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Software as a Service (SaaS)Strategies for Hosting ProvidersDouglas Johnson, SWsoft
Steve Merkel, Data393
Tuesday, May 8, 2007
May 2007 Software as a Service (SaaS) Strategies for Hosting Providers2
What is SaaS?
Application 1
Customer Site
Server
ClientPC
Traditional Deployment
Application 1
Hosting Provider Site
Server
InternetInternet
SaaS Deployment
Server Application
• What has changed from ASP model of a few years ago?– Customer readiness– Improved network capacity– Improved software delivery platforms
Software deployed as a hosted service and accessed over the Internet
May 2007 Software as a Service (SaaS) Strategies for Hosting Providers3
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
• Types of applications
– CRM, web conferencing, web content management, HR, supply chain, collaboration, email, and others
* Gartner Release, September 2006
0%
5%
10%
15%
20%
25%
2005 2011
SaaS % of Business Software Marketopportunity: $8B increasing to $40B
May 2007 Software as a Service (SaaS) Strategies for Hosting Providers4
SaaS – The Track to Higher Revenue
4
Customer Needs Web PresenceEmail E-commerce Collaboration Application Mgmt
Rev
enue
Opp
ortu
nity
(S
MB
: 20
Use
rs/M
onth
)
$10
$100
$1,000
DomainRegistration
$1-$3
Shared StaticWeb Hosting
$3-$10
Shared DynamicWeb , DB, Apps
$5-$20
Virtual PrivateServers
$15-$100
Dedicated & Managed Server
$100-$500
Business-Class E-mail(i.e. Hosted Exchange)
$150-$300
Add Business Collaboration(i.e. SharePoint, LCS, VoIP)
$200-$500
Advanced Apps(CRM, ERP, vertical)
$250-$1500+
Infrastructure
SaaS
May 2007 Software as a Service (SaaS) Strategies for Hosting Providers5
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
May 2007 Software as a Service (SaaS) Strategies for Hosting Providers6
SaaS – Applications
Most software (including IIS/Apache) can be installed or hosted
Web Conferencing• WebEx• LiveMeeting• Spreed
CRM• Salesforce.com• SugarCRM• Microsoft CRM
Email / Collaboration• Exchange• SharePoint• OpenXchange
HR Portals• Employease• Taleo• Workstream
E-commerce, E-marketing• Miva, OScommerce• ExactTarget
Business Admin• NetSuite• Hosted Quickbooks
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
Hosting Infrastructure• Shared web hosting• Database hosting• Streaming
May 2007 Software as a Service (SaaS) Strategies for Hosting Providers7
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?
May 2007 Software as a Service (SaaS) Strategies for Hosting Providers8
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?
May 2007 Software as a Service (SaaS) Strategies for Hosting Providers9
Hosting Requirements for SaaS
Stepping up fromTraditional Hosting to Software as a Service
TraditionalHosting
Licensing and Applications• Pay based on usage• Pay based on accounts• Pay based on resources• Quality of service parameters
Platform and Service Delivery• Standards based• Multiple installations per server• Application isolation• Quality of service parameters
Provisioning• Rapid• Driven by workflow• Automated or manual• Services delivered as soon as users requests them
Service Management• Self service • Non-technical• Single sign on to all services
Back office support• Billing and accounting• Inventory management• Customer service
Migration• Onsite to hosted• Hosted to hosted
Softwareas a
Service
May 2007 Software as a Service (SaaS) Strategies for Hosting Providers10
Cost Drivers:• Hardware• Licensing• Maintenance• Management
Traditional Configurable Multi-Tenant
SaaS Deployment Types
Virtualizationeffect
Automationeffect
NoteConverting traditional applications to multi-tenant applications is more
expensive than virtualizing.
Reducing SaaS Costs
May 2007 Software as a Service (SaaS) Strategies for Hosting Providers11
SaaS – SWsoft Delivers Solutions
Categories of SaaS Applications
Configurable applications- Guest books, polling, chat, blogs,
photo galleries, site builders- Ecommerce solutions- Content management systems
Multi-tenant applications- Email (Exchange with HMC)- Collaboration (SharePoint with HMC)- VoIP- Web conferencing
Traditional applications- Accounting packages, photo editing
software, etc.- Other stand-alone software not
converted to multi-tenant
SWsoft Delivers
Automation and Billing- Automated ordering and provisioning- Automated domain registration- Automated workflow management- Automated billing and account management
Customer Self Service- 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
Automation and Self Service- All features provided above
Isolated Environment- Environment variables (memory, CPU, disk space,
directories, processes, etc.)
May 2007 Software as a Service (SaaS) Strategies for Hosting Providers12
Application Repository
SaaS Application Type – Multi-Instance (Configurable)
• Lightweight web applications can be deployed on demand directly into the customer’s web environment Hosting Provider Site
Customer Web Directories
Application Repository
Web ApplicationWeb
ApplicationWeb Application
User 1 Directory User n Directory
…
Web Application
Web Application
External Application Site
Web Application
Web Application
• 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
PEMManagement
Node
Internet
Customer 1 Customer 2 Customer n…
May 2007 Software as a Service (SaaS) Strategies for Hosting Providers13
• Step 1: Select Application to Install
Demo – SWsoft Delivers Web Applications
• Step 2: Select Application Configuration Options• Step 3: Install Application (automatic) • Step 4: Manage Application
May 2007 Software as a Service (SaaS) Strategies for Hosting Providers14
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
Storage Area Network
Hosting Provider Site
Customer Configuration
Application Server
Application 1
User 1 Directory User x Directory
…
Application Storage
PEMManagement
Node
Internet
Customer 1 Customer 2 Customer n…
Application n
…C1 Storage
Config 1Config nConfig x
Cx Storage
May 2007 Software as a Service (SaaS) Strategies for Hosting Providers15
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– 1 BlackBerry messaging server– 1 SharePoint front-end server– 1 SharePoint back-end server
• Capacities– 5,000 mailboxes– 500 BlackBerry users
• Redundant and scalable
May 2007 Software as a Service (SaaS) Strategies for Hosting Providers16
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 Quantity Unit Price Total Price
Active Directory Servers 2 $3,168.00 $6,336.00
Microsoft Provisioning Server 1 $3,768.00 $3,768.00
Exchange Front End Servers 2 $3,168.00 $6,336.00
Exchange Back End Servers 2 $3,888.00 $7,776.00
PEM Operations Support System 1 $3,908.00 $3,908.00
PEM Business Support System 1 $3,908.00 $3,908.00
DNS Servers 2 $2,734.00 $5,468.00
SAN 1 $20,000.00 $20,000.00
Total 11 $57,500.00
May 2007 Software as a Service (SaaS) Strategies for Hosting Providers17
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
Hosting Provider Site
Application ServerPEM
ManagementNode
Application
End User Customers
ServiceProvider
Provisionapplication
Phonecall
VE1 VE 2 VE n
Application1
Instance1
Application1
Instance2
Websitetransaction
Automatedprovisioning
andmaintenance
May 2007 Software as a Service (SaaS) Strategies for Hosting Providers18
Case Study
Data393 is a premier provider of Managed Infrastructure Solutions, that owns and operates its own state-of-the-art data center in Englewood Colorado.
Case Background:
Colocation
Dedicated Hosting
Firewall Application Management (Powered by API)
Full, Half, Third Cabinets Highly Redundant Power Options
Private Cage Space
Linux and Windows Plesk Tools
High performance hardware options
Managed Services
18,000+ Sq. Ft. Raised Floor 24/7 Staffing 23gbps to the backbone
Advanced Monitoring Load Balancing SAN/NAS WAN Connectivity Data Protection
May 2007 Software as a Service (SaaS) Strategies for Hosting Providers19
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.
The Problem: 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.
Known Issues: 1. Avamar did not have any charge-back support when we purchased the software back in January of 2005. (This has subsequently changed).
Our Solution: BillingAndCustomerOnlineNotification Engine
May 2007 Software as a Service (SaaS) Strategies for Hosting Providers20
Case Study
May 2007 Software as a Service (SaaS) Strategies for Hosting Providers21
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.
Required Considerations: • 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.
2. Deploy multiple instances using IP based, or Name based hosting facilities within Apache.
3. Virtualization.
May 2007 Software as a Service (SaaS) Strategies for Hosting Providers22
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.
2. Management tools included with Virtuozzo simplify day-to-day operations of our service.
3. We were able to go to market immediately with our service, without having to re-write any of the existing code.
4. 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”.
May 2007 Software as a Service (SaaS) Strategies for Hosting Providers23
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.
2. 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).
3. 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.
May 2007 Software as a Service (SaaS) Strategies for Hosting Providers24
Option 1(provide VE and deploy applications)
Sample Product Offerings for Traditional Applications
Option 2(provide applications with environment)
Step 1: Server Environment
Silver Server - $49 / month1GB RAM, 200GB disk space, 200 CPU units
Gold Server - $99 / month2GB RAM, 400GB disk space, 500 CPU units
Step 2: Select Applications to Deploy
Application 1 - $99 / monthCollaboration and more …
Application 2 - $149 / monthBusiness process and CRM
Application 3 - $499 / monthWeb conferencing
Application Cost Users Total
Application 1100MB disk space per mailbox
$10 5 $50
Application 22GB traffic per user
$15 10 $150
Application 31 enterprise license
$140 1 $140
TOTAL (per month) $340
May 2007 Software as a Service (SaaS) Strategies for Hosting Providers25
SaaS – The SWsoft Platform
• OPEN FUSION provides a standards base • Virtuozzo provides a flexible and manageable platform • PEM delivers automation and service delivery
OPEN FUSION Standards
Application Format and Packaging
Common Licensing Models
Code Re-UsabilityShared Code Base
AuthenticationSingle Sign On
Standard Update Process
End User Customers
ISVs
Hosting Providers
and
Resellers
SWsoft PEM
Service Plan Management BillingControl
Panels(end user,reseller,service
provider)
Storefront
Reseller Module
Payment Gateway Interface
Domain Registration
Interface
Business Rules
(workflow)
Reporting
SWsoft Virtuozzo
Application Density
Application Isolation
Quality of Service
Parameters
Service Portability
May 2007 Software as a Service (SaaS) Strategies for Hosting Providers26
SaaS – Barriers to Adoption
-- IT manager
I will lose my job if we implement SaaS.
-- Compliance manager
We need to keep our data in our facilities.
-- Datacenter manager
We already know how to run this application and want to own it.
-- Datacenter manager
What if the service goes down?
• Job will get more interesting.• Why sell to IT?
• Place data on customer premises• Use virtualization to isolate data
• Has expertise ever left a company?• Does owning software benefit
customers?
• Odds of a service failure are higher for company owned applications.
• 24 x 7 datacenters
May 2007 Software as a Service (SaaS) Strategies for Hosting Providers27
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