NEARLY

CONSUMERS USE MOBILE

PHONES TO GET INFORMATION
AT LEAST 3-4 DAYS PER WEEK

80%

OF WORKERS DO SOME WORK OUTSIDE

OF THE OFFICE

OF TODAYS GLOBAL WORKFORCE ARE

ANYTIME, ANYWHERE WORKERS WITH 3+
DEVICES, WORK FROM MULTIPLE
LOCATIONS AND USE MANY APPS

51%

OF
CIOS

ARE CONCERNED THAT THE DIGITAL

TORRENT IS COMING FASTER THAN
THEY CAN COPE

EMPLOYEES
GLOBALLY

29% 60%

BELIEVE I.T. IS INEFFECTIVE AT PROVIDING

COLLABORATION, DATA ANALYSIS AND
MOBILITY CAPABILITIES

1.4
GLOBAL
CONSUMERS

BILLION

ABOUT

WITH TABLETS AND

SMARTPHONES
BY 2016

80

the new
normal

Millions of units shipped

Mobile

60

40

20

1995

1997

Desktop PCs

1999

2001

2003

Notebook PCs

Source: KPCB/Mary Meeker. Internet Trends 2014: Code Conference

2005

Tablets

2007

2009

2011

2013

Intelligent
Systems

1.7T

Auto & Trans

Retail

Manufacturing

Healthcare

Energy

Computing

Telecom

Consumer

$7 B

$16 B

$197 B

$3 B

$27 B

$908 B

$179 B

$356 B

Source: IDC Sept 2013 and Microsoft

System Revenue

212
75
50B

249834

Software Revenue Growth

Rate in 2017
25%

22%

20%

5.5x higher
Cloud SW
growth than
packaged SW

15%
10%

4%

5%
0%

SaaS/PaaS
Revenue

Packaged
Software

Customers are buying services, not

applications or servers
Shifting adoption patterns:
using SaaS as a way to extend on-premises
applications to replace existing applications
with cloud alternatives

91% of net new software is built for cloud

delivery in 20142
20% of all applications revenue in 2014 is
generated by SaaS1

Source #2: IDC Direction 2014, Transformation Everywhere How SaaS Gets Built, March 2014
Source #1: IDC Forecasts Worldwide Public IT Cloud Services Spending to Reach Nearly $108 Billion by 2017 as Focus Shifts from Savings to Innovation, 2013 )

 By 2017, the CMO will spend

more on IT than the CIO and control

most of the technology spending.

How will you deliver fluid experiences that

untether the workforce

connect customers

transcend time, place, context, and device?

The
challenge of
mobility

Where is the value?

Where do you invest?

Different paths (and economics) to apps

INVESTMENT

NATIVE UX

MARKET

Empty

Full

Empty

Native Web

Full

Empty

Full

Cross-platform

Half

Half

Full

Universal app

Full

Full

Half

Native app

How will you adapt to a cloud first world

unlocking new markets

enabling development agility

as the economics of software shift?

Increasing deal size with the cloud

Solution on Customer Hardware

Solution on Azure

Customer has 600k budget

Customer has 600k budget

Hardware/maintenance cost = 300k

Azure cost to run = 150k

Software license opportunity = 300k

Software license opportunity = 450k

Leading in a cloud-first world

Strong Focus and Commitment
Clear business model and customer segmentation
Investment in dedicated or experienced resources

Seller Incentive To Drive Cloud

Comp plans or sales incentive developed to drive the right selling behavior
Appropriate partner margins to encourage channel to lead the change

Pricing That Drives Business Objectives

Priced with competition and/or existing offerings taken into consideration
Incentive for selling SaaS over other products to accelerate early adoption

Well Integrated and Visible

Internal systems adapted and ready at launch Learn, Try, Buy clear on website
Channel and field ready with relevant offers and incentives tied to marquee industry event

Cloud and SaaS model adoption

Opportunities

Expanding Market Opportunity

Sell directly to business decision makers
More predictable revenue

Lower infrastructure support costs

Challenges

Requires business model shifts

Revenue builds up more slowly, harder to invest back in business

Legal and regulatory concerns around data

SLA management - Requires high level operational disciplines
Requires re-architecting existing applications

Core Competencies

Non-core, but Necessities

Essential value for ISVs to build

Limited value for ISVs to build

Software+
Customer
workflows

As-a-Service
(Platform & Infrastructure
Management)

Balancing SaaS delivery with core software and solving customer problems.

ISVs are experiencing more challenges and burdens managing their own infrastructure

Core Competencies

Non-core, but Necessities

Essential value for ISVs to build

Limited value for ISVs to build

Software+
Customer
workflows

Choosing the
Right Cloud
Platform

Choosing the right cloud platform is critical when expanding your business to the cloud and SaaS

Business Model
& Strategy

Pricing /Cost Structure

Pricing model monthly, annually

Funding model: CAPEX vs. OPEX
Cost to scale (COGS)

Application
Architecture

Complexity &
Customization

Complexity of solutions data

layer/app layer

Target Market

Business Goals

Macro environment data

sovereignty, regulatory compliance

Grow organic or through

acquisition

Channel model

Funding get sold, get

invested

APIs

Tenancy

Target market and geo presence,

expansion

Solution integration: 3rd party

solution integration, APIs support

Cloud First or Cloud Both

strategy

Single tenant vs. Multi-tenant

Customization enabling partners

Core vs. new/extended solutions

Operations

Customer Needs & SLA Support

Reliability/Availability

Easy on-boarding

DevOps

Performance

Service management: Provisioning,

usage metering, billing

DevOps collaboration

Security/Compliance
Scalability

ALM

Versioning

Hybrid Cloud: Across On-Premises, Managed Hosting, and Public Cloud

80% of SaaS ISVs are self-hosted today

< 2%

18%
39%
41%

Cloud-based infrastructure
(Public Cloud)
Enhanced Managed Services
and Hosted Managed Services

Key Drivers

Fast time to solutions, rapid deployment

for new services

Global reach with broad geo coverage

Delegate operations and infra management

to capable managed hosting partners

Specific geo coverage or local presence while

maintaining operational control to meet
customers expectations and SLA

Infra HW operational efficiency

Complex solution architecture and customization

Full operational control to meet customer

expectations and SLA

Cost to scale. CAPEX funding model

Co-location

ISV On-premises

Source: IDC Direction 2014, Transformation Everywhere How SaaS Gets Built, March 2014

Complete Hybrid Cloud Platform

ONE Consistent Cloud Platform to Support ISVs Business Needs

< 2%
18%

39%
41%

Cloud-based infrastructure
(Public Cloud)

Microsoft Cloud OS
Customer

Enhanced Managed Services

and Hosted Managed Services
Co-location

ISV On-premises

Source: IDC Direction 2014, Transformation Everywhere How SaaS Gets Built, March 2014

ONE

Microsoft

Consistent
Platform

Service
Provider

Allows ISVs to expand SaaS

business seamlessly with a
consistent hybrid platform

The Platform for Your SaaS Business

Multi-Tenant

Integrated Virtualization
Microsoft

Data platform
On-Premises

Common Identity

One
Consistent
Platform

Service
Provider

Unified Management

Flexible Deployment

Deliver a consistent platform to run your applications across on-premises, Microsoft public cloud, and service providers cloud

Grow your business with Microsoft no matter where you start

Microsoft Azure

Develop

Deploy

Manage

On-Premises

Monitor

Service Provider

Designed for Cloud Applications

Application Hosting
(SaaS/PaaS/IaaS)

Desktop Hosting
through RDS
Foundation for Hosting Service Provider Offers

Windows Azure Pack &

Service Provider Foundation
API
Custom Control Panels
Service Management Portal

ISV Control Panels

Provides standard management API

Service Management API (REST OData)

Windows Server 2012 R2

Web
Networking

Applications

System Center 2012 R2

Remote Desktop Services

Storage
Management
Windows
Server
2012 R2

Active Directory

Provides
the comprehensive,
platform
Virtualization with
Hyper-V
Multi-Tenancyhighly scalable
Availability
/ Scalability / Security
Compute

Storage (File/Block)

Network

Service Provider Foundation API

System Center 2012 R2

OS &the
Application
Monitoring
Provides
cost efficient,
unified
management platform

Automation & Self-Service

Infrastructure Provisioning

kr

kr

chf

TL

$
Rp

$
24 x 7 x 365
280 years

1 billion

R
20 million

76

June 2013

250,000

50% of the Fortune 500 companies

Dynamics CRM serves

over 3.5 million users

Nearly 50 million Office

Online users

Contextual awareness
Key app adoption

Azure

Data

Programming languages + tools

.NET, Visual Studio, TFS + Git, Java, NodeJS, PHP,
Python, Ruby, C++

IaaS
Windows VMs
Linux VMs
Storage
Networking

.NET

PaaS

Hyper-V

Web
Media
Visual
Studio
Mobile
Identity
Gaming
Cloud services
Data Analytics

System Center

Active Directory

Microsoft cloud infrastructure

Microsoft is a thought leader and innovator in the cloud

on regulatory compliance
Microsofts services are engineered to help customers
to meet their regulatory compliance needs
Routinely collaborate and seek input from regulators to
validate our approach
No other cloud provider offers the breadth of regulatoryrelated and other trust features across cloud platforms
Regulatory compliance is a feature set of O365, Azure and
CRM Online. Microsoft continues to adapt and evolve in
building regulatory compliance features into our services

Standard process for

development of secure software
International standards
ISO 27034-1
Comprehensive
application
security program

Flexible controls,
measurements and
secure coding requirements

Physical security

Logical security

Data security

24-hour monitoring of
data centers

Lock box processes for

strictly supervised
escalation process greatly
limits human access to data

Lock box processes for

Encryption at rest protects
data on Microsoft servers

Multi-factor authentication,
including biometric
scanning for data
center access
Internal data center
network is segregated from
the external network
Role separation renders
location of specific
customer data unintelligible
to the personnel that have
physical access

Servers run only processes

on whitelist, minimizing risk
from malicious code

Encryption in transit with

SSL/TLS protects data
transmitted between
customer and Microsoft

Dedicated threat
management teams
proactively anticipate,
prevent and mitigate
malicious access

Threat management,
security monitoring, and
file/data integrity prevents
or detects any tampering
of data

Port scanning, perimeter

vulnerability scanning,
and intrusion detection
prevent or detect any
malicious access

Admin and
user controls
Rights Management
Services prevents file-level
access without the right
user credentials
Multi-factor authentication
protects access to the
service with a second factor
such as phone
S/MIME provides secure
certificate-based email
access
Data loss prevention
prevents sensitive data from
leaking either inside or
outside the organization

Top of Mind Issues for ISVs

Remaining competitive
Staying focused
Reducing costs
Managing datacenters
Security, privacy & continuity
Embracing globalization
Improving free cash flow
Boosting capital value

ISVs Must Think Differently

for the Cloud
Financial Metrics
Churn Rate
Cash flow and cost of sale
Customer Lifetime Value
Committed Monthly Revenue

Sales & Marketing

Licensing
Customer Acquisition and Cost of Sale
Try before Buy Click, Try, Buy
Sales Cycle
Referral Programs

Distribution & Support

Delivery rhythm
Channel Dynamics
Service Level Agreements
Support
Billing

A Different Economic Calculus

Large upfront fees replaced by smaller ongoing
payments collected and recognized over time
Cost of sale has to be managed very carefully
Ongoing cost associated with application delivery
Upfront investments in R & D, sales, marketing
and support with no immediate payback

Capital markets that assume exponential

customer adds and reduced acquisition cost at
the margin

New Financial Drivers

CMRR

Cash
Flow

C-PIPE

Churn
Rate

CAC

CLTV
Source: Bessemer Venture Partners: 10 Rules Of Cloud Computing And SaaS

Assumptions

5-year model
$10k bookings in month 1
$2k monthly growth

5-year impact

At 2.5% churn, $(64,000)

At 5% churn, $(90,000)

Source: David Skok, Matrix Partners

Assumptions

5-year model
$10k bookings in month 1
$2k monthly growth
Expansion revenue of 2.5% to current customer base

Source: David Skok, Matrix Partners

Managing churn
Increase stickiness
Track and react to customer engagement
Contact your customers
Put top sales talent on cancellations
Consider longer-term contracts
Track and react to churn

Traditional Sales Process: Sales Led, Sales Driven

Steps in Sales Process

How is this Done?

Cloud Sales Process: Customer Led, Support Driven

Steps in Sales Process

How is this Done?

Business Value For ISVs

Pay as You Go
Enterprise Agreement
Open Licensing
Resell Azure and maintain direct
customer relationships

Using Azure IaaS to support easy trial of

existing click-wrap software
Dynamics CRM as a unified customer and
app instrumentation platform
Azure as a low cost data distribution &
storage platform
Augmenting existing apps with cloud
based instrumentation and analytics

Partner Success Story: iQmetrix

ISV Speeds to Market, Trims Costs 30 Percent by Using Open Source Tools,
Cloud Delivery
iQmetrix uses a software-as-a-service model to deliver innovative
marketing solutions to the retail industry.
By using Microsoft Azure to host its newest product, iQmetrix was able to
use the MongoDB to achieve faster time-to-market, instant global
scalability, and IT infrastructure cost reductions of 30 percent.
iQmetrix can now focus on what it does bestdevelop great retail
solutionsand give customers better solutions at a lower cost than the
competition.

By using Microsoft Azure, our

developers could use the software
they already knew and felt was
best for the jobopen source
MongoDBto get our enterprise
product to market in just six
months.
Anne Weiler
Vice President, Marketing, iQmetrix

ACCEO with Oriso

Hosting Specialist Helps ISV Bring Existing Applications to the Cloud
ACCEO wanted to offer its accounting software as a service, and Oriso
wanted to help independent software vendors (ISVs) deliver solutions as
online services.
The companies partnered to deliver ACCEO solutions using an Oriso
hosted service called iGOcloud, based on Microsoft Cloud OS.
As a result, ACCEO can enhance its offerings, lower costs, and compete
more effectively, while Oriso broadened its market and revenue
opportunities.

With Microsoft Cloud OS and

iGOcloud, we can offer our
customers SaaS solutions with the
same interface and business logic
as our locally installed software.
That saves us money and
differentiates us from our
competitors..
Etienne Soucy, Product Owner,
ACCEO Solutions

7x Faster Performance Enables Real Time Updates

SaaS provider to large retailers
wanted to increase inventory
availability refresh speed to improve
customer satisfaction

Increased sales with greater

throughput and improved
customer satisfaction with SQL
Server 2014 In-Memory

7x faster performance enables

near real time inventory updates