - $99 / month Collaboration and more … Application 2 - $149 / month Business process and CRM Application 3 - $499 / month Web conferencing 2GB traffic per user Application 3 1 enterprise license TOTAL (per month) $340 24 May 2007 Software as a Service (SaaS) Strategies for Hosting Providers
Slide 25: SaaS – The SWsoft Platform • OPEN FUSION provides a standards base • Virtuozzo provides a flexible and manageable platform • PEM delivers automation and service delivery SWsoft PEM Control Panels (end user, reseller, service provider) End User Customers Storefront Service Plan Management Billing Domain Registration Interface Business Rules (workflow) Reporting Reseller Module Payment Gateway Interface SWsoft Virtuozzo Hosting Providers and Resellers ISVs Application Density Application Isolation Quality of Service Parameters Service Portability OPEN FUSION Standards Application Format and Packaging Common Licensing Models Code Re-Usability Shared Code Base Authentication Single Sign On Standard Update Process 25 May 2007 Software as a Service (SaaS) Strategies for Hosting Providers
Slide 26: SaaS – Barriers to Adoption I will lose my job if we implement SaaS. • Job will get more interesting. • Why sell to IT? -- IT manager We need to keep our data in our facilities. • Place data on customer premises • Use virtualization to isolate data -- Compliance manager We already know how to run this application and want to own it. -- Datacenter manager • Has expertise ever left a company? • Does owning software benefit customers? What if the service goes down? -- Datacenter manager 26 May 2007 • Odds of a service failure are higher for company owned applications. • 24 x 7 datacenters Software as a Service (SaaS) Strategies for Hosting Providers
Slide 27: Questions and Answers Conclusions: • Hosting providers are perfectly positioned to benefit from the SaaS trend • ISVs will benefit from SaaS by gaining customers in new markets • Automation and virtualization are keys cost containment and SaaS success • SWsoft and OPEN FUSION will help you grow your business and benefit from trends such as SaaS 27 May 2007 Software as a Service (SaaS) Strategies for Hosting Providers