Archive for April, 2009

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News Analysis: Details On The SUGEN KPI’s For SAP Enterprise Support

Published on April 29, 2009 by R "Ray" Wang

More details have emerged on the actual 10 or 11 KPI’s that SUGEN and SAP have agreed to as well as the SAP’s targets for showing value.  To start with, here are the main KPI’s for each category:

SUGEN KPI’S

Business Continuity

  • Increased business solution availability
  • Reduced amount of work related to all SAP incidents (including reduced mean time to resolve and reduced overall SAP incidents)

Business Process Performance

  • Reduced number of emergency changes.
  • Reduced amount of work for post-go-live stabilization and optimization.
  • Reduced number of failed changes, which must be backed out of business solutions in productive use.

Protection of Investment

  • Deployment of the latest innovation for application and technology stacks.
  • Reduced maintenance costs by elimination of unnecessary modifications.

Total Cost of Operations:

  • Decreased hardware costs (e.g. CPU).
  • Decreased storage costs.
  • Reduced total work of deploying support and enhancement packages.

Approach shows rigor in the cost justification and value process

According to user group members, measurements will be conducted quarterly with the first one occurring in every six months.  SAP must also show the following in order to prove value:

  1. Demonstrate tangible cumulative cost savings for customers exceeding the increase in support fees
  2. Prove KPI index decrease by 30 percent within the next four years, aggregated over the100 customers participating in the benchmark program
  3. Use cumulative savings over the four years using a pre-define schedule of four percent in 2009, 12 percent in 2010, 22 percent in 2011, reaching the full 30 percent by 2012

The bottom line – user groups should now determine the minimum R&D percentage of investment from revenues

The SUGEN KPI’s provide a great framework for other user groups to begin a discussion on the value of the new SAP  Enterprise Support offering in comparison to today’s programs.  Keep in mind, these are only useful when vendors must justify a maintenance fee increase.  The bigger and more important issue – how are the maintenance revenues reinvested?  Consequently, users should begin to track the ratio of R&D dollars that tie back to the amount of maintenance revenue.  This will be key issue for the next 5 to 10 years.

Your POV

Do you think SAP met its promise to SUGEN?  Will this help you with your commitment to SAP?  Do you feel SAP has now done the right thing?  Send me a private email to rwang0 at gmail dot com.  Posts are preferred!   Thanks and looking forward to your POV!

Copyright © 2009 R Wang. All rights reserved.

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News Analysis: SAP and SUGEN Make Progress on Enterprise Support

Published on April 28, 2009 by R "Ray" Wang

Since SAP’s announcement of its single tier Enterprise Support plan last July, customers have continued to express dissatisfaction.   In response to such complaints, the SAP User Group Executive Network (SUGEN) of 12 SAP user groups and SAP have been engaging in discussions around the value derived from this new offering.  This morning SAP and SUGEN announced an agreement on three key areas of the Enterprise Support offering:

  • Defined list of key performance indicators to measure the results of SAP Enterprise Support (ES) services. As part of the agreement, the value of ES will be measured by through the jointly agreed SUGEN Key Performance Indicator Index (SUGEN KPI Index).
    Based on the press release and informal conversations, the four areas covered include business continuity, business process improvement, protection of investment, and total cost of operations.  No public details have yet been provided on the specific metrics but there is an expectation for customers to realize value within a four year time frame of the benchmarking program

    POV: The four areas measure how choice, value, and predictability of investment come together in the overall maintenance offering.  If successful, this represents a unique and transparent approach to demonstrating value in maintenance.  In the coming weeks, SAP users will want to seek details of the specific KPI’s and determine how those KPI’s will be measured on a consistent basis across different types of organizations.

  • Joint benchmarking program to define and measure how SAP customers may derive value from ES. With agreement on the KPI’s in place, a formal benchmarking program will be instituted to provide baselines to quantify value.   SAP and SUGEN have agreed on the parameters of the representative customer sample.  SUGEN will choose the customers.   Importantly, an independent party will validate results will conduct quality assurance and independent validation of the results.

    POV: Benchmarking remains the critical factor in this program.  SAP customers should pay close attention for balance in the representative customer sample.  Key variables include level of internal SAP competency, size of organization, complexity of environment, number of instances, industry, and geographic focus.   One can not overemphasize the importance of this program.  The results not only impact future maintenance fee increases, but also provide important benchmark data on SAP operations.

  • Changes to the 2008 pricing program for current contracts that may will be migrated to ES. Based on the KPI program, SAP agrees to postpone subsequent price increases pending the realization of targeted improvements measured by the SUGEN KPI’s.  These changes have been made to the 2008 pricing program for ES.  Instead of ongoing increases until 2012, the new program ends in 2015.  As stated in the press release “Starting in 2010, the price of SAP Enterprise Support for existing customers will continue to increase based on individual contract terms but will not be higher than a yearly fixed upper cap. This translates to an increase average of no more than 3.1 percent per year from 2010 onwards. The price of SAP Enterprise Support will be capped at 22 percent through 2015. “

    POV:  Two scenarios emerge.  Should the value of ES not be realized, then the price increase will not pass.  However, customers will more likely face a more gradual price increase to the 22%.   This may prove to provide some relief for recession strapped customers.

The bottom line – progress on Enterprise Support issue may result in a win – win for  SAP customers

Expect customers to take the news with cautious optimism.   Should the benchmarks succeed, customers may gain value.  Failure to meet targets meet a freeze on maintenance.  In any case, this is welcomed news and provides a hard fought win-win for the customer and the vendor-client relationship. Congratulations go out to SUGEN and SAP for coming to a common ground!  This shows the importance of preserving independent user groups and the role active users play in shaping the overall agenda.  The one thing left in the choice, value, predictability equation is choice – meaning a tiered maintenance program or access to third party maintenance.  With the less than positive Q1 earnings report announced today, let’s wait to see how other chips will fall into place.

Your POV

Do you think SAP met its promise to SUGEN?  Will this help you with your commitment to SAP?  Do you feel SAP has now done the right thing?  Send me a private email to rwang0 at gmail dot com.  Posts are preferred!   Thanks and looking forward to your POV!

For more POV’s:

Dennis Howlett – April 28, 2009 “SAP software revenues plummet, announces new deal on maintenance”

Copyright © 2009 R Wang. All rights reserved.

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Monday’s Musings: It’s The Relationship, Stupid! (Part 4) – Stop Under-investing In R&D

Published on April 27, 2009 by R "Ray" Wang

Economic Downturn Challenges Enterprise Software Executives To Uphold The Sanctity Of The Vendor – Customer Relationships

Conventional wisdom would assume that in a challenging economy, strong relationships would be a key success factor to retaining business and mitigating loss of revenue.  Unfortunately, this does not appear to be the case for many companies, including vendors in enterprise software.  Blame it on the economy, fear of depending on their people, or plain greed, but a good number of executives have taken an approach that attempts to preserve shareholder value at the expense of their vendor – stakeholder relationships (i.e.employee, customer, and partner).  Now in their defense, these muckety mucks face dire times and hard decisions need to be made.  However, they are not in a unique situation and risk jeopardizing brand value, trust, and market credibility for short term gain. Let’s look at five common value destruction strategies:

Part 4: Under investing in R&D and then repackaging existing content as new innovation

Back in the heady days of the 80′s, custom dev teams faced challenges with primitive tool sets, constantly changing business priorities, and escalating costs of internal maintenance.  The cost to keep up with change seemed unsurmountable.  Consequently, packaged apps vendors offered businesses the promise of economies of scale so that the long term cost would be less.  Client would benefit from best practices in various industries.  In turn, the software vendor would provide the scale to take over bug fixes,  enhancements, new functionality, staffing, and future innovation. The promise of packaged apps appeared to solve the issues that custom development failed to address.  With Y2K in full force, everyone rushed to put their latest ERP system to beat the crunch.  Upon reflection, it may seem that we traded one set of cost for another.  Here are four customer examples as to what’s been happening.

  • Forcing clients to re-pay for the same functionality ” They delivered some supply chain planning capabilities in the old modules.  With each release and our input, the product improved.  One day they moved to an engine pricing.  When they launched XXX, they decided to come back and charge us for the new product.  We had access to 80% of the functionality already.   We had the old product for 10 years and should have been entitled to the new release after millions of euros in maintenance and our feedback.  This was the beginning of the downturn in our relationship.  Today they keep trying to sell us on their new suite and its just a repackaging of all their disparate products!”  EMEA Discrete Manufacturer,  CIO
  • Failing to deliver on promised roadmaps ” We sat on these Vendor X Customer Boards (i.e. industry peer groups) where we worked out future capabilities with some competitors, system integrators, and other technology partners.  After 5 years of talk, we still have not seen 85% of the functionality requests we put into play.  Instead, the company has focused on the low end of the market segment and in other industries.  We spent all this time talking and now we have very little to show for it.  We’ve paid over 16M in maintenance in the past 5 years.   What happened to realizing the customer input into the product design process?  Its been an outrage!  We could have built everything on our own and maintained this for the same cost or less.  Yes, we could rebuild our ERP and be more successful and cost effective and just might as the tooling has significantly improved and PaaS platforms provide potential.”  CPG,  Senior Director for Business Apps
  • Charging for technology uplifts. “After using Vendor X‘s Business Intelligence product for 7 years, we finally decided to upgrade to the next version.  We compared the upgrade and functionality wise, the new release had less capabilities than the old release.  They had built the product on a new technology platform.  While it could be more advantageous for us, we were shocked that they had the nerve to charge a replatform fee for us to use the new product.  They demanded additional money for the same functionality.  This is absurd!  We moved to Vendor Y a year later because they did not seem like they would be acquired and avoided this scenario. “  Global Financial Services,  VP Analytics and Business Intelligence
  • Responding at a snail’s pace to innovative technologies. ” I’m miffed that the large ERP vendors keep missing the boat on new technology.  Why can’t they deliver a multi-tenant SaaS offering?  What’s up with hosting and mega tenancy? We seek new cost effective deployment options and everything comes back more expensive each year.  We also can’t understand what’s so hard about improving usability.  Why don’t they just take Adobe AIR and Flex and rebuild the screens?  We don’t really care what’s in the back end!  We just need something that is role based and carries the relevant data that are people need to make a decision.  After paying these guys over 100M in maintenance in 10 years, we could have built this faster, better, and cheaper.  How come they can’t deliver better use of collaboration technologies?  At the rate we’re going, we’ll be using more SharePoint than Vendor X’s portal”  Major Oil and Gas,  Director ERP Project

The bottom line – failure to deliver on promised functionality jeopardizes hard won trusted relationships

Clients made strategic bets with key software vendors to go with packaged apps.  Many shared with them their best practices in the development and improvement of the vendor’s product.  These were trusted relationships.  In the end, vendors achieved economies of scale but under invested their profits back into the product.  Clients had a good start with some basic apps.  But with an average of 80% of all maintenance and support fees going back to profit and not the product, the client vendor promises may be too broken.

Initially, most clients took this in stride and gave the vendor some grace period in delivery of key functionality.   After a series of excuses, many vendors failed to deliver as they were distracted with satisfying investors or engaged in M&A.  In such cases, clients and vendor user groups should take action and engage in deeper conversations about what ratio of revenue goes back to R&D.  How quickly should enhancements be prioritized.  What ratio of R&D would the clients expect reinvested from license and maintenance fees?

For those clients, its time to apply some leverage on those vendors badly behaving to be more forthright with their commitment on promised roadmaps and more responsive to client enhancement requests.  Clients should be more proactive!  Clients may need to be more public.

Your POV

Got a success story where your vendor has bucked the trend and delivered more than expected.  Got a POV on how they are keeping good relationships? Or got a great story on the bone-headed thing your vendor or your employer has done to destroy value in the relationship!  Send me a private email to rwang0 at gmail dot com.  Posts are preferred!   Thanks and looking forward to your POV!

Copyright © 2009 R Wang. All rights reserved.

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Event Report: Lawson CUE 2009

Published on April 25, 2009 by R "Ray" Wang

Keynote highlights include themed presentations around value

Customers, partners, and prospects gathered together in the always spectacular San Diego Convention Center for Lawson CUE 2009.  Moments before the keynote, the team unveiled the latest Lars Larson video, “Lost and Found”!  In true Lars Lawson fashion, the final solution reflected simplicity.  The keynote then kicked off with a series of classic Harry Debes jokes to warm up the crowd.  Amidst a back drop of “Who wants to be a Billionaire?”, Harry began an interview of his show guests which included Lawson customers and executives.   Armed with new words such as ‘interlutions’ and ‘liquid applications’, Guenther Tolkmit,  Senior Vice President of Product Development shared how Lawson has moved to agile development cycles of 4 to 6 weeks for new interlutions.  Ed Sturdivant, County Auditor of Ft. Bend County of Texas detailed how they achieved a revenue & cost-savings of a combined $4.9 million over 3.5 years with Lawson.  Meanwhile, Catholic Healthcare Initiatives described how their roll out of Lawson to 45,000 employees realized a $125M savings across 77 hospitals in just their first year.

img00123-20090420-0805

(Photo: Lawson CEO Harry Debes with Lars Lawson.  Copyright © 2009 R Wang. All rights reserved)

The Day 2 keynote kicked off with Dean Hager’s Extreme Makeover – Lawson Edition.  The audience got a glimpse of his ice fishing house as he highlighted new announcements in the Microsoft based User Productivity Platform.  Smart Office 9.03, enterprise search, and M3 analytics led the charge for new developments announced at CUE09.  With the makeover complete, attendees saw the new Hager household.

Lawson's Dean Hager and his "Fish House'

(Photo: Lawson Senior Vice President of Product Management,  Dean Hager and his “Fish House” Extreme Makeover-Lawson Edition.  Copyright © 2009 R Wang. All rights reserved)

Major announcements include new product offerings

In addition to the new M3 analytics and PLM capabilities for Fashion, key development and related analysis from this year’s CUE include:

  • Vertical industry and target capability focus. Despite presence in 15 vertical industries, Lawson now actively targets seven industries including food processing, fashion, distribution, equipment services management and rental, health care, and public sector.  True to its heritage, Lawson also targets the human capital management (HCM) horizontal with an integrated talent management suite and workforce management solution.

    POV    :  Software vendors below $1B in revenue have the bandwidth to focus on just 5 to 10 verticals.  Lawson’s strategy makes sense as industry relevance and capability provides a key barrier of entry from larger ERP players.  Lawson’s strength in HCM provides it with the opportunity to go deep on vertical HCM requirements.
  • Lawson Smart Office 9.0.3. First delivered to M3 customers in 2008, this latest release delivers the same attributes of intuitive role focused design, personalization, integration BI, process automation, and Microsoft Office integration for S3 customers.  Smart Office builds on Microsoft tools and technologies such as Windows Presentation Foundation and Groove.  This latest release adds interactive charting and analysis tools to list views, a new ad-hoc query tool called InfoBrowser, and better enterprise mash up support.  Additional enhancements include personal history, type ahead, personal watches (DVR or Tivo like feature), off-line editing in Microsoft Excel, export to Microsoft Outlook Tasks, embedded learning, and custom widget creation.

    POV:     Lawson’s continued focus on usability and user experience may help improve overall productivity for the customers.  Form must follow function and in this case, these screens show a movement towards the fundamentals of Enterprise 2.0 applications.

    4
  • Lawson Enterprise Search. Based on the popular Apache open source search solution Lucene, the new search appliance serves S3 customers today and M3 customers next year.  Search features span across both structured and unstructured data from Lawson apps and Lawson BI to the user’s desktop.
    Lawson Enterprise Search appliance is a connected as a virtual machine using VMWare.  User security is enforced and individual user history can be stored and searchable.

    POV: Customers seek tools and techniques to quickly find information.  Enterprise search plays a key role in accessing items such as transactions, purchase orders, assets, and customers.  Lawson’s new offering may provide such a proactive solution.  However, the real test will be its ability to serve up non-Lawson data with ease and relevance.

  • New global maintenance and support offerings. Lawson revised its maintenance and support offerings and now offers a two-tiered precious metals based support and maintenance plan.  Bronze provides customers with providing product updates, access to MyLawson.com and access to support consultants during the customer’s business hours. It also provides 24/7 critical issue support, access to upgrades, tax and regulatory updates, and corrections – as well as remote diagnosis, rapid technical response, customer-focused “hot topics” web sessions, and electronic reporting.  Silver adds on to Bronze offerings but includes a Lawson Global Support Account Manager, a scorecard activity review to track progress on support cases, and software update planning services.  Silver customers gain access to senior support resources within the Lawson Global Support and Product Development teams, priority case queuing, and an exclusive track event during the Lawson CUE event.

    POV:    choice, value, and predictability,  Lawson’s move here demonstrates a willingness to apply customer feedback in making revisions. While Lawson did raise maintenance fees last year in December 2007 (corrected April, 28, 2009) to the chagrin of some customers, the new offering does provide better clarity and tiering of options.   Because customers continue to seek
  • Lawson Online Learning Suites.  New learning management tools for S3 and M3 are directly delivered to the desktop.  Four types of course include the OnDemand collection which provides self paced courses, the Simulation Collection which delivers step-by step realistic scenarios, the Interactive Webcast Collection which engage with demos and q&a sessions, and the Virtual lab collection which offers online, instructor led courses.

    POV    :  With travel freezes and crazy work schedules, customers seek training options that not only match their learning style, but also meet their schedule and availability.  Lawson’s Online Learning Suites provide a cost effective and flexible approach to training.  Course content quality does vary according to some clients but overall the feedback is positive.

The bottom line – vertical orientation and move towards Enterprise 2.0 add needed innovation and relevance

The Intentia acquisition continues to bring Lawson economies of scale in R&D, back office functions, and sales and marketing.  More importantly, strong vertical beach heads for M3 in Fashion, Food & Beverage, Equipment Services Management & Rental, and Distribution balance out the s3 product line’s dominance in health care, public sector, and human capital management.  The result – a focus on user productivity amidst a growing vertical focus.  Customers in the key target verticals should keep Lawson in short lists.

Your POV

How was your Lawson CUE experience?  Does Smart Office or enterprise search compel you to upgrade to the latest Lawson release?  What’s your view on the merger of Intentia? Post your comments here or send me a private email to rwang0 at gmail dot com. Thanks and looking forward to your POV!

Catch the tweets from the keynotes at Lawson #CUE09

Featuring: Merv Adrian

Naomi Bloom

David Dobran

Larry Dunnivan

Jim Holincheck

Paul Howard

Dennis Howlett

Michael Krigsman

Aaron Pearson

Lisa Rowan

Frank Scavo

Thomas Wailgum

Josh Weinberger

Copyright © 2009 R Wang. All rights reserved.

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News Analysis: Oracle Acquires Sun, Enters Open Source and High End Computing Markets

Published on April 20, 2009 by R "Ray" Wang

Oracle announces a $7.4B deal for SUN just a few weeks after the IBM deal fell through.  If completed, Oracle will control a significant major open source alternative and a nice piece of the high end computing business.  These open source components have been viewed as the alternative to the dominance of the Big 4 or MISO (Microsoft, IBM, SAP, and Oracle).   Oracle will also gains an innovation engine with the assets of Sun’s Labs groups which pioneers a series of innovations that include potential enterprise solutions for the virtual world.  The deal puts Oracle on a continued path to acquiring deeper components of the enterprise computing stack, including appliances.  Here’s how the stack looks:

  • Middleware - While Java and Solaris may appear to be the crown jewels in the deal, Oracle has managed to slowly buy out other stack competitors (i.e. BEA and now Sun) and integrate them into the Fusion Middleware suite of tools for custom development and its own Fusion Applications product lines.   Sun complements BEA.  In addition, the open source stack will also provide Oracle with a new avenue to the SMB market .  (added 4/22)
  • Database - Oracle takes out the low cost competitor to SQL server on the low end and gets a shot at converting them to Oracle DB instead of IBM.  Control of mySQL adds to an SMB entry point and the removal of a competitor .  (added 4/22)
  • Hardware - Oracle gains another great recurring revenue (maintenance) base with Solaris.  This complements Oracle’s large and profitable database installations on Solaris that would have fallen prey to the IBM DB2 team.  While there’s some talk about Oracle selling the hardware side, this seems unlikely as Oracle focuses in on the appliance market.  More importantly, Oracle can take Sun’s tools and build a purpose built appliance running database, middleware, and apps.  (added 4/22)

The bottom line- Oracle succeeds at post merger integration where others often fail

Despite skepticism, Oracle has made these acquisitions work from a financial perspective, with year-over-year quarterly profit growth that has generally been well above 20%. Some key success factors include:

  • Acquiring companies for the recurring revenue. Oracle’s first set of deals (i.e., PeopleSoft and Siebel) focused on installed base acquisitions that provided a strong foundation of support and maintenance customers. This base of recurring revenues provided Oracle with the room to continue strong R&D investment while reducing overall costs.  Oracle takes out another highly profitable maintenance base adding pressure to competitors.  In this acquisition it gains the profitable Solaris revenue stream while moving into a maintenance business for open source software.
  • Eating its own dog food. In the late 1990s, Oracle made a major commitment to re-engineering its back-office processes using its own applications. As a result, Oracle has become highly efficient, with a ratio of general and administrative expenses to revenues of 3% to 4% – in most calendar quarters, one percentage point lower than SAP’s and even lower than other large software vendors like Microsoft and Symantec.  Expect Oracle to put the Sun assets into its arsenal of tools for delivering software innovation.
  • Mastering post-merger integration. With two former investment bankers at the helm, Oracle has one of the best post-merger integration teams in the business. Oracle’s profit performance signals that it has been able to add new companies and their stream of revenues while keeping costs down.   Sun will provide considerable synergies in the short and long run.

See related coverage:

Your POV

What do you think abou the acquisition of SUN?  Did you count on SUN as your open source stack alternative to the Big 4? Send me a private email to rwang0 at gmail dot com.  Posts are preferred!   Thanks and looking forward to your POV!

Copyright © 2009 R Wang. All rights reserved.

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Research Summary: Shape Your Apps Strategy To Reflect New SaaS Licensing And Pricing Trends

Published on April 16, 2009 by R "Ray" Wang

FORWARD AND COMMENTARY
“Shape Your Apps Strategy To Reflect New SaaS Licensing and Pricing Trends” represent the seventh report in an on-going series to provide clients with insight on how to better align their packaged apps strategies.  As more and more clients seek SaaS solutions as options to pipe in innovation and potentially control costs, clients should be aware of how to build a SaaS strategy that remains sustainable and prevents vendor-lock in.

Other documents as part of the ongoing series on packaged apps strategy include:

  1. Why You Need A Long-Term Apps Strategy
  2. Forrester’s Long-Term Packaged Applications Strategy Framework
  3. Does Your Apps Strategy Support Your Corporate Business Drivers?
  4. Packaged Apps Strategies Take A Back Seat At Most Enterprises
  5. The ROI Of Packaged Apps Instance Consolidation
  6. Five Steps To Building A Recession Proof Packaged Apps Strategy
  7. Shape Your Apps Strategy To Reflect New SaaS Licensing And Pricing Trends
  8. Third Party Apps Maintenance Rebounds
  9. Craft Your Negotiations Strategy To Reflect New Packaged Apps Licensing And Pricing Trends

RESEARCH HIGHLIGHTS

A. Introduction

Recessionary forces drive applications professionals to seek new delivery models such as software-as-a-service (SaaS), platform-as-a-service (PaaS), and other XaaS (X-as-a-Service) models. But with these options’ upfront benefits in choice, value, and predictability come new ownership risks that applications professionals and business stakeholders should explore. Forrester’s review of 11 vendors in SaaS enterprise resource planning (ERP), customer relationship management (CRM), and supply chain management (SCM) confirms that, motivated by heavy competition for new customers, these vendors remain vigilant in mitigating such end-user concerns. In fact, SaaS vendors continue to improve and refine subscription models for new buying scenarios beyond cost/user/month. Forrester recommends that all applications professionals include SaaS in their firm’s long-term packaged apps strategy and that they take five key actions to mitigate risk while avoiding lock-in.

B. Research Findings

The Recession Is Driving Increased SaaS Adoption 

Faced with impending IT budget cuts, increasing business demands, and the encumbrances of legacy packaged apps, enterprises are increasingly turning to true multi-tenant SaaS delivery options during the downturn.  SaaS adoption as part of a long-term apps strategy keeps growing because:

  • Subscription pricing reduces capital expenditures (capex).
  • SaaS enables more-rapid deployment.
  • Enterprises expect frequent updates with new functionality.
  • Business leaders drive more and more software decisions.
  • Vendor success generates buzz and increased interest.

Vendors Demonstrate Continued Evolution And Value of SaaS Pricing Models
Forrester analyzed the completed, work-in-progress, or ongoing initiatives for the latter half of 2008 for seven SaaS applications vendors. The software licensing and pricing trends Forrester found include refined pricing models, new bundling and unbundling options, and a focus on fixed-price implementations. Specific trends for these SaaS apps vendors include:

  • Amitive delivers a usage-based model to foster collaboration and community participation.
  • Intuit attaches a SaaS services model to on-premise QuickBooks Enterprise Solutions.
  • Intacct reduces the barrier of entry for SMBs while simplifying channel pricing.
  • NetSuite continues to expand vertical-edition bundling and flat-fee pricing for add-ons.
  • QuickArrow delivers choice with tiered and bundled user-based pricing models.
  • salesforce.com provides more value for existing license fees and more user tiers.
  • Workday maintains a simple subscription pricing model based on company size.

Recommendations – Adopt SaaS Benefits While Mitigating Risks In Your Long-Term Apps Strategy

Keep in mind that while cost/user/month SaaS pricing models may seem simple at first, factors such as connection points, storage, support, and module-based pricing can quickly add to their complexity. In addition, true multitenant SaaS models leave users without the software code should the vendor go bankrupt or the client choose to end its relationship with the vendor. While considering SaaS as part of a long-term apps strategy, enterprises should follow these simple suggestions to get the most out of SaaS and mitigate risk:

  • Balance pay-as-you-go month-to-month terms with long-term contracts.
  • Compare SaaS versus on-premise over an appropriate period.
  • Understand long-term ownership implications.
  • Seek more than just refunds for outages in service-level agreements.
  • Choose a financially viable SaaS vendor or seek a software escrow-like mechanism.

C. Report Links

Click on the link for the detailed report along with the “What It Means” and “Alternate View” for: Shape Your Apps Strategy To Reflect New SaaS Licensing And Pricing Trends. For media courtesy requests, please send me an email to rwang@forrester.com

Your POV.

Would love your feedback on the report.  You can post here or send me a private email to rwang0 at gmail dot com.

Copyright © 2009 R Wang. All rights reserved.

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