The Future of Software Delivery: The opportunities and challenges of emerging software delivery models

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The Future of Software Delivery: The opportunities and challenges
of emerging software delivery models
Published on March 2009

Report Summary

The Future of Software Delivery
The opportunities and challenges of emerging software delivery models

Report Overview
The way companies perceive and purchase their software is starting to change. Organizations no longer have to buy an on-premise
application and host it on site, they can have it delivered on-demand, as a service or hosted by the software provider or a third party.
But while these new models offer more choice in how they pay, receive and use applications, the proliferation of terms has led to
some confusion amongst organizations about what they are and what they constitute. 'The Future of Software Delivery: The
opportunities and challenges of emerging software delivery models' is a new report published by Business Insights that examines the
market conditions that led to the emergence of these new models and the benefits they offer over traditional delivery types. This
report also examines future market opportunities for software delivery models and how they may be extended to hardware platforms
in the future.

Key Findings
The size of the on-demand CRM market will increase rapidly through 2009 to reach 27% of total market size as the CAGR for
on-demand far exceeds that for the total CRM market.

There are signs that enterprises with revenue of more than $1bn are also adopting more SaaS (Software as a Service) applications.
Originally some industry commentators predicted SaaS would not expand beyond SMBs into larger organizations.

A study by Triple Tree and the Software and Information Industry Association (SIIA) found that on-demand deployments were 50% to
90% faster, with a total cost of ownership five to ten times less than installed software.

The growth rates for on-demand CRM and ERP application markets are significantly higher than for the premise-based market. This
is an indicator of the high levels of growth potential in the market.

Use this report to...
' Identify and target future growth areas of on-demand CRM using this report's analysis of new market opportunities by sizeband,
vertical and region, as well as market forecasts for key sectors.

' Understand the key issues in the software delivery market including vendor ecosystem, competitor offering and on-demand vs
on-premise deployments.

' Enhance your sales and marketing strategies with this report's comparison of different vendor strategies and recommendations on
improving your go-to-market strategy. ' Assess emerging software delivery models with this report's cost analysis of implementing
software via different models.

Explore issues including...
On-demand is often used interchangeably with SaaS, but it's also a bigger concept in its own right, referring to a new way for

The Future of Software Delivery: The opportunities and challenges of emerging software delivery models Page 1/7


organizations to respond faster to customer demand, build new partnerships or react to market changes.

Vendor ecosystem. At the moment there is no single vendor leading the market for SaaS delivered solutions. Jostling for dominance
in this market are traditional applications vendors, infrastructure vendors, pure play SaaS vendors and services providers.

SaaS in the enterprise. SaaS looks set to continue pervading the enterprise, whether through those application areas that suit
Internet-based delivery, such as web conferencing and collaboration tools, to those that were previously considered as necessary to
be kept behind the firewall: helpdesk, back-up software, word processing, spreadsheets, slideshows, content management and even
supply chain management software.

Discover
' What's the difference between SaaS and traditional on-site implementations'
' Will any of these alternative software models become the primary way that organisations buy software'
' How is today's hosting model different to the ill-fated ASP model of the 1990s'
' Where does hosting fit in and how does it differ'
' What are the limitations of these software delivery models'
' Who are the leading vendors in this space' And is there a market leader yet'

Table of Content

Table of Contents
The Future of Software Delivery
Executive summary 10
New software delivery models 10
The changing IT landscape 11
Future opportunities 11
Managed application hosting 12
Pitfalls of new software delivery models 13
Vendor activity 14
Chapter 1 Introduction 18
What is this report about' 18
Who is this report for' 18
Definitions 19
Application service provider 19
Hosted applications 19
Managed application hosting 19
On-demand 19
On-demand subscription fees 20
On-premise applications 20
Service-oriented architecture (SOA) 20
Software as a service (SaaS) 20
Chapter 2 New software delivery models 22
Summary 22
Introduction 23
Software as a Service 23
Characteristics of SaaS 25



Ownership 25
Location 25
Payment 25
Tenancy 25
Growth in the SaaS market 27
The market opportunity 27
On-demand 29
Growth opportunities for on-demand 30
Application hosting 31
The ASP legacy 32
Outsourcing 33
Cloud computing 34
Web 2.0 34
Concluding thoughts 35
Chapter 3 The changing IT landscape 38
Summary 38
Introduction 39
How did IT come to be delivered as a service' 39
The next big thing 39
Disadvantages of the on-premise model 40
Cost 40
Implementation 41
Support and maintenance 42
The benefits of new software delivery models 42
Lower IT costs 43
More manageable costs 43
Familiar pricing model 43
Faster and easier implementation 44
Less software needed 44
Easier upgrades 44
Faster time to value 44
Greater access to new applications 44
Stronger ties between IT and business goals 45
Easier to manage 45
Scalability 45
Disaster recovery readiness 45
Chapter 4 Future opportunities 48
Summary 48
Introduction 49
CRM: the starting point for SaaS and on-demand 49
CRM market opportunity 50
Other application areas being delivered as a service 51
The ERP market opportunity 51
Business intelligence (BI) 52
Email 53
Others 53
Hardware as a service 54
Vertical opportunities 55
Financial services 55
The on-demand CRM market 55



Vendor spotlight 55
The benefits of SaaS for manufacturers 56
SaaS delivered technology can support a range of business processes 58
Go-to-market recommendations 60
Public sector 64
Higher education 64
Benefits of SaaS for institutions 65
Higher education processes suitable for SaaS delivery 65
SaaS in operation 68
Go-to-market recommendations 70
Communications 72
Utilities 72
Regional opportunities for on-demand CRM 73
North America 73
Europe, Middle East and Africa 73
Asia Pacific 74
Central and Latin America 75
Chapter 5 Managed application hosting 78
Summary 78
Introduction 79
Trends influencing the hosted application market 79
More applications to be delivered through managed hosting 79
Managed hosting is growing vertically and horizontally too 80
Services as competitive differentiation for managed application hosting providers 81
Growing costs could limit managed hosting providers 83
Expect virtualization to help alleviate rising data center costs 83
Being more efficient could boost green credentials too 84
Chapter 6 The pitfalls of new software delivery models 88
Summary 88
Introduction 89
Customer concerns about new delivery models 89
Security 89
Infrastructure 91
Service levels 92
Regulatory concerns 92
Lack of customization 93
Culture 94
Challenge out-dated perceptions 95
Be patient 96
Challenges for software providers 97
Architecture 97
Service levels 98
Customization 98
Cost 98
Customer support 99
Security 99
Overcoming barriers to adoption 100



Educating the market 100
More applications needed 101
Stay flexible 101
Promote on-demand and SOA as related concepts 101
Conclusions 102
Chapter 7 Vendor activity and effective strategies 104
Summary 104
Introduction 105
Competitive landscape 105
There are no clear leaders in the SaaS market 105
Different vendors carry multiple SaaS product lines 106
Vendor offerings 107
Software providers 107
New-breed on-demand vendors 107
Traditional enterprise application vendors 112
Infrastructure providers 118
Amazon 118
IBM 119
EMC 119
HP 120
Dell 121
Sun Microsystems 122
Capitalizing on the market opportunity 123
Key success factors for successful vendors 125
Amount of configuration options 125
Target and expand the right processes 126
Develop SMB specific functionality 126
Vendors should focus on a small number of key selling points 129
Provide SaaS delivery to applications in a modular, expanding fashion 130
Vendors need to continue to educate the market about issues such as security 130
Configuration, configuration, configuration should be the mantra of SaaS vendors 131
Index 132
List of Figures
Figure 3.1: The hidden costs of on-site deployments 41
Figure 3.2: Advantages of the SaaS and on-demand delivery models 42
Figure 4.3: Relative opportunities for SaaS within SCOR process groups 59
Figure 4.4: Perceived inhibitors to SaaS adoption within manufacturing companies 62
Figure 6.5: Challenges for software providers 97
Figure 7.6: Key success factors for successful vendors 125
List of Tables
Table 2.1: A comparison of on-premise and SaaS delivery models 24
Table 2.2: Features of the on-demand delivery model 30
Table 2.3: Distinguishing between hosted and SaaS applications 31
Table 4.4: The CRM vs on-demand CRM global market, 2004-2009 ($m) 50
Table 4.5: The ERP vs. on-demand ERP global market, 2004-2009 ($m) 51
Table 4.6: Deployment of different software delivery models in higher education institutions 64



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