ForrTel:Using Software-As-A-Service To Gain Power Over ITLiz Herbert

Analyst

Forrester Research

March 31, 2005. Call in at 12:55 p.m. Eastern Time

Theme

Software-as-a-service puts control into the hands of

business users

Agenda

• What is SaaS?

• Advantages and disadvantages of the SaaS model

• How SaaS empowers the business user

• Trends in software-as-a-service (SaaS)

• Recommendations for user firms interested in software-as-a-service

What is SaaS?

What is Software-as-a-Service?

• Subscription-based software

» Pay as you go

• Low risk

» No large, upfront license fee (since you rent instead of buy)

• No hardware required

» Software vendor manages the infrastructure

How does SaaS differ from managed hosting?

SaaS

- You rent the software

- Pay-as-you-go, subscription-based pricing

- Software vendor takes care of the infrastructure

- Upgrades are automatic and seamless

Managed Hosting

- You own the software

- You pay a large license fee upfront

- You pay a third party to manage the infrastructure

- You worry about when to upgrade and how to upgrade

Advantages of SaaS

Reduced need for IT

• You don’t need to worry about . . .

» Hardware

» Database support

» Scalability

» Uptime

» Reliability

» Security

» Platforms (Windows versus Mac)

. . . since the software vendor worries about this for you

Shorter time to implement

No time spent acquiring or testing hardware

+

No time spent installing software

+

Shorter RFPs since the risk is lower

=

Implementation times ranging fromone day to a few months

More frequent upgrades

• Vendors release upgrades two to three times per year

» Versus once every one to two years for on-premise

• Upgrades happen automatically and seamlessly

» At off-peak hours, without you doing anything

• Upgrades are incremental rather than big-bang

» No need to re-engage consultants

» Reduced (or zero) need for retraining users

Additional advantages

• Easier to do an incremental rollout

» No more shelfware

• Quicker ROI

» Since shorter time to implement and reduced upfront costs

• Easier to use

» Familiar Web look and feel

» Point-and-click tools instead of coding

Disadvantages of SaaS

• More expensive in the long run

» Breaking point usually occurs around year three

• Less control over the app

» Customization and integration capabilities typically more restricted

• Vendor viability becomes even greater concern

» Since vendor controls your software, security, and your data

Summary of hosted versus licensed tradeoffs

Source: September 27, 2004, Best Practices “Hosted Versus Licensed CRM: Cost And Implementation Tradeoffs”

How SaaS empowers business users

Business users have more control over the purchase

• Line-of-business manager, such as vice president of sales, drives purchase

• Subscription model pricing reduces the need for budget authority at the executive level

• Firms don’t have to get IT approval

» Since they don’t need hardware or IT involvement

Business users have more control over the app

• Point-and-click wizards for:

» Setting up users and profiles

» Creating custom fields

» Creating new reports

» Setting up workflows and alerts

» Customizing the layout

No more waiting for IT!

Trends in SaaS

What types of apps are firms buying “as a service”?

Base: North American Firms (SMBs and Enterprises)

Source: Business Technographics® November 2004 North American Benchmark Study

39.80%

39.50%

35.70%

33.20%

29%

Sales force automation

Marketing automation

Procurement/sourcing

HR

Finance

Which vendors lead the trend?

• CRM

» salesforce.com

» Siebel CRM OnDemand

» RightNow

» NetSuite

» Salesnet (sales force automation)

» BlueRoads (partner relationship management)

Which vendors lead the trend?

• HR

» ADP, Ceridian, Employease

• Recruiting

» BrassRing, Recruitmax, Taleo, Ultimate Software

• Accounting

» Intacct, NetSuite

Where are the vendors focusing development?

• Vertical specific offerings

• Customization tools

• Integration capabilities

• Internationalization

• Mobile and offline access

• Workflow

Recommendations

What to consider in your contract

• Service-level agreements

» System uptime (and the payout for unplanned downtime!)

• Data ownership

» What happens to your data at the end of your contract or in the case of the vendor folding

• Support

» Hours of phone support

» Turnaround time for email support

Additional recommendations

• Form a council to test out solutions and ferret out requirements

» Take advantage of free trial offers from SaaS vendors

• Map tools to business processes

» And don’t rely on app to fix broken business processes; faster to implement can mean faster to fail

• Consider hidden costs

» Add-on modules, wireless and offline, integration can all cost extra

Liz Herbert

lherbert@forrester.com

www.forrester.com

Thank you

Entire contents © 2005 Forrester Research, Inc. All rights reserved.

Selected bibliography

• March 16, 2005, Trends “Subscription Applications: Fad Or Future Direction?”

• January 10, 2005, Market Overview “A Buyer's Guide To Hosted eCommerce Solutions”

• September 27, 2004, Best Practices “Hosted Versus Licensed CRM: Cost And Implementation Tradeoffs”

• September 23, 2003, Forrester Brief “Jump-Starting RFID Initiatives With Hosted Solutions”