SaaSify Your Business - Move Your On-Prem Apps to the ... Mark… · © 2019, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Marin Mamic, ISV Team Leader February

© 2019, Amazon Web Services, Inc. or its Affiliates. All rights reserved.

Marin Mamic, ISV Team Leader

February 26, 2019

SaaSify Your Business - Move

Your On-Prem Apps to the

Cloud on AWS


Software Innovation ForumFeb 26th, 13:00 – 18:00

Hall 4

Track can be filtered at the AWS Berlin Summit webpage under: „Software Innovation Forum“

Software

Innovation

Forum26.2.

13.00-18:00

Hall 4

https://aws.amazon.com/de/events/summits/berlin/


Software Vendor Booth

Software Innovation Forum

2

1



Setting the SaaS stage


Global subscription economy

https://www.zuora.com/wp-content/uploads/2017/12/2017-Global-Subscription-Economy-Info2-01.jpg

Gartner predicts that by 2020, more than

80% of software providers will have shifted

to subscription-based business models.

IDC predicts that by 2020, 50% of the

world’s largest enterprises will see the majority

of their business depend on their ability to

create digitally enhanced products, services,

and experiences

http://info.zuora.com/rs/602-QGZ-447/images/Zuora_SEI_Q2_Report_2018.pdf

https://www.zuora.com/wp-content/uploads/2017/12/2017-Global-Subscription-Economy-Info2-01.jpg



Subscription economy index


Quarterly levels of the Subscription Economy Index (SEI), in comparison to indices of the

S&P 500 Sales per Share and U.S. Retail Sales. All indices take a base value of 100 on

January 1, 2012, and grow in proportion to the quarterly increase in the one year trailing

total sales that they measure. Over a period of 6.5 years (January 1, 2012 to June 30,

2018), the SEI grew at an average annual rate of 18.1%. The S&P 500 Sales per Share

Index grew at an average annual rate of 3.3%, while U.S. retail sales grew at an average

annual rate of 4.1%.



Outcomes and benefits of developing SaaS Solutions

SaaS gross margins

improve over timeAverage gross margins of top-performing companies has grown from 55% to 76%within 2 years

Cost savings are

realized with SaaS

development and

support

SaaS revenues are a

fast-growing portion of

overall revenues

+80% of ISVs have realized cost savings related to application maintenance (84%)

and application development (81%) with their SaaS products.

Revenue from SaaS subscriptions has grown from 36% to 45% within 2 years.

Innovation and agility

are enabled by SaaS

delivery

81% of ISVs cited improved time-to-market for new applications, and 79% cited

the ability to offer new services and applications as important outcomes

Sources: The ISV Business Case for Building SaaS on Amazon Web Services

(AWS), a commissioned study conducted by Forrester Consulting on behalf of

Amazon Web Services, August 2016


Sources: The ISV Business Case for Building SaaS on Amazon Web Services

(AWS), a commissioned study conducted by Forrester Consulting on behalf of

Amazon Web Services, August 2016

Customer demand 90% developed a SaaS product as a response to customer demand for new solutions.

Competitive pressure

Increased agility and

responsiveness to

market demands

Lower the cost of

application

development

Expanding addressable

market

71% noted that losing traditional-on-premise customers to SaaS competitors was a key

motivator to enter the SaaS market

80% noted that the ability to rapidly respond to changing customer and market needs was an

important factor in developing a SaaS product

78% viewed SaaS development as a way to streamline software R&D and delivery costs.

85% viewed SaaS delivery as a way to reach new geographies, 80% saw it as a way

to enter new verticals, and 78% thought SaaS products could aide expansion into new,

usually smaller, company size segments.

Why are ISVs driven to develop SaaS Solutions?


Exploring the SaaS


SaaS Journey Impacts Core ISV Processes

• Churn Rate

• Cash flow

• Lifetime Value of a Customer

• Committed Monthly Revenue

• Single Tenant

• Multi-Tenant

• Security

• SW Upgrades

• DevOps

• Microservices

• Serverless

• Pricing

• Cust Acquisition

• Try before Buy

• Sales Cycle

• Referral Programs

• Delivery rhythm

• Channel Dynamics

• SLAs

• Support

• Billing


The Fish Model

https://www.gsb.stanford.edu/insights/why-every-business-will-soon-be-subscription-business

https://www.gsb.stanford.edu/insights/why-every-business-will-soon-be-subscription-business


Financials

Acquiring

Customers

Retaining

Customers

Monetizing

Customers

CAC

Cost to acquire a

Customer

LTV

Lifetime Value of

a Customer

MRR

Monthly Recurring

Revenue

Customer

Churn Rate

Sales and Marketing Expenses

------------------------------------------

Number of New Customers

https://www.forentrepreneurs.com/saas-metrics-2/

ARPA x Gross Margin %

------------------------------------------

% MRR Churn Rate

ARPA – average revenue per account

Gross Margin % – COGS / Revenue,

% MRR Churn rate – Churned MRR / Last month's Ending MRR

https://www.forentrepreneurs.com/saas-metrics-2/


Customer profitability

Source: forentrepreneurs.com, pixabay.com

CAC Payback period

Cost to acquire a

Customer

LTV:CAC Ratio

Sales efficiency

Relationship between lifetime value and amount you spent to

acquire them

LTV

Calculated as -------------

CAC

Common target ratio for a “healthy” SaaS business is > 3:1True cost of capital guidelines, to determine discount rates to use:

10% for public companies

15% for private companies that are scaling predictably

20-25% for private companies that have not yet reached scale and predictable growth

Therefore LTV:CAC should be much bigger than 3:1

How long it takes you recover your CAC

CAC

Calculated as -----------------------------------------------------------

Avg. Revenue per Account * Gross Margin

General rule: < 12 months to recover CAC


Prospecting Processes and GTM Approach

https://winningbydesign.com/wbd-science-book/

https://winningbydesign.com/wbd-science-book/


Existing customer base migration

Do your existing customers today care about SaaS?

How will they perceive the change?

How do you want to treat on-prem customers?

• Continuity

• Special offers

• Hardline

Do you want them to move to SaaS and at what pace?

Why do customer pay for your maintenance today?


Product development

End customer vs ISV view

ISV view Customer view


On-

Premises

Lift &

Shift

Instance

Right-Sizing

Improved

Elasticity

Measure,

Monitor,

Improve

Optimized

EC2

Storage

Optimization

Serverless

Architecture

Managed

Services

True AWS

Optimized

Lowering TCO and Improving Margins

COST

Operational CostsWorkforce Productivity Cost AvoidanceBusiness Agility Operational Resilience

Typical TCO

Comparison


SaaS Customer Support Model - 5 Metrics

1. Conversation volume/volume per rep

2. Customer satisfaction score (CSAT)How was this interaction?

3. Net Promoter Score (NPS)How likely are you to recommend

our product to a friend or colleague?

4. First response time

5. Cost per conversation

https://www.kayako.com/blog/saas-support-model/

https://www.kayako.com/blog/saas-support-model/


SaaS Journey Impacts Core ISV Processes

• Churn Rate

• Cash flow

• Lifetime Value of a Customer

• Committed Monthly Revenue

• Single Tenant

• Multi-Tenant

• Security

• SW Upgrades

• DevOps

• Microservices

• Serverless

• Pricing

• Cust Acquisition

• Try before Buy

• Sales Cycle

• Referral Programs

• Delivery rhythm

• Channel Dynamics

• SLAs

• Support

• Billing


Gartner’s Five most valuable lessons learned in the process

of transitioning to a subscription business model

https://www.gartner.com/doc/reprints?id=1-4RB3WOE&ct=180216&st=sb

Ease into a subscription model

Break down entry barriers with subscription

Improve value and create recurring revenue streams

through subscription

Use value articulation and pricing as levers to influence

transition speed

Ensure partner and reseller revenue streams

remain intact


Transformation of Dynatrace

The

Challenge

Dynatrace is an application performance

management software company with

products for the information technology

departments and digital business owners of

medium and large businesses. The company's

services include performance management

software for programs running on-premises

and in the cloud.

• Dynatrace wanted to provide SaaS to fulfil

a growing demand from customers

• The CTO wanted to create an agile and

highly available environment

• Focus on development rather than the

day-to-day running and monitoring of the

firm’s IT infrastructure.

By using AWS, Dynatrace

has changed its approach

to IT and software delivery,

focusing on product

development

By using multiple

geographies and AZs,

we can flexibly deploy

software wherever in

the world our

customers are

Using multiple AZs,

Dynatrace ensures its

systems run seamlessly

Dynatrace is achieving

significant scale and

speed by using AWS,

which has positive

impact on business

agility

Company

Description

“The beauty of AWS

is that in less than

24 hours, we can

spin up a cluster in

Frankfurt, for

example, with

capacity to onboard

up to 1,000

enterprise

customers.”

Bernd Greifeneder

Chief Technology

Officer, Dynatrace

Source: https://aws.amazon.com/de/solutions/case-studies/dynatrace/


Using the SaaS model


SaaS changes the Customer Relationship

Source The ISV Business Case for Building SaaS on Amazon Web Services (AWS), a commissioned study conducted by Forrester Consulting on behalf of Amazon Web Services, June 2016


Centered around ongoing customer relationship

https://www.amazon.de/Subscribed-Subscription-Model-Companys-Future_and/dp/0241363667/ https://www.slideshare.net/Zuora/sydney-subscribed-2016-keynote

https://www.amazon.de/Subscribed-Subscription-Model-Companys-Future_and/dp/0241363667/

https://www.slideshare.net/Zuora/sydney-subscribed-2016-keynote


Platform economy

A platform is a business model that creates value by facilitating exchanges

between two or more interdependent groups, usually consumers and producers. In

order to make these exchanges happen, platforms harness and create large,

scalable networks of users and resources that can be accessed on demand.

A platform is simply a building

block or template on top of

which lots of people can innovate.

https://www.applicoinc.com/blog/what-is-a-platform-business-model/

https://en.wikipedia.org/wiki/Platform_economy

You could

be here


AWS Technology Partnership for Software Vendors

C O N S U L T I N G

P A R T N E R S

P r o f e s s i o n a l s e r v i c e s f i r m s t h a t

h e l p c u s t o m e r s o f a l l s i z e s d e s i g n ,

a r c h i t e c t , m i g r a t e , o r b u i l d n e w

a p p l i c a t i o n s o n A W S

C o m m e r c i a l s o f t w a r e a n d I n t e r n e t

s e r v i c e s c o m p a n i e s t h a t p r o v i d e

s o f t w a r e s o l u t i o n s t h a t a r e e i t h e r

h o s t e d o n , o r i n t e g r a t e d w i t h A W S

T E C H N O L O G Y

P A R T N E R S


5 Keys to a successful partnership

1 It all comes down to the customer

3 Drive simplicity and innovation

4 Go Big

5 Educate and drive customer success

2 Deep ownership and transparency


Software Vendor Booth

Software Innovation Forum

2

1

© 2019, Amazon Web Services, Inc. or its Affiliates. All rights reserved.© 2018, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Amazon Confidential and Trademark

Documents

SaaSify Your Business - Move Your On-Prem Apps to the ... Mark… · © 2019, Amazon Web Services, Inc. or its Affiliates. All rights reserved. Marin Mamic, ISV Team Leader February