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the race to cloud services


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Service providers should become cloud-app aggregators and embrace

the cloud as their delivery platform solution in the SMB segment

This paper examines the SaaS opportunity within the small & medium business market and the plan to enable ISPs to capture it.

copyright 2011

the race to

cloud services

the race to


About the Author

List of Figures & Tables

Executive Summary


The Opportunity

Components of a SaaS Marketplace

Challenges for ISPs

The AppDirect Marketplace - a PaaS Solution to App Aggregation


Glossary of Terms

About the Author

List of Figures & Tables

Executive Summary


The Opportunity

Components of a SaaS Marketplace

Challenges for ISPs

The AppDirect Marketplace - a PaaS Solution to App Aggregation


Peter Kerr is a former Vice-President of Marketing for Bell Canada’s Small & Medium

Business Division. Mr. Kerr has twenty years of product management, marketing

and corporate planning experience working with several well- known North American


At Bell, Mr. Kerr was responsible for a $1 billion voice and Internet connectivity suite of

products including cloud-based value-added service offerings. He has launched

count-less new technology products and new service delivery platform alternatives.

Figure 1. Expected Benefits of Cloud Applications

Figure 2. Importance of Buying From a Local Provider

Figure 3. Workloads Addressed by Paid Cloud Services Today, and in 3yrs

Figure 4. The Long Tail of SaaS Profitability

Figure 5. Channel Most Likely to Buy Web Based Apps From

Figure 6. The AppDirect Application Catalog and Recommendation Engine

Figure 7. The AppDirect User Manager

Figure 8. The AppDirect Subscription Manager

Figure 9 . Application Fragmentation

Table 1. The ISP Revenue Opportunity

Table 2. The ISP Retention Opportunity

Table 3. The Increased Bandwidth Guarantee

about the author

about the author

list of figures

list of figures

list of tables


The small and medium business (SMB) segment has always been the holy grail of revenue opportunity for Internet Service Providers (ISPs). That potential will not be recognized from the sale of internet and telephone service alone. In fact, the revenue growth for ISPs has been stagnant and the growth op-portunity lies with the sale of value added services which have been an elusive and difficult business for most ISPs to estab-lish. As small and medium businesses continue to look for ways to operationalize their spending and reduce waste, the cloud presents an attractive model for infrastructure and application delivery. The cloud-based SaaS market represents a significant revenue opportunity for ISPs targeting this market.

According to a December 2010 Microsoft study, approximately 29% of small businesses are already paying for cloud apps to-day, and an additional 10% expect to begin paying for apps by 2014. Furthermore, many of these businesses expect to be pay-ing for multiple apps: 36% of businesses paypay-ing for SaaS plan to be paying for four or more apps within the next three years. It is no wonder that the IDC estimates the market to be growing at a 27% CAGR. Given the rapid expansion of this market, ISPs could see substantial revenue upside by becoming the app des-tination of choice for their business customers.

That’s the good news. The bad news is that targeting this mar-ket opportunity will pose a challenge to ISPs. Customers need a critical inventory of apps and a partner who can guide them through the maze of choices in the SaaS market. In addition, these customers need help with deployment and on-boarding, integration and support. As a result, ISPs will need to provide a robust service-delivery platform, customer portal and applica-tion syndicaapplica-tion process that will guarantee a large and growing selection of applications.

There are two ways for an ISP to establish a credible offering delivering SaaS applications. The first is a “do-it-yourself” (DIY) model where the ISP tries to use internal resources or expen-sive consultants to build their own platform. Delivery platform development can run into the millions of dollars for an ISP and can take 2+ years to develop. Customer portal execution re-quires not only an upfront investment, but also an annual Ca-pex investment to ensure it remains up-to-date. Given today’s diverse telecom investment priorities, securing annual funding can become problematic, particularly if early adoption rates are slower than forecasted. The second option is to partner with a company that specializes in delivering application stores and who can provide the platform, support and expertise required to help the ISP get to market quickly and at a fraction of the cost of the “DIY” model.

Fortunately, ISPs now have an alternative to DIY. AppDirect, a San Francisco-based company, has developed a cloud-based, Marketplace-as-a-Service (MaaS) solution that will enable ISPs to enter the SaaS market quickly and with minimal risk.

Drawing on their deep knowledge of Cloud Services, AppDirect’s seasoned engineering team specializes in creating white-label SaaS marketplaces where businesses can find, buy, and use

web-based applications. The AppDirect MaaS solution allows ISPs to begin providing a robust SaaS delivery platform and cus-tomer portal in 90 days or less with limited capital investment. In addition, AppDirect’s syndication process will ensure a large and growing selection of applications for ISPs to offer their cus-tomers. The service also includes an optional outsourced help desk so that ISPs do not have to train their current staff or set up a support queue from scratch. Lastly, with AppDirect, ISP costs become 70-90% variable, based on user-subscription vol-ume, which minimizes investment risks regardless of the speed of adoption within the ISPs customer base.

ISPs need to seriously consider not just selling cloud applica-tions but leveraging the benefits of the cloud for their own de-livery platform needs.

Globally, telecom players targeting the business segment are jumping on the cloud-computing band wagon as a new revenue stream.

Why not? It’s clear that traditional wireline revenues are flat or in decline, and new revenues from IP connectivity solutions are simply replacing existing legacy service revenue.

Enter cloud-computing—an opportunity for carriers to offer IT services closely linked to their internet connectivity product suite and datacenter assets. Prospects look good—with a 27%1

CAGR expected over the next five years and a market size of $107B by 20142.

One component of cloud computing, Software-as-a-Service (SaaS), is expected to drive $48B2 of the total cloud opportunity

and is the natural targeting point for ISPs marketing to the small business segment. While the size of the SaaS prize is large, there are challenges to realize it.

Cloud applications involve a very different set of economics for third-party resellers. The current business processes and billing/delivery systems used by ISPs are not geared to man-age these applications. Service Delivery Platform development projects have always challenged telecom IT departments, par-ticularly in the business wireline segment where there tend to be far fewer customers to amortize development costs.


cloud computing

…an opportunity for carriers to

offer IT services closely linked to

their internet connectivity

prod-uct suite and datacenter assets

and expertise…

executive summary

executive summary



This paper examines the SaaS opportunity for ISP’s within the small & medium business market, the typical challenges ISP’s will face in gearing up to target this space, and a vastly superior strategy to the traditional “DIY” approach.

IDC estimates that worldwide Public IT cloud services spend-ing will grow to $72.9B by 2015–-a 27.6% CAGR. This growth rate is significantly higher than regular IT spending, which is estimated at 5%. Merrill Lynch paints a similar picture, estimat-ing total cloud spendestimat-ing (private + public) will hit $107B in 3- 5 years, with $48B coming from cloud applications and the rest from cloud-based platform and infrastructure-as-a-service cat-egories. In addition, Google has publically stated that it already has over 3M businesses using Google Apps and recent research by Microsoft indicates that 39%3 of small businesses expect to

be paying for cloud applications within the next three years.

Small businesses are notoriously under-staffed when it comes to IT resources. Cloud applications mitigate this resource issue to some extent.

Apps delivered via the cloud are always up-to-date, so new and existing employees all have the same version of the software. Computer hardware and operating systems are also irrelevant as the apps all run through standard internet browsers. This means that mobile employees or staff working at multiple loca-tions can access their information anywhere, on any browser-equipped device, without the company needing IT staff to hook up virtual-private-network connections. In addition, all data is stored in secure datacenters in the cloud rather than on user desktops – an important feature considering that many small businesses do not regularly back-up their data to remote loca-tions or have sufficient firewall safeguards. Expense reduction is also seen as a key benefit as apps are purchased on a per user basis and billed monthly, simplifying cash flow manage-ment and expense forecasting.

Why Cloud/SaaS is Appealing to Small

Busi-ness Customers

Why Cloud/SaaS is Appealing to Small

Busi-ness Customers

These facts are great news for Business Internet Service Pro-viders. Over the last 3 to 5 years wireline telecom providers, particularly incumbents, have seen the writing on the wall. New product categories were required to offset flat/declining rev-enue forecasts coming from maturing penetration rates in the once high-growth internet access business. “Value Added Ser-vices” became the natural market opportunity. Within the SMB space, ISPs have floundered in finding exactly which IT products and services to provide and how to deliver them. After trial and error, most ISPs today have become content in reselling ser-vices that very closely align to their internet portfolio—namely domain name registration, email, desktop security and in some cases remote backup and support. These services were gener-ally bundled with internet services or upsold during an internet sales conversation.

Enter cloud computing. The cloud has created a significant op-portunity for ISP’s within the SMB space. It has created a way to deliver IT services that leverages two telecom core assets-internet connectivity and data center management.

Introduction (continued)

Introduction (continued)

Worldwide Public IT cloud

servic-es spending will grow to $55.5B

by 2014-–a 27.4% CAGR.

SMBs can use cloud-computing

as a way to mitigate a lack of

on-site IT resources in their


Figure 1 (SMB Cloud Adoption Study – Global Report, Microsoft, Edge Strategies, Dec. 2010)

the opportunity


Three revenue streams are available to ISPs within the SaaS opportunity.

I. Application Revenue

There is a large and growing volume of apps already avail-able in the marketplace today. Most of these apps are being delivered by little-known companies which make it difficult for small businesses to find them and even more importantly, feel confident in trusting their key business activities and company information.

This is where ISPs come in. They are well positioned to play app aggregator as 82% of small businesses believe it is important or critical to purchase from a local provider. ISPs have the customer trust, awareness levels and usual-ly, the web traffic volume to establish an app marketplace for their internet subscriber base.

While the SaaS market is large and growing it is also very fragmented across a large spectrum of application types—both horizontal, such as CRM, Financial Manage-ment or Project ManageManage-ment Applications and vertical, industry-specific apps.

The SaaS Opportunity

The SaaS Opportunity

Cloud computing has created a

way to deliver IT services that

le-verages two telecom core assets–

internet connectivity and data

cen-ter management.

ISPs are well positioned to play

app aggregator as 82% of small

businesses want to purchase from

a local provider.

Figure 2 (SMB Cloud Adoption Study – Global Report, Microsoft, Edge Strategies, Dec. 2010)


The SaaS Opportunity (continued)

The SaaS Opportunity (continued)

The cloud provides a significant opportunity for vertical/niche application developers. Because the cost to deliver software per user is lower within the cloud, software applications with a smaller target market can now be developed profitably.

Given the fragmented nature of software, no single app category will likely drive sufficient revenue opportunity. Therefore, playing an aggregator role is not just smart for an ISP, but a necessity to grow overall app revenues. Given the importance of purchasing a broad spectrum of applications from a local supplier, it is expected that businesses will want a trusted, single source with a critical mass of applications. It is not surprising that recent research indicated that small business would prefer to purchase their software from app marketplaces or ISPs over other potential channels.

Due to the fragmented

nature of software, no

single app category

will likely drive

suffi-cient revenue.

Figure 5 (AppDirect market study, 2010)


Microsoft research indicates that, on average, SMBs who pay for cloud services will be subscribing to 3.3 apps each, and 36% of firms pur-chasing cloud apps will pay for 4+ services3.

Using IDC and Microsoft’s data points, the following market opportu-nity exists in 2013 for an ISP with 100,000 business subscribers:

Example: ISP with 100,000 Business Internet Subscribers

Assuming the ISP above was receiving $60/month for internet access, it would only require a 3% share of the annualized app revenue op-portunity above to grow internet revenues 1% year over year. In addi-tion, the ISP in question most likely has significantly higher volumes of residential customers (possibly on the order of 10x). On any given day, these customers are potential entrepreneurs. For start-up businesses, cloud apps make smart purchase decisions as they do not require a large upfront fee. Therefore, the SaaS market opportunity for the ISP example provided is potentially much larger than shown.

II. Retention Benefits

Beyond the direct revenue benefits associated with re-selling cloud applications, there are additional revenue streams available.

As a mature product offering with a high level of com-petitive intensity, internet access churn rates can cre-ate substantial lost revenue annually for ISPs. Over the last few years providers have become aware that as additional services are attached to an internet account, internet access churn improves—in some cases by as much as 20%4.

Because not all customers will purchase additional ser-vices from their ISP (such as email or desktop security), reselling a broader set of cloud-based applications in-creases the chances of driving the penetration rate of customers with at least one attached service closer to 100%.

Using the ISP in the example above, a 2% monthly churn rate over a four year period would create annualized lost revenue levels of $51M. This is a shocking number, which is rarely seen by ISP executives as telecom metrics are focused on net gains/losses. Even in mature incumbent ISPs, there tend to be enough new subscriptions each year to offset most or all of the customer churn. This lost revenue, however, is still real. Had these customers not cancelled their subscriptions, the ISP would have generated another $51M in revenue in 2013. These figures are particularly significant when we consider that an ISP with 100,000 subscribers would typically only generate $72M per year in internet revenues.

The SaaS Opportunity (continued)

The SaaS Opportunity (continued)

SMBs who pay for cloud

services will be subscribing

to an average of 3.3 apps

each—Microsoft Study.

Current research suggests

that an ISP with 100,000

business subscribers could

generate $21.8M annually

from reselling cloud apps to

its base.


III. Increased Bandwidth

Ultimately, an ISP’s core offering is still its internet access. Business cus-tomers aren’t normally downloading music and movies, so up to now there have been very few reasons why an average small business would require higher bandwidth than the standard 5-8Mbps offering. Luckily, the cloud adds new demand requirements. As businesses increase the number of cloud apps and app users, they will be looking for greater response times, especially increased upload bandwidth. In addition, they will be interested in new network continuity services, such as fixed wireless internet access, to guarantee network uptime should their main connection go down. The indirect revenue benefits (increased

band-width and churn improvement) would significant-ly reduce the financial risk of deploying a cloud marketplace as these benefits could potentially cover the cost of deployment on their own.

Building a successful SaaS marketplace involves much more than a great looking web portal and shopping cart for app purchases. If all your marketplace does is allow app purchases, then it has significantly missed the opportunity the cloud offers.

Key Components: • Directory/Search/Compare • Single Sign-On • Managing Users • Managing Applications • Managing Subscriptions • Billing Engine • User Support • Syndication Process • Data Integration

components of a saas marketplace

components of a saas marketplace



Ultimately, the goal of an aggregated marketplace is a critical mass of apps for business users to browse. Conse-quently, a robust directory of apps and directory services, such as app ratings and feedback, are critical tools in help-ing small business customers navigate through this collection of lesser-known software names.

The SaaS Opportunity (continued)

The SaaS Opportunity (continued)

Figure 6

If we then assume the ISP launches a cloud marketplace and is able to improve churn rates by 15% amongst only those customers who purchase cloud applications, the ISP could generate an additional $2.9M a year by 2013 from improved retention levels.

Figure 6

In a cloud-app world,

cus-tomers will not only want

higher bandwidth but

guar-anteed network uptime such

as a fixed wireless back-up



Single Sign-On

Single Sign-On

One advantage of subscribing to apps through an app aggre-gator like an ISP is the ability to login once to access all of a customer’s apps. Not having to remember multiple login-IDs or passwords adds tremendous value to the end-user experi-ence and is typically not possible if the user purchases the apps individually.

Managing Users

Managing Users

Most apps will not require IT involvement; however, organiza-tions purchasing cloud apps will still want to appoint an admin-istrator. This individual or group of individuals, depending on the size of business, will be responsible for managing users, ap-plications and subscriptions.

Administrators need one view of users and groups which is easy to search and sort. They need to be able to quickly drill in to individual users and get detailed user, group, and application assignment information to facilitate quick administrative ac-tion. They should be able to automatically import users from a variety of directories and applications in order to accelerate deployment.  Administrators must also be able to easily select users and one or more applications and automatically provision the necessary accounts and access to the targeted users. This process should be available to groups so that the application assignments happen automatically when users are added to a group. Because of the security and business impact to the customer, administrators need the ability to remove application access when necessary. This includes centralized deprovision-ing to automate the end to end process and workflow includdeprovision-ing a complete audit trail.

Managing Applications

Managing Applications

In companies using cloud applications, ap-plication management is critical. For example when a new employee has just been hired, the administrator needs the ability to quickly identify the apps the new employee will re-quire. Conversely, good marketplace admin functionality would allow new software to be introduced into the company and for the ad-ministrator to quickly identify employees who require it.

In many cases a new application will be avail-able directly from an app developer’s website prior to it becoming available inside an aggre-gator’s marketplace. Therefore, one admin function that would prove very useful would be the ability to “import” subscriptions that were purchased prior to marketplace avail-ability so that they can show up in the SSO portal in the future and be managed like other apps and subscriptions by the administrator.

Figure 7

Customers will require help

navigating through the

in-ventory of apps, many of

which will be unknown

brands to the user.


Managing Subscriptions

Managing Subscriptions

Administrators require the ability to manage subscriptions. Many app developers include a 30-day free trial to encourage adoption. Therefore, the ability to cancel application subscriptions prior to billing commencing is important. In addition, administrators need to be able to upgrade or downgrade application editions depending on the features required by their organization. Finally, the ability to review invoice and payment history is a standard requirement.

Billing Engine

Billing Engine

The marketplace needs to be able to manage credit card and other potential electronic billing/purchasing formats. ISPs may find having the billing functionality connected to their current legacy billing systems advantageous, but historically this has come at a significant cost. While some argue that a single bill that includes these new apps, plus traditional purchases made by the customer is a good customer experience, most customers accept the fact that online app purchases will show up separately as a credit card transaction. The benefit to the ISP is that they can avoid costly bill-ing integration while preventbill-ing the customer from “sticker shock” when app charges and connectivity end up on the same bill.

Figure 8

User Support

User Support

Developing a SaaS marketplace is not just about technology. A complete solution also addresses user support and application syndication. While each application developer typically provides some level of support for their individual software (although in many cases this is limited to FAQs and email), the marketplace itself and particularly the admin functionality will require aggre-gators to also provide user support. This may take the form of FAQs and email, but, given the need to protect the ISP’s brand, most likely should include telephone support as well. The goal of aggregators should be to minimize the calls/emails coming in to them directly that pertain to the individual apps, so they can focus their support resources on the portal itself. To do this, good mar-ketplaces will make it clear to users where to get support on indi-vidual apps. In addition, call center staff must have the necessary training/resources to be able to answer superficial app questions and to quickly redirect to the app developer’s support resources.

Integrating marketplace

bill-ing functions with legacy

billing might be beneficial–

but is it worth the cost to

build and the sticker shock

customers will receive with

a single bill?




First, let us define syndication in terms of how it is used within a SaaS market-place. Syndication is the process of identifying, certifying, contracting and inte-grating new cloud applications into your SaaS marketplace. Given the importance of a critical mass of applications within a marketplace, the establishment of this process is paramount. Unless the marketplace solution includes a built-in syn-dication process, the responsibility of selecting and productizing the hundreds of apps that could go into the marketplace falls on the aggregator’s shoulders. Selecting the wrong apps can damage the aggregator’s brand. Software and in-frastructure needs to be validated and user support levels verified. Even then, the process to agree on margin and other contract terms can be long and it must occur before integration into the marketplace can begin. An ISP trying to do this on its own would require significant product management and legal resources to quickly build a sufficient inventory of applications.

Data Integration

Data Integration

Ultimately, small business customers will be seeking a collection of applications that can work together. In the simplest terms, this means the output of one app (e.g. billing application) can become the input of another (e.g. accounting ap-plication)

This level of data integration may prove the most challenging for aggregators as it requires significant support from the application developer community. Thank-fully, application developers have already identified this as a critical component of market adoption. Many are now signing on to the Small Business Web, an alliance of developers promoting the idea of data integration between cloud applications. Even today, many applications already integrate with one another.

The aggregator’s role can be twofold in this process. First, they should act as an integration evangelist. Promoting integration as a priority with their developer partners and potentially even making integration and membership in the Small Business Web a requirement of their marketplace app providers. Clearly, those aggregators who can demonstrate enough marketplace adoption and user vol-ume, like Google, will be in the strongest position to dictate requirements to the developer community.

media attention on the

small business web:

“As a startup owner, you

probably don’t care about

APIs–but you might care

that putting your invoicing

data into Freshbooks will

let it flow into

bookkeep-ing and tax solution

Out-right. Or that sending your

business cards to

Shoe-Boxed means that you can

add the data you get to

CRM provider BatchBlue’s

BatchBook database as

well as send it through

sales lead provider


- inc

“The Small Business Web

represents a

fundamen-tally different way of doing



As big an opportunity as the SaaS market is for ISPs, a number of challenges lie ahead.

challenges for isp


challenges for isp


Margin and Return

Margin and Return

Cloud-application reselling involves a very different set of economics than facili-ties-based ISPs are used to. The current market has embraced a model where the app developers are capturing approximately 70% of the available margin leaving 30% or less for resellers.

In a call center or field sales environment, this margin level would be unsustain-able in the telecom industry. Even at the +60% margin levels ISPs are receiving today to resell business continuity services like desktop security, final EBITDA margins are questionable once channel costs are allocated.

In an online, cloud-based marketplace, economics are different. High transaction channel costs are replaced by traffic-generating marketing expenses and ongo-ing site investment to remain relevant and up-to-date. The investment needed is not a one-time cost. While many ISPs have deep-pockets, they also tend to have many competing investment priorities, making it difficult to guarantee an-nual capital dollars will be available--but this guarantee is critical.

The marketplace portal is only one part of the investment equation. Billing and provisioning platform development costs, whether built internally or through a third party can be large.

Today, developers are

tak-ing 70% of the available

margin leaving app

resell-ers 30% or less to

amor-tize their costs over and

make a return on


Fragmentation and Material Demand

Fragmentation and Material Demand

While the SaaS market is large and growing, it is very fragmented, which is forcing providers to take an aggegator approach to capture material share of wallet in the space.

The need to provide a meaningful portfolio of applications across the necessary business functions to capture material revenue levels will make it extremely difficult for ISPs to signup app develpers one by one. The chart above demonstrates that once you get past acounting, payroll and office suite apps, business application needs become very fragmented.

It could take ISPs several years to build up sufficient app inventory to be seen as a worthwhile desitination by their client base.

For ISPs building a

market-place on their own, an

an-nual Capex commitment is

critical to maintain market



Once you get past

ac-counting and office suite

applications, the software

needs of businesses are

wide and varied.

Figure 9


Customer Support

Customer Support

Many telecom product launches are dictated by the training schedule of their call centers. With cost reduction a high priority across the industry, call centers are being managed with little flex, making it very difficult to obtain additional training time for new product launches.

Customer support training costs for these types of services can be high as either all call center staff need to be trained or a special, small queue must be estab-lished with poor economies of scale. In either case, retraining is usually required due to low call volume levels during initial introduction and ramp-up.

Cost reductions within

the telecom sector have

left many call centers with

little-flex room for training

leaving many to resort to

small, inefficient

special-ist queues for new



AppDirect marketplace – a maas solution to

app aggregation


AppDirect marketplace – a maas solution to

app aggregation

AppDirect has taken the

cost and time associated

with portal and delivery

platform development,

helpdesk staffing and app

syndication and

trans-formed it into a MaaS


ISPs are embracing cloud computing as a revenue generating opportunity with their client base, but now many see it as having the potential to solve their own operational/platform issues—particularly those identified earlier.

AppDirect, a San Francisco-based company, has developed an alternative ap-proach for ISPs looking to target the SaaS space.

Using a Marketplace-as-a-Service (MaaS) business model, AppDirect has taken the cost and time associated with portal and delivery platform development, help-desk staffing/training and app syndication and transformed them into a MaaS. This is good news for ISPs as it means that they can immediately leverage the benefits of cloud computing internally.

90 Days to a Branded, Fully-App-Loaded Portal

90 Days to a Branded, Fully-App-Loaded Portal

The AppDirect model allows ISPs to go to market quickly with a high-end cus-tomer portal and delivery platform that can be branded to suit the unique needs of the ISP. The AppDirect marketplace solution also includes a syndication process, which means that ISPs can launch their branded site with a large and growing se-lection of the most popular cloud applications on day one, rather than spending 12 to 24 months building up their application inventory on their own.

No Staffing or Training Headaches

No Staffing or Training Headaches

With AppDirect, having to setup a small, inefficient specialist queue or spend money on expensive training is no longer an issue. Customer support operations are available as part of the ISP’s monthly fee schedule.

AppDirect’s approach ensures a fully trained and cost-effective staffing solution as costs are amortized over multiple AppDirect clients. With this approach, ISPs know there is sufficient call center staff to handle unpredictable spikes in volume typical of a new service launch, all while paying a lower cost per call.


High-End Customer Portal Experience

High-End Customer Portal Experience

The AppDirect marketplace features state-of-the-art functionality for the best user and admin experience possible. AppDirect forces the use of a consistent template on each app developer to ensure application descriptions, pricing, free trials, fact sheets, videos and comparisons are all consistent for the user. In addition, each ISP marketplace comes equipped with a feedback engine to allow users to rate and comment on apps they have purchased within publishing guidelines defined by the ISP.

All critical admin functionality is available, including the ability to import subscrip-tions purchased by employees prior to them being available in the AppDirect mar-ketplace. This will allow company administrators to stay on top of all apps being purchased within the company.

No Capex Investment Required

No Capex Investment Required

Probably the most exciting part of the AppDirect MaaS model is the payment structure. Like other cloud computing services, the AppDirect marketplace has a monthly licensing fee schedule. There are no upfront Capex costs as there is no development work on the part of the ISP. Better still, the costs to run the mar-ketplace are variable based on user and subscription volume. Costs to the ISP remain relatively low should marketplace transaction volume take longer to ramp up than forecast. Because syndication is included in the AppDirect solution, a minimal number of marketing staff are required. ISPs are focused on generat-ing traffic and sales rather than corrallgenerat-ing application developers. The monthly model not only reduces project risk but facilitates faster implementation as it al-lows product management to avoid the traditionally lengthy capital governance process typical at most telecom companies.

ISPs get a branded

web-site with state-of-the art

user functionality and

ad-min features.

As a MaaS solution, ISPs

pay monthly for the

ser-vice—no Capex

invest-ment is required. Costs

are 70-90% variable based

on success.

Telcos and ISPs are searching for ways to augment their revenue stream by embracing Value Added Services and leveraging the momentum and opportunity of the cloud. In particular, the opportunity to sell SaaS applications via a branded application mar-ketplace is huge and growing. But it is not without its challenges. A MaaS approach by ISPs wanting to get into the space quickly with as little risk as possible is the most viable approach.

AppDirect is in the best position to offer ISPs immediate application resale opportunities without the developmental and opera-tional challenges normally associated with new product launches. This leaves ISPs to focus on what’s more important—driving traffic, trial and usage of their app store inventory.



glossary of terms

glossary of terms

API ARR ASP CAC Churn Cloud Computing CLTV CMRR CoLo Cross-Sell Down-Sell Freemium Hosted Software IaaS Marketplace-as-a-Service (MaaS) Mashup MRE MRR MSP

Application Programming Interface. Annual Recurring Revenue.

Application Service Provider.  Typically associated with a hosted single tenant soft-ware solution.

Customer Acquisition Costs.  A key SaaS metric that measures sales effectiveness based on how long it takes to pay back sales and marketing investments.

A SaaS measure of customers who do not renew their annual or monthly subscription agreement.

A utility computing method that shares many types of computer resources through virtualization and delivers an elastic computing environment over the internet. Customer Lifetime Value.  A key SaaS metric that is used to measure customer value, usually over 3 to 5 years.

Contracted Monthly Recurring Revenue.  A key SaaS metric that is calculated for new customers, up-sells, cross-sells and removing churning customers.

Co-Location facility. A term for leasing a third party’s physical data center infrastruc-ture, which usually includes the building, power, Internet connectivity and security. A key SaaS metric measuring new software functionality or modules added to an ex-isting software subscription agreement.

A key SaaS metric that measures when customers remove of functionality, users or capability that lowers the CMRR.

A business model in which the SaaS or Cloud Computing provider offers basic features to users at no cost and charges a premium for supplemental or advanced features. Single tenant software that is delivered over the internet from either the software ven-dors own data center or through a third party hosting company.

Infrastructure-as-a-Service refers to a combination of hosting, hardware, provisioning and basic services needed to run a SaaS or Cloud application that is delivered on a pay-as-you-go basis.

Marketplace-as-a-Service is a hosted marketplace that allows users to find, buy and manage their cloud applications and services in one place.

It is a web application that combines data or functionality from two or more external sources to create a new service. The term implies easy, fast integration, frequently us-ing open APIs and data sources to produce results that were not the original reason for producing the raw source data.

Monthly Recurring Expenses. Monthly Recurring Revenues.


Multi-tenancy On-Demand On-Premise Platform-as-a-Service (PaaS) Private Cloud Public Cloud Renewal SLA SOA SaaS Subscription TCV Up-Sell Virtualization

Refers to a  software architecture  where a single instance of the  software  runs on a server, serving multiple client organizations (tenants). Multi-tenancy is contrasted with a multi-instance architecture where separate software instances (or hardware systems) are set up for different client organizations.

Is often used as an interchangeable term along with SaaS.

Traditional method of installing and customizing software on the customer’s own com-puters that reside inside of their own data center.

Platform-as-a-Service solutions are development platforms for which the develop-ment tool itself is hosted in the cloud and accessed through a browser. With PaaS, developers can build web applications without installing any tools and then they can deploy their applications and services (reporting, integration, security) without any specialized systems administration skills.

Employs cloud computing principles within a customer’s own internal networks. The term implies that the same virtualization and highly flexible and scalable methods used in huge internet-based enterprise datacenters.

Cloud computing conducted using the public internet outside of any enterprise fire-wall.

Agreeing to extend an existing software subscription agreement beyond the initial term.

Service Level Agreement. The contractual terms of service associated with SaaS pro-vider’s offerings.

Service Oriented Architecture.

Software-as-a-Service refers to multi-tenant software delivered over the Internet and customers consume the product as a subscription service that is delivered on a pay-as-you-go basis.

SaaS licensing method where customers rent their software from the provider usually over a 1-3 year period.

Total Contract Value. Total value of a transaction as measured over the term of the agreement.

A key SaaS metric measuring additional software functionality, users, or capacity that is sold onto an existing software subscription agreement.

The creation of a virtual (rather than actual) version of anoperating system, a server, a storage device or other network resources.

Glossary of Terms (continued)




1) 2) 3) 4) 5)

Global Study on Public IT Cloud Services, IDC, 2009

The Cloud Wars Part III, Bank of America, Merrill Lynch, May 2010

SMB Cloud Adoption Study – Global Report, Microsoft, Edge Strategies, Dec. 2010 AppDirect market study, 2010


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