Software as a Service

Tradeoff Considerations

Cost Effective or Liability?

Authored and Presented By:

Gordon F. Jones gjones@stratafusion.comPartner: The Stratafusion Group (925) 786-3207January 24th, 2006

Presentation Agenda Background on Your Presenter Evaluation of Core Competencies of IT dept. ASP models – Complete or Hybrid New offerings – What companies are doing ASP- Pros ASP - Cons Key Contractual Points Summary: Q & A

Assess your IT department’s Core Competency - Leverage others for the rest

Source: Modified from “Leveraging the New IT Infrastructure.”

InfrastructureInfrastructure• Business integration • Standardization

• Business flexibility & agility • Reduced marginal cost of business unit’s IT

69%69%

TransactionalTransactional• Cut costs • Increased throughput

88%%

StrategicStrategic9%9%

InformationalInformational• Increased control• Better information• Better integration• Improved quality

14%14%

• Increased sales• Competitive advantage• Market positioning• Innovative services

Case Example of Putnam’s Hybrid model

Putnam Investments

Customer

Blue MatrixGrand Central Communications

SalesForce.com

Web Services – Creating & distributing Analysts Reports leveraging ASP

Email addresses sent

Analysts reports written on web site operated by B.M.

G.C. matches topic of report with interests of Putnam’s clients

Client info. drawn

Pros

Improved Reliability, Scalability and Security – ASP’s Core Competency

Frees up IT staff to focus on Core Competencies Potential Savings/Cost avoidance, especially capital

investments Standardization solution of applications, avoiding costly

customizations

Cons

Potential security risk with customer data being transmitted outside company’s firewalls

Costs can escalate if not clearly defined Lack of bargaining power in future contracts once

committed Service levels can be less if business had relied on “high

touch” Loss of flexibility if std package not good fit for company Risk if ASP goes out of business

Cons (cont.)

Employee turnover at ASP ASP may not help in transition to another vendor May have “choke points” if several conversions

happening, without capital investment Lack of control when major releases forced out – “Big

Bang”

Key Contractual Points re: Operations

Specific Performance metrics – Reliability, Response time. Penalties and remedies defined. Uptime – definitions, who measures, partly down. Security & Intrusion Detection Can they hardware hot fix or is there a scheduled mtce time window? Notification of ECR’s Costs – per server, transaction? Service levels responses to Sev. 1 and 2 incidents. Always state 24 x7 – do

not care about holidays! Choke points – know where they are. Replication capabilities to remote sites – cost Business Resilience model Infrastructure OS software version – currency position. Notice period of software changes Compliance positions – SOX IT Sec 404, S.E.C, Sas 70 etc.

Key Contractual Points re: Costs

All costs to be specific in contract – avoid hidden costs e.g. custom reporting

“Cap” on rate increases Termination “without cause” – company but ASP must

give adequate period to allow selection & conversion.

Key Contractual Points re: Applications

Timing of major releases Position on customization requests Bug fixes turnaround time Process & procedures for changes

Summary: Q & A

Gordon F. Jones gjones@stratafusion.comPartner: The Stratafusion Group (925) 786-3207January 24th, 2006