Saugatuck Cloud Slam Blue Skies

Blue Skies –

The Air Clears
on
Cloud Computing
Mike West
Westport, CT
Vice President
Phone: 203-454-3900
Program Director
Cloud Research Board ™
Saugatuck Technology

Cloudy Language

• WALL STREET JOURNAL BIZTECH BLOG
– “Overuse of the Term 'Cloud Computing' Clouds Meaning of the
Tech Buzz Phrase” (September 23, 2008)

– “Microsoft Comes up with Yet Another Meaning for „Cloud
Computing‟ ” (October 2, 2008)

• The “ubiquitous buzzword . . . that everyone seems to
interpret as a different animal.” Forbes
• According to Gartner, Cloud Computing is “creating a lot
of confusion in the market”
• “There is a clear consensus that there is no real
consensus on what cloud computing is.” Irving Wladawsky
Berger, Chairman Emeritus – IBM Academy of Technology

Page: 2
Entire contents © 2009 Saugatuck Technology Inc.
All rights reserved.

CIOs on Cloud Computing

Recent Saugatuck interviews with CIOs revealed:
• “Cloud computing is anything the user wants it to be. OK, that's probably more facetious
than you wanted to hear. But it really is true – cloud computing means the availability of IT,
delivered as a service, from a provider unknown to or unseen by the user. It can be us in
house; it can be IBM; it can be SalesForce.com…” Divisional CIO, Top-5 US brokerage / financial services firm

• “Cloud computing is the outsourcing of IT infrastructure. I see the cloud including SaaS
and computing, Storage, etc. I don't know that we would outsource IT management to a
cloud provider…” CIO, mid-sized US manufacturing firm (with 7 small subsidiaries)

• “When I think of “Cloud Computing, I think of it as the ability to dream software
solution dreams. I then think of rendering it in a language of my choice. And finally, being
able to somehow magically quot;pushquot; code into the quot;Internet Cloudquot;, without fore-knowledge or
regard for any of the layers underlying my code (DBMS, OS, connectivity or Computer)…
The leading vendors are Google, Facebook, Amazon.com, and Salesforce.” CIO, Global Retailer

• “Cloud Computing is about on-demand infrastructure that can be flexibly deployed based
on my computing needs. Longer-term, it is all about building and deploying new apps in the
cloud – as we shift the way we deploy IT from internally-managed datacenters to centralized
utilities... Amazon and Google are the early compute-focused players, but Cloud Computing
will cross the entire ecosystem of providers within a short time…” SVP Fin/HR Apps at Top-5 US Bank
Source: Saugatuck Technology

Page: 3

What are Cloud Computing and Software as a Service?
Saugatuck Definitions:

• Cloud Computing
encompasses on-demand infrastructure (compute, storage, networking),
and on-demand software (OSs, apps, middleware, management, dev.
tools), customized dynamically to fit current and immediate business
process requirements, along with the ability to deliver and manage those
business processes.

• Software as a Service (SaaS)
refers to software provided and used in a utility computing context,
where the services provider delivers the functionality of the application
software over the network through a services interface. Typically these
services are sold via either a subscription model, or on a utility-style,
quot;pay as you goquot; (PAYG), or per unit, basis.


Post-Crash Business Drivers for Cloud Buyers

Business Drivers
Implementation cost 43%
Availability of cost-effective, responsive tiered user support 30%
Key Drivers
Implementation timeframe • Cost
26%
Solution deployment/usage methods (on premise, hosted … • Support
25%
Availability of implementation resources • Speed
23%
Service

Relationship with technology vendor 20%
Payment methods (license plus maintenance, usage-… 18%
No-obligation trial or pilot program 17% Decreasing Loyalty
Relationship with implementer (VAR, system integrator, etc) 16% to Legacy Brands
Services delivered by brand name vendor 16% and Relationships?
Availability of multi-year pricing incentives 15%
Availability of flexible billing terms 14%

% 10% 20% 30% 40% 50%
Percent

Source: Saugatuck Technology Inc., 2009 SaaS Survey (Dec „08), N=1788, TOP THREE so results equal more than 100%

Saugatuck Insight: Far and away the most important business driver for Cloud buyers is
Implementation Cost. Given this global survey was taken 8-10 weeks after the start of the
economic collapse (in mid-September 2008), it is not surprising to see this result.
At the same time, it is interesting to note that buyers rank the relationship with existing
channel / implementation partners and brand name vendors at the low-end of business
drivers, along with multi-year pricing incentives and billing flexibility.
Page 5

The Evolving Cloud Landscape
The focus shifts over time from cost-effective delivery of stand-alone application services
(Wave I), to integrated business solutions enabled by web services APIs and ESBs (Wave
II), to workflow- and collaboration-enabled business transformation (Wave III), leading to
measured, monitored and managed business processes (Wave IV).
By 2012, Cloud Computing will capture at least twenty five percent of IT spending growth.

Beyond Software-as-a-Service: Cloud Computing
High
SaaS 1.0 SaaS 2.0 Cloud Computing
Wave III: 2008-2013 Wave IV: 2011-2016
Wave I: 2001-2006 Wave II: 2005-2010
Workflow-Enabled Measured, Monitored, Managed
Cost-Effective Integrated
Business Transformation Business Processes
Software Delivery Business Solutions

Post-SaaS Adoption
Adoption

• End-to-End Cloud Business Processes
• Intelligent Hubs Linking Platforms
Ubiquitous SaaS Adoption
• Virtualization on Mobile Devices
• Focus on Business Transformation
Mainstream SaaS Adoption
• Elastic Cloud Infrastructure
• ISV to SaaS Enablement
• Integrated w/ Business
• Standards for Workload Portability
• Server and Application Virtualization
• SaaS Integration Platforms
Early SaaS Adoption
• SLAs for Composite Service Offerings
• Stand-alone Apps • SaaS Development Platforms (PaaS)
• Business Marketplaces
• Support at Business Process Level
• Multi-tenancy • Public Cloud Infrastructure (IaaS)
and SaaS Ecosystems
• Limited Configurability • Cloud Collaboration Platforms
• Customization Capability
• Focus on TCO / rapid • Customized, Personalized Workflow
• Focus on Integration
deployment

Low
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Page 6

Cloud Technology Considerations by Geography

Technology Considerations United States Europe Asia
69.8% 61.0% 73.5%
Robust backup/recovery capabilities
67.8% 57.6% 71.8%

higher levels for all responses
Robust disaster recovery capabilities
51.4% 49.9% 63.5%
Software development platform & tools

wide range (45 points)
49.0% 46.6% 61.7%
Web Services API
45.5% 47.8% 59.1%
SLA compliance data
40.6% 42.5% 56.0%
SOA architecture
37.7% 46.7% 53.7%
Display data on mobile devices
32.4% 42.1% 55.9%
Multi-tenancy based solution

37.2% 41.4% 55.0%
Support for Web 2.0 mashups
34.3% 45.1% 52.4%
Update data via mobile devices
24.9% 41.9% 53.0%
Appliance form factor
Source: Saugatuck Technology Inc., 2009 SaaS Survey (Dec „08), N=1788

Saugatuck Insight: Notable differences in the key technology considerations driving demand
across geographies, especially among Asian executives. Mobile device support is more
important in Europe and much more important in Asia than in the United States. Please note
the much wider range of responses in US and higher levels for all responses in Asia

Page 7

Channel Preferences by Region

Leading Regional Preference
IT Consultancy

United States
Direct from SaaS
Solution Provider
Service

Industry-specific VAR
or System Integrator
Europe
Local/Regional VAR
or System Integrator

Managed/Hosted
Services Provider Asia
Business
Consultancy
(e.g., accounting firm)
% 20% 40% 60%
Source: Saugatuck Technology, Web Survey December 2008, N=1788

Saugatuck Insight: Channel strategy must be tailored to geography. The US ranked “direct from
provider” highest; Europe and Asia ranked “IT consultancy” highest. IT consultancy channel is ranked
highest overall due to ranking in Europe and Asia. Note also the much higher preference for “Business
consultancy” in Europe and Asia. “Local/Regional VAR or system integrator” is most popular in Asia.

Page: 8

Purchase Plans – Collaboration & Social Computing
Please indicate when your company plans to purchase a SaaS solution in each of
the following categories:
All Sizes 100-300 300-500 500 to 1000 1000 to 2500 2500 to 5000 Over 5000
2009 2011 2009 2011 2009 2011 2009 2011 2009 2011 2009 2011 2009 2011 > 60 %
52 - 60 %
Email 48.4% 64.8% 54.5% 71.8% 51.3% 72.8% 52.1% 69.3% 47.0% 62.8% 44.9% 59.9% 42.9% 56.5%
44 - 52 %
Web Conferencing 47.7% 66.7% 44.5% 67.6% 45.5% 69.7% 49.0% 69.5% 45.2% 63.6% 53.6% 69.0% 49.3% 63.9% 36 - 44 %
Calendaring 41.0% 59.4% 46.1% 64.3% 46.8% 72.5% 40.2% 64.1% 40.7% 58.3% 42.1% 57.3% 35.2% 48.9% < 36 %
“Office” Suite 40.9% 61.2% 46.0% 69.0% 42.2% 67.2% 39.2% 61.2% 36.1% 55.6% 34.7% 51.5% 41.7% 58.8%
Project Management 40.8% 62.4% 44.5% 66.1% 40.3% 68.2% 41.6% 66.8% 40.0% 61.9% 43.3% 59.1% 37.7% 56.3%
Business Collaboration 39.6% 61.3% 40.4% 62.0% 39.1% 67.0% 43.0% 64.0% 33.2% 60.4% 41.8% 59.4% 39.5% 57.9%
Forums 34.7% 53.5% 34.0% 56.2% 37.7% 61.9% 34.4% 56.3% 31.5% 50.9% 37.8% 54.9% 34.5% 47.1%
“Communities” 34.7% 55.0% 36.0% 57.7% 37.8% 62.2% 36.2% 56.9% 31.2% 53.5% 32.7% 56.4% 33.9% 48.9%
Social Networking 33.9% 51.4% 37.9% 55.9% 34.8% 58.8% 35.5% 54.4% 31.9% 50.9% 33.1% 53.0% 31.0% 43.2%
Whiteboards 33.0% 53.3% 34.1% 54.8% 36.7% 62.9% 36.2% 58.5% 28.0% 53.1% 38.4% 55.5% 29.2% 44.8%
Blogs 32.9% 50.9% 34.1% 54.6% 37.1% 60.3% 33.7% 52.3% 30.7% 47.4% 31.3% 52.1% 31.1% 44.5%
Content Tagging 32.8% 52.9% 35.3% 54.7% 37.7% 63.2% 33.1% 57.2% 29.2% 52.8% 37.6% 54.5% 28.7% 44.4%
Wikis 32.5% 50.6% 33.7% 51.6% 37.6% 56.8% 30.5% 52.5% 29.0% 47.9% 32.5% 54.2% 31.9% 45.9%
Source: Saugatuck Technology, Web Survey December 2008, N=1788

Saugatuck Insight: The sweet spot in collaboration and social networking tools is clearly the small
and mid-sized market (100-1000 employees), with the 300-500 employee segment particularly
promising. It is worth noting that for all sizes, an upside of nearly 20 percent from 2009 to 2011
pertains to all categories of collaboration and social networking tools. However, large enterprises
(2,500 employees and above) do not show the same level of interest in these solutions in comparison
to smaller enterprises with the exception of Project Management and Business Collaboration, where
there is a nearly 20 percent increase from 2009 to 2011.
Page: 9

SaaS and Core Business Systems
Between 2009 and 2012, at least 40 percent of upper mid- to large-enterprises will seriously
evaluate SaaS-based “core” financial solutions, as well as broader operational systems and
requirements (e.g., order management, procurement, ERP, HR).

Key catalysts that will drive mid-to-large
High
Adoption of SaaS
enterprises to migrate to SaaS-based
for Collaboration,
financial systems (“Core” and “Non-Core”)
Self-Service, CRM
• Dramatically lower costs
and SFA
• Simplification of the upgrade / release
management process
“Upper-Mid” to
• Powerful integration tools (apps / data)
“Small” to “Mid”
“Large” Enterprise
• Advances in SaaS application customization Enterprise
capabilities to support personalized workflows
Broad SaaS
• Easier access to next-gen technology
Adoption
and architectural advances
Curve
Adoption of SaaS
for “Core” and “Non-
Core” Financial Systems /
SaaS “Tipping-Point”
Operational Processes
(General Market)

Early Mainstream
Early Mainstream
Low Adoption
Adoption Adoption

2014
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Page 10

Saugatuck Cloud Ecosystem Model

Level 4; BPO / Managed
Services. Specialized expertise often
delivered in conjunction with a Cloud-
based solution, e.g., Mobility as a
Service, Cloud-based security.
Level 3: SaaS (Waves I-III) and
related services. Business solutions
delivered from the Cloud, typically in a
multi-tenant architecture, and billed
under subscription model.
Level 2: Cloud
development, PaaS, SaaS
integration, Service
Hubs, including
billing, administration, aggregation, sec
urity and mobility solutions, systems and
infrastructure management, data
warehousing, data access and
analysis, and related professional
services.
Level 1: Cloud-based On-
Demand infrastructure providers
and platforms that host SaaS and
other on-demand solutions and provide
service offerings to manage
infrastructure platforms (collocation);
Level 0: Suppliers of
hardware, system software and
utilities, data center management
software, networking
equipment, 11
Page hardware and software, and
associated services

“. . . –as-a-Service” Taxonomy

IaaS PaaS SaaS ITaaS
Infrastructure-as-a-Service Platform-as-a-Service Software-as-a-Service IT-as-a-Service

Business Process Outsourcing, Business Process Outsourcing, Business Process Outsourcing, Business Process Outsourcing,
Level 4 Level 4 Level 4 Level 4
Managed Services, Managed Services, Managed Services, Managed Services,
Business & Information Services Business & Information Services Business & Information Services Business & Information Services

Software as a Service, Software as a Service, Software as a Service, Software as a Service,
and Related Services and Related Services and Related Services and Related Services

Cloud Development, SaaS Cloud Development, SaaS Cloud Development, SaaS Cloud Development, SaaS
Integration, Services Integration, Services Integration, Services Integration, Services
Hubs, e.g., Billing, Security, Mobility Hubs, e.g., Billing, Security, Mobility Hubs, e.g., Billing, Security, Mobility Hubs, e.g., Billing, Security, Mobility
, and Related Services , and Related Services , and Related Services , and Related Services

Cloud Infrastructure, Cloud Infrastructure, Cloud Infrastructure, Cloud Infrastructure,
e.g., Hosting, Execution and e.g., Hosting, Execution and e.g., Hosting, Execution and e.g., Hosting, Execution and
Storage, And Related Storage, And Related Storage, And Related Storage, And Related
Services Services Services Services

Hardware, Software, Networking
Hardware, Software, Networking Hardware, Software, Networking Hardware, Software, Networking
and Services
and Services and Services and Services


Saugatuck Insight: IaaS providers (Level 1) serve as channels for
integration, security, mobility, billing & payments, and other Level 2 providers. PaaS providers
(Level 2) may also refer or offer Level 1 hosting services, either through partnership, portability or
platform capabilities of their own. SaaS providers (Level 3) may partner with Level 2 billing and
payments or security providers or with Level 4 BPO / MSP providers. ITaaS providers may offer
the full range of ecosystem Inc. services.
Entire contents © 2009 Saugatuck Technology
Page 12

Key Findings – Recent Saugatuck Cloud Research
Saugatuck Insights:
• Despite the economic meltdown, purchase plans for Cloud Computing solutions,
including SaaS and Cloud Infrastructure, remain strong in 2009 and for 2010 – across all
geographic and customer segments.
• A new ecosystem is forming around Cloud Computing that will transform the IT sector.
This inevitable transformation will result in a multi-level ecosystem, ranging from technology suppliers through Cloud
Computing providers to business services providers.
• While Cloud Computing is emerging (Wave IV), SaaS adoption has clearly moved
“beyond the tipping-point” (Waves I-III) – Accelerating “mainstream” adoption of SaaS shifts demand to
core business systems, not only among SMBs but also Large Enterprises.
• Hybrid application architectures emerge – SaaS increasingly linked with on-premise data, applications and
processes through Web Services-based Integration APIs.
• SaaS Analytics, dashboards and BI/performance management tools driving a metrics-based
approach to business services.
• A new SaaS-based business services delivery model is emerging – as onshore and offshore
BPO providers are forced to rationalize their one-to-one outsourcing models, reduce costs and bring greater process
efficiency to their clients. Offshore providers begin to embrace SaaS / Cloud across multiple dimensions of their businesses.
• The most aggressive adopters of SaaS are low-to-midsized SMBs with 100-499
employees. A small, emerging group of SMBs, labeled by Saugatuck as “The New SMB,” forego traditional IT and
immediately establish themselves with SaaS- and cloud-based IT.
• Cloud, SaaS and Mobility are helping to make the “boundary-free enterprise” a reality.
Cloud Computing has emerged -- and will continue to evolve – to enable increasingly networked, mobile businesses, staffed
by knowledge workers that are exchanging information and doing business with organizations across the globe in an
economic environment favoring agility and speed of response.
Page 13

The Boundary Free Enterprise
20th Century Enterprise – 21st Century Enterprise -

“Within Bounds and Borders” “Boundary-Free and Global”

Economies of Scale Agile Economies

Volume Production Speed of Response

Industrial Plant Workers Mobile Knowledge Workers

Local, Regional, National Global Organizations

Vertical Integration Virtual Integration

Hierarchical Structures Distributed Networks

Planes, Trains and Automobiles Mobile Devices, Browsers and the Cloud


Chart: 14

How to Contact: Regional Sales Offices
US OFFICES INTERNATIONAL

Headquarters Germany
Saugatuck Technology Inc. Saugatuck Technology Inc.
49 Riverside Ave. Bluecherstr. 4
Westport, CT 06880 D 65343 Eltville am Rhein
USA Germany
(P) +1.203.454.3900 (P) +49.6123.630285
Regional Sales: Al.Vanek@Saugatech.com Regional Sales: frank.sempert@saugatech.com

Silicon Valley

•
••
Saugatuck Technology Inc.
5201 Great America Parkway, Suite 320
Santa Clara, CA 95054
USA
(P) +1.408.727.9700
Regional Sales: Andrew.Jeffs@Saugatech.com

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