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Hello, everybody, and welcome to our webinar series, Navigating the Cloud. My name is Holger Schulze and I'm your moderator today. Today's webcast will educate you about the six most common business challenges associated with delivering software as a service and how to navigate these challenges in the cloud to achieve better revenue assurance, product versatility, and enablement of complex license models. This is the first of a series of webcasts that will explore the most critical aspects of moving to SaaS. And the webcast will educate software companies on best practices for software monetization in the cloud, covering the hottest topics around delivering software as a service, including service catalog definition and management, usage authorization and metering, business process optimization, and more. Our presenters today are Mike West with Saugatuck Technology and Todd Steel with SafeNet. Mike West is vice president and distinguished analyst at Saugatuck Technology, and he will tell us about the changes that are taking place in the software world today as our industry is rapidly moving from on-premise software to software delivered as a service. Todd Steel is product manager for software-wide management solutions at SafeNet, and he will tell us about six business and technical challenges of moving to SaaS and how software companies should approach these challenges. But before we get started, I would like to highlight that you can ask questions at any time during the live webcast. Simply click the Questions button on your screen and enter your question. We will answer the questions at the end of our webcast during Q&A. Also, if you would like to join the conversation on Twitter, please use the hashtag shown on the screen. Now without further ado, let's get started. Mike, the floor is yours. Hi. I'm Mike West from Saugatuck. Welcome. It's easy to talk about changing businesses and business models, but not so easy for a firm to do it on its own. The transition to SaaS affects every single aspect of the business, and making it happen without help is practically impossible. Even the largest software business requires partners for the software transition to SaaS. How do we know this? Since 2003, Saugatuck has conducted research into what was then called on-demand or pay-as-you-go IT and now includes SaaS cloud computing and cloud business services. Our survey research-- and we launch annually surveys into SaaS and cloud infrastructure-- has polled over 10,000 C-level and VP-level executives to date in our partnership with Business Week Research Services. We have worked with more than 200 software companies to examine and advise them in their transition, and we have worked work with all the leading SaaS providers on their business and go-to-market strategies. Our latest research shows continuing trend of accelerating SaaS adoption in all types and sizes of firms and in all geographies. Our research also shows that even the most traditional business-critical software is now moving to SaaS. The chart on page 2 depicts the shift from on-premise solutions to the cloud. The bars are representing the workloads based on traditional software and cloud-based SaaS services. As you'll see in 2014, they arrive at a balance point, at a tipping point, if you will. And by 2014, we expect that more than 45% of new enterprise IT workloads will be cloud based. Two important trends-- the movement to the core and increasing differentiation in cloud solutions. About movement to the core, HR finance especially are now joining CRM, customer support, and collaboration. ERP is still in the wings, but preparing to walk on stage as vertical solutions continue to grow in number, functionality, and relevance across all industries. And early and rudimentary cloud solution offerings have deepened and begun to evolve and will continue to evolve to compete meaningfully against traditional on-premise solutions in terms of mature business functionality as well, through delivering unique cloud capabilities that will, over time, increase their competitive advantage. Two hot horizontal solution areas I call your attention to-- the rise of cloud analytics, complementing the management of master data, cloud data stores, and tools for business analytics, will be increasingly provided by cloud solution providers through platform offerings that can link the data of cloud and on-premise business solutions and deliver inquiry and analysis capabilities, dashboards, and scorecards and trigger alerts to business users in real time. And two, mobility. Smartphone apps, especially wireless networks, are evolving to support portable PCs, notebooks, tablets, and mobility devices, including smart phones from Apple and Android providers, increasingly enriched through application capability specifically designed for the cloud and portability. By 2015, there will remain no business computing category that hasn't moved to the cloud. On this next slide, we depict the evolving cloudscape moving through a series of well-defined waves. The first wave, SaaS 1.0, is standalone SaaS solutions. The second wave and the third wave are really what we call SaaS 2.0. Wave two about integration and bringing business solutions together. This wave is just now completing as we move into wave three, where workflow-enabled business transformation becomes possible. And the fourth wave, of course, is the shift beyond SaaS, really, into cloud computing, where the term SaaS just joins with a series of other capabilities in the cloud that are available to users worldwide. Two characteristics of this-- hybrid architectures. Integrations role continues to grow as SaaS apps move from the periphery toward the core, and linkage between cloud and on-premise apps becomes more crucial. Through 2015, cloud business solutions providers offer integration APIs. Cloud integrators will produce a wide range of adapters and services and tool kits for creating them. And new wave cloud SIs will expand their value propositions beyond custom engagements to embrace horizontal offerings that they create, offer, manage, and maintain in subscription services offerings. The hybrid business portfolio will be dominated by cloud solutions in 2015, as the on-premise segment transforms from the driver of transactions to the repository of business data. And, too workflow, in the cloud and on premise grows in importance as cloud business solutions providers and master brands make acquisitions of pure plays and start-ups, enrich their capabilities in support of hybrid architectures that enterprises have committed to. Through 2015, alliances between and among cloud solution providers will lead to the offering of robust composite solutions in the cloud that include unified workflow architectures. By 2015, too, enterprises will be-- their portfolios will be workflow-driven hybrids of cloud and on-premise data and functionality that are monitored, measured, and managed to meet enterprise performance objectives. On the next slide, we look at the revenue picture. You might believe that what I've said impels you to move to the cloud. But is there any evidence? Our research indicates very clearly that SaaS as a business model is much more attractive and beneficial than traditional on-premise software. We've assembled a market basket of SaaS and another market basket of traditional enterprise software firms. For on-premise ISVs, the growth measure is based on net new revenue-- net new license revenue. And for the SaaS model, the most accurate indicator is deferred revenue growth. In the recent past months, overall raw percentage growth has declined for both. For SaaS, this makes sense, because it was extremely high initially, and the growth rates will decline because the base continues to grow. But even in decline, SaaS revenue growth remains well above traditional software vendor growth rates, and especially during this worst financial recession in decades. So based on our analysis of market factors, we see SaaS maintaining and continuing its growth rates above on-premise software in the coming months and years, and our recommendation to all software vendors that we work with is to transition business models to include SaaS or, as Saugatuck terms it, cloud business solutions. But there are significant challenges. I mean, is this transition a complete crap shoot? Not really. You're probably more at risk staying put in the on-premise category. So how does risk vary by the size and maturity of the company? The chart above indicates that public companies have a much more complex challenge. What are the dimensions of risk? And what are the best practices? We see the challenges for software companies moving to SaaS as being in the categories of finance, technology, organization, operations, and culture. There are new challenges in finance, including funding, managing existing and legacy products, pricing of the new offering for competitive positioning and profit, and profitability strategy, including new cloud financial metrics. Cloud buyers will expect intuitive pricing and flexible payment offerings. In the technology space, strategy, architecture, R&D management, integration, and customization, infrastructure selection and implementation are the challenges that we identify. And cloud buyers will expect performance over features and ease of integration and customization capability. In the organizational category, you need an organization transition plan. Managing sales and marketing sales compensation will be a challenge. Partnering strategy, migrating existing customers, managing customers and partners, distribution channels, and value-added services. The cloud buyers will expect accountable, responsible customer support, even intimacy. In the operations space, security, service levels, backup and recovery, operation metrics, initial functional requirements and ongoing enhancements, facilities to automation and efficiently manage the processes required for a SaaS business, and service excellence. Here, cloud buyers will expect secure, robust services, verifiable service-level agreements. And finally, culture, not to be overlooked. Because a SaaS company is a new identity for the organization's customer-facing units. Consideration of the company's name, potentially changing it. Cultural evolution to create customer intimacy, unity, and building collaborative support through online communities. Cloud buyers will expect customer-focused, innovative, and proactive approaches to them. At the bottom line, we see SaaS will dominate the software industry agenda for new investment and spending, increasingly influences buyer software infrastructure and business services decisions. These ISV strategies may come in all flavors and sizes, but every aspect of the ISV will be impacted by the market shift to SaaS. the I cited before, the economic, the technological, the operational, the organizational, and the cultural. But you've got to pick your battles, in terms of what you can do and what you can rely on third parties for support. Again, I cannot stress too much that to go it alone is a mistake. You need to look for support. And there are all kinds of aspects of the SaaS transition that require reaching out and embracing and joining in partnerships with other entities. But be cautious, especially, about quick fixes, especially technological and organizational quick fixes, that don't provide you with long-term leverage and scalability as your client base grows. One highlight here is the whole notion of monetization that Todd touched on earlier. This is a common mistake that lots of firms make, thinking they can manage the transition to SaaS without a very, very deep examination of their billing and payments approach, their partnering, how you manage channels, and so forth. It's a very complex change, and this is one example of where you might want to partner and find solutions from other players. And finally, I'd like to close with a ominous warning. Beginning in 2012 and continuing through 2015, the migration of existing on-premise solutions will decline rapidly in favor of cloud native solutions from traditional on-premise vendors. It's one thing to throw what you've got on premise into the cloud in the short term. It's a quick fix with a pricing change, but that will not play in the long term. You've really got to take advantage of what the cloud has to offer. And now I'd like to conclude and transition this back to SafeNet. Excellent. Thank you, Mike. Now that we better understand the major changes and concerns associated with moving to SaaS and cloud environments, I'd like to ask Todd Steel to tell us more about the specific business challenges that software product managers have to overcome when moving to the cloud. Todd, take it away. Thanks, Holger. My name's Todd Steel. I'm a senior product manager here, and I'm talking to you today because over the last year and a half, SafeNet has really been focusing on the SaaS market and the cloud market and how current providers are providing solutions in the cloud and how existing ISVs are trending to add on adjacent SaaS-based offerings, as well as moving their solutions to the cloud. We've talked to scores and scores of our existing customer base and many existing cloud providers all up and down the stack, and we really distilled it down to six major challenges. And so today, I'll be really focusing on those challenges and really what the pitfalls are and how to address them. The first information that we really uncovered was that enforcing contract compliance can be really costly. So costly, not just in terms of the right technology to control, but also costly in terms of customer experience, and I'll talk more about that. Today in the SaaS market, right, most offerings have very limited feature bundling. Typically, you're purchasing SaaS-based solutions today, or users are purchasing those solutions, with a very flat-rate, all-inclusive type plan. Then software vendors are trying to repackage or come to market with new packages. What we found is that it's being very costly in both time to market and engineering work to repackage those offerings. Today, there's very restrictive and simple subscription business model since it's very in its infancy in terms of sophistication on the broad way in which you can consume software that's being hosted in the cloud. And usage information is available in the cloud today, but it's really manually complex to get. And it's really purposed for billing. The information around usage is really not there to optimize your business, is what we discovered. And for those customers who have an offering on both on-premise and SaaS-based offering, what we found is that really they're almost operating as two separate companies. That there's a fragmented operational process going on that's requiring multiple systems and multiple different ways to manage the two different business lines separately. So distilling feeling that down into simple statements, right, we're really going to be focusing today on the six problems of service agreement compliance, how to make sure that I have a versatile enough product, how I'm agile enough in my service offering so that I can reach the maximum market applicability, how I can have sophisticated license models to serve all ranges of my market-- my addressable market-- having the right business intelligence information to optimize my business and make the right strategic decisions, and how do I deal with this complex back-office support. What considerations should go there? So the first challenge that we uncovered is that service agreement compliance is really going to cost you if you don't get it right. You want to make sure that you have the proper controls in place to realize revenue for your service use, of course. Well, service overuse costs you in two different ways-- profitability and customer experience. Let me tell you-- start by telling you a real-life story of one of our clients, right? This story is about a mature SaaS company that has been around for over 10 years. They've been selling into large enterprise technology companies with a customer portfolio than any of us on the phone would be jealous of. When they launched their service, they launched with the expectation that, based on who they're targeting, their target customer market-- and remember, we're talking about large household name technology companies-- that they'd have no problems with maintaining compliance for the licensing terms through just a standard paper likeness. Well, a year and a half went by, and they were pretty successful by adding on many new clients, but they went back and found it odd that none of their customers came back to them to renew their-- to increase their limits on their licenses that they purchased. So what they went ahead and did is they performed an audit. And surprisingly, what they found was that not a single customer in their portfolio was complying to their terms. Even the largest, really the largest, most well-known customers were happily consuming more service than what they were purchasing. Well, that put this vendor in a very difficult situation. He had the daunting task of working with the customers to try to bring them back into compliance. And of course, these customers were furious that they add the ability to get out of the compliance in the first place. They had expected that the solution would control them in some manner, and that this unintentional overuse was impossible to happen with this service. I'm going to expand a little more on this, but just to remember right now, revenue assurance is critical to profitability and a positive customer experience. So when we look at service agreement compliance, right, we're talking about profitability through revenue assurance and avoiding a negative customer experience. On the revenue assurance side when we talk about licensing, we're really not talking about denial of access. That is not the end game. That's not what we're all about. We want to provide access as much as possible. So having a positive customer experience is what we should be focused on. We shouldn't be focused on denying access. What's more important than denying access is the knowledge, understanding who's overusing and being able to use that knowledge to go back to these unintentional over-users and use that as an upsell opportunity. Let's create a revenue stream out of unintentional overuse. That leads to the second one, though, about avoiding a negative customer experience. One thing that we found time and time again is that truing up can be really costly. And when we say that, we mean that there's really a significant negative impact for an enterprise who's consuming a service who unintentionally goes over their contract limit. And why I say this is that it's expensive because they want to save face, right? They don't want to be told that hey, you're outside your contract limit. Having them go back and true up can make them create an audit of their purchasing process which, again, makes your buyer look really bad and stops making you look like a partner, right? a software technology partner. And having to write a bigger unexpected bill at the end of the year for the same level of service is always very difficult for your customers to have to go back to management and explain how they got out of compliance, why their bill increased, and in-- because the customer seems like hey, I'm just using the same level of service I did last year. Why did my bill double, right? So that truing up experience can be really costly. So you really want to find the proper balance. And what we mean by "the proper balance" is positive customer experience is the end goal, of course, of course. And it's more important than denial of access. But denial of access is better than a negative customer experience, right? Getting into a negative customer experience with how they purchase and how they use your software is the worst of all worlds. So you want to have the proper controls in place, right? So when we say denial of access, what we really mean is having the proper controls in place. So you want the proper controls in place and transparent limits so that that customer can understand what they're actually purchasing What is their contract limit? And when they're getting close to that contract limit, the particular warnings so that they understand that you're getting close. Maybe you want to re-up. Maybe you want to create an upsell opportunity here. And having it within the service to provide an easy upgrade to a new contract really provides the best customer service possible. The second one-- every wildly successful offering really must be tailored to fit individual needs. You will never grow into your potential markets without the ability to create a custom fit of your service for your customers. For your customers, one service package does not fit all, right? For your business, you want to create a versatile offering that can yield any service package. That might make sense, right? So what do we mean by product versatility? When we're talking about product versatility, we're really talking about how do I optimize my market applicability with my offering, right? It's got so many features. How do I make sure I have the right packages? So we combine product segmentation and product packaging to create the right matrix for going to market. At a high level, what does that mean? So product segmentation is really determining, within your application, what features do I want to monetize? What am I controlling? What am I basing my pricing off of, right? And then mirroring that and mapping that to hey, what bundles of features are most applicable to what customer segments that I have or what market segments that I have. So combining those, understanding your business and combining those is-- creates that matrix of the right packages to have your optimized market applicability. So what are the challenges? Or actually, I think of all these as really opportunities, almost as user stories, right? What are those user stories around product versatility that I should be considering, that I should be cognizant of? So you want to make sure that you can monetize different features within your application for different customers. Yes, it sounds really basic, and it is really basic, but it's really important to be able to say, hey, these features are only applicable to this segment of the market. So I'm only going to package and sell them, in an attractive way, to that segment. But not only do you want to be able to control the features on a per-customer basis from one customer to another, to really maximize the profitability within an account, you tend to sometimes want to be able to create different feature levels for different users with inside one customer. So the ability to have a super user and a base user at different price points to maximize your applicability with inside one customer. Also, you want to be able to introduce new features at a premium, right? So being able to, when you spend and invest in R&D on bringing to market new value, you want to be able to introduce those, not as inclusive to the existing subscription, right? You may, but another way is if it's very high value and high cost to maintain it, you may want to introduce it as a premium. Say hey, we have this great new feature wed love for you to trial it and upgrade to this service. And the last aspect of product versatility that's important to not really forget about is the end user subscription self-service and management aspect of it. And what we mean by that is your product needs to be versatile enough so that a customer-- and transparent enough-- so that a customer can understand what am I purchasing from you? What am I getting? How can I map my value to what you're offering, right, to my costs? And so your product packaging wants to be displayed and well understood by that user. And their ability to manage themselves, assign users, upgrade their service simply, understand that, hey, there's new features here that I can move to. And then maybe have them create the sales event themselves by understanding that hey, you're not getting all of my services. There's other services that you can upgrade to. So you really want to have a versatile enough product that you can monetize those things separately and package them for them. Well, versatility is really only half the battle, though. If you can't rapidly respond to evolving customer and market demands, you really create an opportunity for the competition to catch up to you. Being able to adapt your service catalog in real time significantly reduces your costs and time to market. One of the most successful players in SaaS, a service offering we've all used on this phone, every single one of us as used this service, told us this story. To introduce new packages-- no new features, no new innovation, no new competitive value, just a new package-- this vendor had to spend nine months to get to market with a new package. For those nine months, they were not increasing the value of their solution to their customers. All they were changing was what feature bundles that they were delivering. So when we look at business agility, right, we're looking at two different aspects. We're making sure that we have the ability to get to market quickly, and it doesn't cost me to make changes, or the cost is very limited to make changes. Well, when we look at time to market, right, very often when you're at a trade show, for example, you want the ability, when you're providing your service at a trade show, a prospect to walk up to you and say, you know what? What you're offering is very interesting to me, but I only want a subset of this. I want this feature, this feature, and this feature, and you're not offering that. And I'm willing to pay you a fair market price for that, but the way you package your product, you priced me out of the game. So right there you want the ability to quickly, as a product manager, say hey, I can do this. I can offer you this package. See? Click, click, click. Hey, I've got you the package that you need right there on the fly, and you can strike a deal right there. So getting to market quickly with repackaging changes is really important to be able to adapt to your customers' needs and as the market changes, of course. Decoupling engineering from your business decisions, though, is one of the smartest moves you can make. Engineering cost for repackaging is a real momentum killer in adding value to your customer base. What you want to be able to do is make business decisions around packaging, around licensing, around pricing, without having to go back to involve engineering. You want to be able to make these decisions without having to defocus your precious limited engineering resources on not what you're bringing your core value to your customers. This really opens the gate for competition to come in and match your feature level, service by service, if you're defocused on repackaging and having your engineers repackage your service offering versus having them focused on your core value. So you want to be able to decouple those two different processes. Sophisticated license models simplifies buying your software for customers. As your customer markets mature, the way that customers want to consume your offerings will diversify. So we've seen this over the last 25 years, and I've seen it over the last 10-- well, since I've been here is with SafeNet, this truth being played out in the on-premise market time and time again. The same trends are just now happening in the SaaS market as we see adoption rate increasing and the market matures, right? That the way customers want to purchase will diversify. So you want to allow your customers to budget for and consume your service in the best way possible for their business. So as your market matures, right, the way in which the market will consume the software will diversify. Key point here, right? So factors that influences consumption really are market segmentation, customer size, and how critical to the business is your service offering. So an example on customer size, right? A recent news release from CoFluent Design is a good example of this. CoFluent is a leading electronic simulation level company providing system-level modeling and simulation from bedded devices. It is a very high-value asset in their design software, and they're very, very successful at the high end of the market. Well, in their release, they described how they adopted a per-use model for their designs so that they can now reach down and address a lower price point of the market for those customers that only want to do one or two designs a year, but couldn't afford the high price tag. So as their market matures, right, they needed to find new ways that they could offer-- not repackage their features-- but new ways that they could sell their offering to make it more applicable to their customers. And of course, ability to support how a customer wants to consume is really a competitive advantage. If all else is equal, being more flexible, acting more as a technology partner really provides you a leg up on your competition, and you really should be cognizant of that. So the single greatest asset of a good licensing system is the insight into how, when, and by whom your products are being used. Unfortunately, right, many providers in the cloud use this information only as a method for billing and metering their customers. This approach leaves invaluable strategic information on the table that could have been leveraged to improve your target offering. So we see this. Many providers, existing providers today, fall into this trap that billing provider solutions will provide them the insight into what their customers are doing. This information is purposed for billing mediation. It's not purposed for making right, correct strategic decisions. So you want to make sure that you have the right tools for prioritizing engineering user stories, right? I'm a product manager. On a day-to-day basis, the most influence that I have on the business line is really prioritizing these user stories. So having the right tools in place to understand and make the right decision about what should I be investing in? What are my customers using? What are the popular features of those, right? maybe-- and then, in addition to that, what shouldn't I be investing in? My engineering resources, like I'm sure every one of yours, is limited. I invest a lot in a lot of different areas. Knowing what not to invest in is just as important to knowing what to invest in. That also leads us to making the right packaging decisions, right? What features of my products can I monetize separately? Maybe there's low-interest features of your product that you can package in a different way to accelerate increased demand for those features. Maybe the way you package, you bury a feature that no one understands the value of that. So understanding who's using what and when can help you repackage your product to make it more applicable to your market. Also, another really strategic point of information, as a product manager, that you can get from your business information is really lending itself to become a better technology partner. As consumers deploy your software within their organization, right, you want to know ahead of time if there's going to be a deployment issue. So having the right tools in place to say, you know what? I sold this customer a thousand licenses, or whatever the number of seats that you're selling is, and they've only deployed 10 of them in the last quarter. I wonder what's going on. Maybe it's a training issue. Maybe it's a professional services integration issue. Maybe it's a business issue. Maybe there's some problem in finance that you weren't alerted to that's holding everything up. So having a system that can alert you to that and give you the insight into that ahead of time, so that you can proactively go to that customer and work with them on that, is really, really invaluable and really lends itself to that promise of hey, I want to become a technology partner with you. I don't want to just be a software vendor. Well, how many of you have gone through establishing the business process for licensing, right, from contract creation to delivery to tracking to upgrades, et cetera, around licensing? If you all-- if you've been involved, it requires a lot of sophistication and a lot of work. So if you have-- you know that the proper systems and training of your internal resources is critical to your product's success. Introducing cloud services should not double your costs here or increase operational workloads. If you're going to be offering both an on-premise solution as well as cloud-based offerings, you don't want to have double the systems in two different ways to manage those. So when we look at the back office, right, really this operational process affects two different people. It affects you, the software vendor, internally. But it also affects your users. It's really important to not forget about that. As a vendor, right, you want a single way that you can manage multiple business lines. You don't want to have different management systems where you have to come in and create contracts differently, you have to train people different, you have data in different systems, the data is formatted differently, right, for both your on-premise and your SaaS-based offerings. It doesn't make sense. You'd be acting as two different companies within one. You really lose efficiency if you start working in that manner. These different systems drive IT costs, right? Box costs, software costs, training costs, and complexity, just overall complexity. It's really, really important, though, to remember the effect of licensing on your end user, right? That is the single most important thing. And having a simplified user experience is really critical to them. So how do they interface with your products, both your on-premise products when they're purchasing that, and your service-based offering. How do they upgrade from one to the other? You want the way that your customer interfaces with your operations, in terms of their licensing system, to be a single unified view so that they can understand what they purchased from you in an asset detail, right? They can upgrade and downgrade that service very easily. It's really important to not forget about that end user in your different systems. Really to summary, I've taken you through the different areas-- service agreement compliance, product versatility, sophisticated license model, business agility, business intelligence. So these are the core fundamental challenges, I think, that are really facing customers, both existing providers of cloud technology and on-premise customers who are trying to move to the cloud. Well, in our discussions, right, of our over 5,000 customer base and of our over 25 years of experience here, it's a very, very common scenario that I'll run you through that a provider will take a relatively simple application with a very small number, manageable number of features, and in their initial entry the market, right, will offer all the features at a are very flat rate. And because you have a very limited number of features, you're able to capture only a small segment of the market, right? It's an introductory offer. But as customer adoption increases, you're going to go through a traditional cycle of market saturation with your customers. You'll start taking on customers of different types, of different industry segments, and those are going to push you to grow your application in varying directions, different features that are only applicable to certain market segments. So your feature set's going to grow and grow and grow, right? As that happens, you as an ISV have several things to deal with. The first is you need to figure out how to monetize all this additional R&D work, right? Because natural expectation from your customer is to include all this additional in the existing low flat-rate subscription. As an ISV, you know that if you're not able to monetize your continued R&D investment, you're in a losing financial proposition. The second challenge, then, is well, how do I package this larger set of features that more specifically targets each customer segment that my application can Sir? The third problem, then, is, right, that a subset of these features are really high value and/or potentially high cost to maintain. And therefore, I need to really monetize these as a model that more directly ties to the value of use to the specific feature and you get a return, so you can get a return on that investment, right? Like the CoFluent example, being able to monetize in a per-use use model. This natural progression, time and time again, has really played itself out in the on-premise base. All of conversations for existing SaaS and those moving there show that the same cycle is holding true in the SaaS market. So as I said, over the last year and a half, we've been focused on this market, looking at the-- really taking a look at the problems and bringing to market a solution set that really helps our existing customer base and those entering the cloud-based market. So we've come to market as a service, so we went through this same transition. We went through bringing our on-premise technology set to the cloud, offering a feature-based user provisioning, authorization, metering, and management solution for software delivered as a service. So this allows you to define your product set, your feature set, your licensing models, work with your back office, integrating your back office automated provisioning system, to create the contract, assign users, work with your ERP and billing systems to create the invoices, control the users, and hold them to the contract compliance, being able to measure service usage, not just for billing mediation, but also for understanding how to optimize my products-- who's using it when, how-- and being able to adapt that catalog over time to emerging market trends and to meet varying customer segments that you want to maximize your customer applicability. Right now, we are currently in a beta phase of this, so if you're interested in-- if you're going through the transitional process and have an initiative and want to start try out and partner with us to try out our service, see if we're matching the right feature set that you're struggling with, then I encourage you go to our website, sentinelcloud.com, and sign up for a beta-- for our beta program. So just in case there's any of you out there who don't know who SafeNet is, isn't familiar with our offer and how long we've been in the market, so SafeNet's been around in the market for over 25 years. We're a global company focused on security and software rights management. We have 25 different-- 25,000 customers in 100 different countries. We're truly a global company, having offices in over 25 different countries with 1600 different employees, and we're privately owned by Vector Capital. If you're looking for just more industry-specific information, SafeNet publishes and maintains a licensing live site, which is really dedicated to industry practices, industry problems, and following industry trends in licensing. So this is not just cloud-based industry movements, but also things like virtualization, any hot topics around licensing that experts and software vendors are talking about. So I encourage you to go there for more information, just generic information on software licensing. And if you have any questions after this that we don't capture within the Q&A session, which is coming next, I encourage you to write me and we can have a follow-on conversation, either through email or schedule a conference call. You can email me and reach out to me at SaaS@safewnet-inc.com. And I'll be handing it over now to Holger for the Q&A session. Excellent. Thank you, Todd. Now let's start our Q&A session. And if you would like to ask or present us a question, please click the Questions button on your screen and enter your question. Give this a couple of seconds. All right. Here we have a first question, which is, What are the most popular industry segments that you see moving to SaaS, moving to the cloud? And I guess that's probably a question for Mike. Mike, you want to take this one? You have me on voice? Yeah? Can you hear me? Hello? Yes, we can hear you. OK, great. So what are the most popular-- which segments, which industry segments are most aggressive with SaaS adoption? If you look at those industries, and we survey this annually, I ask a lot of different questions that include are you planning? Are you prototyping? Are you implementing? Are you implementing the first solution? Have you implemented more than one? Do you plan to implement more additionally in the future, or are you on the fence thinking about it? And if you just think about those industries in which firms have implemented two or more SaaS solutions already, the far and away the leader is high tech. And that's no surprise, because there are a lot of software offerings that have been on premise and a lot of start-ups who are coming into the cloud with new offerings, and so forth. So the industry that has the biggest presence in SaaS, is high tech. But right behind are three other industries who deliver their business services through cloud-based solutions, and those are business services, retail, and financial services. Not surprising, I suppose. I mean, these are three areas where we engage significantly ourselves. Retail for sure. That would include things like Amazon and so on. Business services, that would be consulting firms, professional services firms of all sorts. That's B2B, and then, of course, financial services, where online banking and online brokerage and the rest are highly present in the cloud. Behind that, well, also in a similar vein of being involved is transportation and energy. And behind that are things like manufacturing, public sector, and health care and pharma, which lag to some degree, especially health care pharma, which is pretty high def. Manufacturing is gradually moving to the cloud. Public sector has certain constraints but is now, I think, aggressively planning and moving to the cloud. So I'd say the top several would be high tech, transportation, energy, business services, retail, and financial services. Excellent. Thank you, Mike. The next question we have here is probably for Todd. It sounds like you have talked to many software vendors making this transition to SaaS and to the cloud. What is the single most common mistake you have seen made time and time again? Todd, you want to take this one? Sure. I think it's a good question. So I covered six different areas that customers-- that we see customers in varying degrees struggle with or trip up on. And one of the most, I think one of the most common is not having the flexibility to grow your customer base and having to short sight. So as Mike had mentioned during his segment, the very end of his segment, is that avoid the quick fixes, right? You want to make sure that you're addressing these issues with a solution set that allows you to grow over time. Because if you start running into these problems, and you only solve it for the short term, you're really going to trip up long term. And the cost to change down the road becomes increasingly more difficult than if you would have invested just a little upfront to solve the business picture. So don't feel like you have to go it alone, right? There's a lot of industry experts that have been through this. And feel free to partner and avoid the quick fixes, I think. I'd like to weigh in on this one as well, Holger, if you don't mind. I think, frankly, and I know this plays to the sweet spot of SafeNet, but this is frankly what I've discovered after spending a year looking at billing and payment solutions on the web. That monetization is the one-- I mean, people know they have to be either multi-tenant or virtualized or something to get their solution to the cloud. If they're a pure play, they're going to be multi-tenant. If they have an on-premise offering they want to customize to the cloud, then virtualization is a way to do that. They know they have to have different kinds of compensation for their sales force. They know they have to have increased customer intimacy and provide community. They know they have to have a much more responsive set of requirements gathering and intimacy, if you will, with their customers. And they know their financing, their financial view of things has to change and move to MRR and other kinds of measures that are closer to predicting financial health. But the one thing they overlooked, whether they're start-ups or they're transitioning ISVs, is monetization. For the startup, the big challenge, of course, is thinking you can manage it on a spreadsheet, a series of spreadsheets. I remember talking to a guy who was the head of the billing department at WebEx. And he said they had 100 people working on-- 100 people working on billing and payments because it was such a manual process. Spreadsheets simply won't carry the load. When you're small, yeah, you can probably do it on the homegrown stuff, the pretty soon if you're going to grow rapidly, you're going to have to do more than spreadsheets. Furthermore, if you're going to grow and take advantage of monetization opportunities, you're going to leave a lot of money on the table unless you have a really flexible billing, license, management system in order to capture revenue opportunities. So to me, the biggest change from the on-premise challenge for the startup in moving to the cloud is in moving from the traditional views of software licensing and maintenance revenue tracking to subscriptions and all the complexities of that, including the metering engine, how you generate invoices, billing, whether you, as people scale up and down within a given month, the number of seats they have, or do you have different time of day rates or different time of year rates or whatever the variability may be. How do you manage? As was pointed out earlier, I think Todd talked about bundling. And how do you manage having a channel partner who takes your solution, throws some things on top of it, maybe even has it's own channel partner, and combines that. How do you manage that? It's complicated, so you might as well go, and this is one thing that a lot new players don't realize. You might as well go to somebody who does this full time. This is their business. I mean, and after all, if you're asking your customers to drop their on-premise stuff and to go to somebody who's a professional, who's going to be doing this full-time 100% for them with all the expertise and experience brought to bear. You can do the same thing with respect to monetization, and find somebody who really knows what they're doing. Good point, Mike. Thank you. The next question that's coming in, is the cloud solution available on a customer's own server, or is it only available on a SafeNet hosted server, or both? Todd, do you want to take this one? Sure. So in our beta right now, you can beta our service, and it's on a SafeNet hosted server in the cloud today. But in the future, we definitely plan to offer both. Perfect. There was another question regarding the webcast itself and whether the webcast is being recorded. Yes we're recording the webcast, and it'll become available on demand right after today's webcast, within a few minutes. And if you want to access the on-demand version, just use the same link that you used to get to the live webcast. Same link will also take you to the on-demand version. Holger, if I could, could I jump in on what Todd briefly answered? It suggested to me something. And that is that people, when they're thinking about the cloud, what is the cloud? Is it just the public cloud or private clouds or internal clouds, a ramification of this same thing? And I wanted to say that yes, the public cloud is where you find an awful lot of stuff from SaaS, PaaS to IaaS. But increasingly, there are vendors who are delivering capabilities to create private clouds, either for a group of companies or for an internal use. And I believe that our evidence shows in the near future, we're going to see a lot more software delivered for private and internal clouds. Combinations of software, customized software delivered by cloud integrators. There's a lot of complexity that's unfolding now as we move beyond the initial stages of the transition to the cloud. And so I would urge any ISV that is thinking about moving to the cloud, get going right away. If you haven't begun, you need to begin right away, or you're going to miss this party. Yeah, you're right on. Excellent. Thank you, Mike. Here's another very long question, so bear with me. For companies moving from an on-premise with annual maintenance invoiced over time to a cloud offering, what are the arguments for making sure systems are in place to support streamlined ordering, provisioning, invoicing, revenue recognition processes? And how do you deal with moving from the typical lead opportunity quote, configure, accept PO, process order, and so on, process to an on-demand, real-time model? Todd, do you want to take this one? Yeah, that's a long question. So I guess there's two questions here, so I'll answer them one at a time. So the first question was what are the arguments for making sure systems are in place to support streamlined ordering, provisioning, invoicing, right, revenue recognition processes. So SaaS equals real-time customer interaction, right? So the argument is that if you're moving to the cloud, it is the expectation. So I hope that was what your question is. Is it a requirement? Yes, absolutely, it's a requirement. So the systems to support real-time customer interaction is a necessity. Second part of the question was how do you deal with moving from the typical lead opportunity, quote, configure, accept PO, process order, explore compliance, issue keys, provision service, invoice, accept payment to an on-demand, real-time model. Well, it's a very generic question. How do you do business? I think the question is, how do you do business in the cloud. And so I think that question probably would be better served by offering an image with some backdrop. So what I'll try to do is take that to our cloud site, and I'll blog that answer. I'll put that question up and blog answer and take you through that there for the purposes of time here. Excellent. Thank you, Todd. So thank you all for submitting your questions. And we'll follow up with any other questions we didn't address today, and we'll email you answers. Also feel free, if you have any additional questions that you'd like to ask our presenters, please send an email to the email address on the screen-- SaaS@safenbet-inc.com. So at this point, I would like to think our presenters, Mike and Todd, again for their excellent insight and advice on the topic of moving software to the cloud today. Now that we better understand the challenges of moving to SaaS, I would like to invite you to our next webinar, where we'll talk about cloud ready SaaS licensing and entitlement and how to specifically address the challenges we identified today. Thank you again for attending today's webcast. And I look forward to seeing you at our next webcast. Thank you.

This webcast, featuring Mike West from Saugatuck and SafeNet's Todd Steel, is part of our Navigating the Cloud Webcast Series. It will educate you on the 6 most common business challenges associated with delivering software as a service, and how to effectively navigate them.

This webcast, featuring Mike West from Saugatuck and SafeNet's Todd Steel, is part of our Navigating the Cloud Webcast Series. It will educate you on the 6 most common business challenges associated with delivering software as a service, and how to effectively navigate them.

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