Tag Archives: ISV

Further Guidance for the Continuing ISV Cloud Business Transition

At the end of October, Saugatuck published a guidance report for clients that identifies, and provides critical management guidance regarding, key business challenges faced by ISVs as they transition over time to become more Cloud-enabling, and typically more Cloud-centric, in their technology and business. That report (1282SSR, Managing Challenges and Transitions: Best Practices for ISVs on Cloud Journeys, 31Oct2013) is available to Saugatuck subscription research clients by clicking here:  http://bit.ly/1gReKvb

Briefly, the six key areas that ISVs need most be concerned with – and be able to manage effectively over time – are as follows: Continue reading

New Report: ISVs’ Cloud Business is Change Management Over Time

What is Happening?          

Saugatuck’s work with hundreds of independent software vendors (ISVs) indicates that for many, the technical aspects of the transition to the Cloud are often fairly well understood – even if the roadmap for success may take some time.

However, what is less understood, and more dangerous to ISVs (and to IT providers of all types transitioning to Cloud-oriented business models), are changes that are required in every area of the ISV business that are typically much deeper and harder to execute, and often entail much more risk to the ISV as a company.

A new 20-page research report published by Saugatuck – Transitioning to Cloud Business: Best Practices for ISVs lays out the key changes, and related management challenges, as the following: Continue reading

Transition Success or Failure in the Cloud: Executive / Financial Challenges

As Cloud adoption continues to accelerate this year, Saugatuck has initiated a focused research program to refresh and expand our research in ISV Cloud transitions. The first wave of these transitions was rather uneven in results with notorious failures and many expensive lessons learned. Moreover, this research will reflect the evolved set of issues and challenges brought about by the shift to the Boundary-free Enterprise™. This applies equally to pure-play Cloud ISVs entering the market as well as traditional ISVs evolving their offering portfolios with new Cloud solutions.

Today’s Cloud platforms are far superior in enabling ISV Cloud transitions and their ongoing operations. Nevertheless, those significant business challenges do remain both for pure-play startups as well as established on-premises ISVs transitioning, primarily in these seven areas: Continue reading

OK, You’re now a Cloud ISV. What about Those Pesky Legacy Customers?

With a legacy customer base moving toward Cloud at multiple, differing, and volatile paces, traditional ISVs adding to or transitioning into Cloud business models are financially vulnerable. They need to protect and prolong legacy revenues and relationships, while building Cloud-based business fast and solidly enough to compete and grow – typically with very different costs, business models, partner relationships, and more.

Problem is, there haven’t been many (if any) useful models or approaches developed to address this. Until now, that is.

Saugatuck has been working with independent software vendors (ISVs) for most of its history, identifying and analyzing changes in business conditions, technologies, adoption patterns, and ecosystems that affect the ISV business model. The IT business focus remains our core research emphasis. Almost every established ISV that we talk with faces a set of substantial challenges in this vein, i.e.: As we move our own business toward Cloud, how can/should we manage our legacy customers and revenue streams?

To help guide ISVs, Saugatuck has developed a simple management model that includes four strategic tenets and associated activities. This blog post boils down the core tenets as follows:

  • Migrate. In our model, “Migrate” means to lead, enable, and support customers as they shift from using and relying on traditional software to Cloud-based software doing the same basic things. Customers are unlikely to simply switch to something new unless they see and understand significant business benefits (e.g., measurable operational improvement, cost reductions).
  • Extend. Extensions are typically Cloud-based, LOB-specific functions and features that layer on top of, or fill in gaps within, legacy solutions, systems, and processes. Think of them as stepping stones to ease customers into hybridized Business and IT environments – environments that are emerging anyway, so ISVs should be working with customers to make it happen.
  • Move. In some cases, what customers are using today has only a tenuous link to what they actually need to do, and they would benefit greatly from an entirely new solution/process/system. Given that your software is both key to that inefficiency and their ongoing business, why not leverage both? Moving customers to offerings that are more modern, more capable, more flexible, more relevant, and which streamline their operations, reduce their costs and/or otherwise enable growth/improvement, is a perfect approach to retaining and growing revenues and relationships.
  • Enhance. Enhancing an ISV offering via OS improvements, UI improvements, APIs (e.g., touch, voice, simplification, mobility, gamification) can stimulate/generate improved use, improved utility, improved satisfaction, improved retention and growth.

Obviously, there’s more, including guidance for ISVs built on our decade-plus of research and experience in their business models and realities.

NOTE: Ongoing Saugatuck subscription clients can access this premium research piece (1186MKT) by clicking here, and inputting your ID and password. Non-clients can purchase and download this premium research piece by clicking here.

What’s That Got To Do With The Price Of Tomatoes?

Addressing the conundrum of Cloud pricing is a challenge that can occupy ISVs transitioning to the Cloud for quite some time, at least in the first few years. And many more mature Cloud ISVs, though they have settled into a Cloud pricing strategy, still may not fully understand the range of options open to them, nor how they might rethink their Cloud pricing.

Little has changed since we first addressed the issue of the value metric in 2007 (344STR, SaaS Pricing: The Value Metric Is Only the Tip of the Iceberg, 3May2007).

As we noted back then, it is still the case that:

“Successful SaaS pricing is all about understanding the customer. It must appeal to the customer intuitively and must seem fair. It must show immediate returns to the customer and promise future value.”

Four of the best known pricing models are consumption, subscriptions, site licenses and auctions. These models are in turn based on different variables and calculated using very different processes. Each model may be more suitable for a specific kind of Cloud offering.

Figure 1: Four Familiar Cloud Pricing Models
1181MKT Figure 3
Source: Saugatuck Technology Inc.

For example, consumption pricing usually requires metering to track usage, although basic, rudimentary consumption pricing may be based on simple time or transaction counts. However, metered usage may also make use of a rating engine (see Note 2) that calculates usage according to a service agreement and rate plan. This can get exotic and may include flat rates, elapsed-time rates, tiered rates, bracketed rates, metered-usage rates, day-of-week rates, time-of-day rates, or some combination of them and may also consider the license type, whether named or unnamed users, pooled or concurrent users, and so on. MetraTech introduced in 4Q2012 a “Real-time Commerce Decision Engine,” based on an extensible metadata-driven architecture that makes it possible to model services, introduce services and pricing plans, including products, services, groups of accounts, usage types, charge types, utilization or commitment tiers, resellers, national jurisdictions, and multiple currencies and to change them in rapid response to market demands. That modeling capability makes what-if pricing a practical reality for the first time.

Subscriptions, site licenses and auctions are three other familiar approaches to the value metric. “Per user per month” became a popular part of the IT vocabulary thanks to the early Cloud leadership of salesforce.com and other SaaS pioneers. However, the value metric has never been the whole story. The job of the value metric is to provide a proxy for the value provided by a Cloud solution and, typically allows the buyer to estimate the bottom line price; that is, before add-on services and options are included in the total Cloud solution bundle. The same goes for site licensing, with tiers making it easy to guess at the vanilla bottom-line price before all those enticing extras. Auctions are popular in the Cloud as a means of pricing products, e.g., on eBay, but typically do not apply to Cloud solutions with the former exception of Amazon Web Services, now discontinued as a pricing mechanism. The use of time-of-day Cloud pricing serves a similar function for the provider by maximizing infrastructure utilization through lower execution prices for under-utilized day parts.

Note: Ongoing Saugatuck subscription clients can access this premium research piece (1181MKT) by clicking here, and inputting your ID and password. Non-clients can purchase and download this premium research piece by clicking here.

Cloud ISV Transition Strategies – New Challenges, New Best Practices

What is Happening?

As many of our readers know, for the past seven (plus) years, Saugatuck has been researching ISV and Master Brand transitions into the Cloud with SaaS, PaaS and IaaS offerings. Our earliest research was based on dozens of interviews with pure-plays and on-premises providers, and we have continued to reach out over the years to identify the most significant challenges that transitioning vendors face and the best practices they use to ensure success in the markets they are pursuing. Continue reading

Saugatuck Research: Windows Azure Insight from ISVs and SIs

Saugatuck has studied the Windows Azure platform in depth over the past two years. This has included briefings by Microsoft as well as extensive interviews with ISVs and global systems integrators (SIs) that have migrated or built nearly 150 SaaS solutions on the Windows Azure platform.

Based on this research, Saugatuck has found that the Windows Azure platform provides migrating ISVs (and SIs deploying primarily for corporate customers) with a highly-productive, robust and cost-effective platform for enabling efficiency, effectiveness, and innovation in delivering SaaS solutions, as one ISV commented:

  • If you’re a Microsoft house on SQL server, you might as well move to Windows Azure. Make Windows Azure your target platform and don’t maintain two separate versions.”
  • Architecture is of profound importance. Good architecture brings agility and cost-effective quality solutions.

We note that in order to realize the benefits of the platform, architecture that understands the platform and its design constraints is considered essential. However, there are significant challenges in getting up to speed on Windows Azure as a platform and in learning how to work around design constraints that can cause delays and increase expenses, for example:

  • Deployment of packages and VM roles from on-premises development still a challenge despite improvements in Azure Development Services Portal. Evolving VM roles and SQL Azure feature set are possible workaround tools.
  • Because of no certainty of achieving certifications or their timing, interim workaround solutions recommended, e.g., hybrid data storage for on-premises storage of regulated data that cannot reside on platform.

Despite these design constraints, Saugatuck believes Windows Azure remains a viable platform to accelerate an ISV into SaaS and recommends ISV consider exploring a relationship with a Windows Azure SI partner to accelerate implementation, avoid wasted expense, and implement a long-term viable solution.

Note1: Ongoing Saugatuck subscription clients can access this premium research piece (1023MKT) by clicking here, and inputting your ID and password. Non-clients can purchase and download this premium research piece by clicking here.

Note 2: For more on Saugatuck’s assessment of Windows Azure, see companion Strategic Perspective 1016MKT 10 Things To Know About Windows Azure, 27 January 2012, or Lens360 blog post Microsoft Azure Update: Ten Things You Need to Know, 01 February 2012.