Move to
the Cloud:
The ISV
Success
Formula
Move to the Cloud: The ISV Success Formula
Move to the Cloud: The ISV Success Formula ... 1
Move to the Cloud: The ISV Success Formula ... 2
Identify the Opportunity ... 4
Plan: Business Decisions ... 6
Plan: Sales and Marketing Strategy ... 9
Plan: Technical Decisions ... 11
Execute: Partner for Speed ... 13
Execute: The Microsoft Azure Platform ... 14
Execute: Microsoft Resources ... 15
The Next Step ... 17
About Hanu Software ... 18
Move to the Cloud: The ISV Success Formula
To take advantage of the wide adoption of cloud computing, ISV’s are transitioning their applications for deployment through the cloud. The cloud allows both the software developer and customers to take advantage of shared computing resources to lower costs. The National Institute of Standards and Technology1, has clearly defined the five essential elements of cloud computing:
On-demand self-service. A consumer can unilaterally provision computing capabilities, such
as server time and network storage, as needed automatically without requiring human interaction with each service’s provider.
Broad network access. Capabilities are available over the network and accessed through
standard mechanisms that promote use by heterogeneous thin or thick client platforms (e.g., mobile phones, laptops, and PDAs).
Resource pooling. The provider’s computing resources are pooled to serve multiple
consumers using a multi-tenant model, with different physical and virtual resources
dynamically assigned and reassigned according to consumer demand. Examples of resources include storage, processing, memory, network bandwidth and virtual machines.
Rapid elasticity. Capabilities can be rapidly and elastically provisioned, in some cases
automatically, to quickly scale out and rapidly released to quickly scale in. To the consumer, the capabilities available for provisioning often appear to be unlimited and can be purchased in any quantity at any time.
Measured Service. Cloud systems automatically control and optimize resource use by
leveraging a metering capability at some level of abstraction appropriate to the type of service (e.g., storage, processing, bandwidth, and active user accounts). Resource usage can be
monitored, controlled and reported providing transparency for both the provider and consumer of the service.
“Cloud computing is a model for enabling convenient,
on-demand network access to a shared pool of configurable computing resources that can be rapidly provisioned and released with minimal management effort or service provider interaction.”
National Institute of Standards and Technology
The Formula for ISV Success in the Cloud
For those ISVs grappling with how to make the transition, the process can seem overwhelming. We’ve assembled this guide to clarify the steps and help you take a systematic approach. Based on our own experience and consulting with experts who help ISVs make the move, we suggest a three tier approach. The process can be distilled down to three phases with multiple elements in each phase. Planning and Execution are clearly the areas that ISVs should spend the most energy through a systematic evaluation of the various business and technical models.
1. Identify the Opportunity
The value of being an ISV
Speed to deployment
Open new markets
Lower operational costs
2. Plan
Business decisions
Sales and marketing strategies
Technical decisions
3. Execute
Partner for speed
The Microsoft Azure platform
Microsoft resources
Marketplace
Opportunity + Plan + Execution = Success
With a realistic approach to the market and thoughtful execution, you can transition your business to a cloud model positioned for growth. The Planning and Execution phases of the process will require the most thought, discussion and decisions. We’ll provide a framework with this guide and additional
“The most compelling reason to move to the cloud is that it allows ISVs to focus all of their energy on the areas of their business where they add all of the value. For the typical ISV, their expertise and their specialty is in solving a specific customer problem through the software that they built.”
Tim Buntel, Platform Strategy Advisor
Identify the Opportunity
There’s no longer a question of whether or not ISV applications need to be offered through the cloud. Now, the question for ISVs is how to approach the transition to ensure business continuity. The first step in that process is to understand the benefits of the cloud and how your business can take advantage of them.
Focus on Value Add
As an ISV, your business model is to build software applications that solve customer problems. All of the other parts of the software business — including IT infrastructure, like keeping machines up and running and making sure your application can scale — are not related to your core competency.
By building on the cloud you are able to focus all energies where you can add the most value in the market.
Speed to Deployment and Sales
Using cloud as your infrastructure means that you can deploy applications without spending the time and money to purchase and configure hardware. With rapid deployment you can react to changing market conditions quickly, ramping up to meet demand or taking products in a new direction.
With no upfront hardware investments – innovations can happen at the speed of thought.
Open New Markets
Software as a service allows ISVs to tap into new markets on many levels. For the enterprise-focused ISV, applications can be trimmed down to focus on the need of the SMB market and distributed through developing SMB web marketplaces. The SMB-focused ISV can target enterprise clients with the cloud-enabled ability to scale quickly.
Globalization provides two separate opportunities to ISVs. Companies are now supporting distributed teams while extending into new markets. ISVs can help companies deliver applications to employees no matter where they are located and can serve localized needs more cost effectively.
“Less is more! Leverage the cloud everywhere you practically can, both for your internal systems as well as for your own product offering(s) and “just say no” to on-premises
deployments!”
Lower Operational Costs
While the decision to move to the cloud used to involve high capital costs that kept most ISVs from entry, that’s no longer the case. There are many options for cloud computing that provide flexibility to support growth without capital investment.
The usage-based cost of cloud services allows you to develop a pricing model that makes the most sense for your application and your customers. The ability to scale up and down to meet variable demand gives you the opportunity to approach any market with confidence.
Data from “The ISV Business Case for the Windows Azure Platform, A Total Economic Impact Analysis, Forrester Research
Plan: Business Decisions
Transitioning Revenue and Expenses
A recent study was conducted by Forrester Research2 examining the total economic impact and business case for six ISVs who have transitioned solutions to the Azure cloud platform. The ISVs realized significant growth and cost reductions as a result of their move to a SaaS model. Findings included:
Annual revenue growth rates of 20% to 250% for applications built on Windows Azure. These are completely new revenues from SaaS applications built on Windows
Azure, and they were achieved in the first nine to 14 months of operations.
Reach completely new customers. Having cloud-based applications that could be
offered globally allowed the ISVs to sell into new market segments and to geographically distant customers.
70% to 80% reduction in hosting expenses. Those ISVs that had previously hosted
applications for their customers using traditional server hosting were able to significantly reduce their hosting expenses while improving service delivery quality.
Initial code porting and development effort of eight to 12 person-months. This
represents the effort needed to port existing code to Windows Azure and develop the first working version on Windows Azure.
Based on a composite of the study ISVs, a summary of the expenses and revenues for the first three years reflects the initial investment in application porting and code rewriting followed by lower maintenance costs.
While the cost of the transition is significant to most ISV businesses, the payoff for marketable solutions reaching expanded markets delivers long term benefits.
Ongoing Financial Metrics
Once you have made the commitment to move, the cloud will require you to understand and track a whole new set of financial metrics to measure your success. According to “Bessemer’s Top 10 Laws of Cloud Computing and SaaS”3 there are six key metrics ISVs should define, model and monitor.
CCMR. The Committed or Contracted Monthly Recurring Revenue (CCMR) is the primary driver of
cloud-based ISV business revenue. CMRR is the combined value of signed contracts on a monthly basis – regardless of your pricing model. The goals are to have a healthy flow of new and existing committed contracts as well as the monthly dollar amount of each contract being as high as possible.
Churn. A critical element of CMRR, churn indicates the value of the monthly recurring revenue that
is expected to be lost from customers that have announced they will stop the service. It’s also a metric that should be monitored closely in its own right as high customer churn can be disastrous.
C-pipe. The forward looking indicator for CMRR and CAC is the expected pipeline of new
subscribers for a given timeframe. Rising or falling C-pipe is an indicator of future revenue.
Cash flow. A key metric for any company. For cloud services specifically, however, it’s critical for
staying afloat when payments are made in small ongoing incremental amounts over the lifetime of the contract. Pre-payment discounts offered to customers are a way to improve cash flow position.
CAC. Customer Acquisition Costs (CAC) includes the cost of sales and marketing to acquire a new
customer. Understanding this number is critical to evaluate the true profitability of each market.
CLTV. The Customer Lifetime Value (CLTV) is the net present value of the recurring profit streams
of a given customer less the acquisition cost. A profitable business will have a positive CLTV. For companies selling software as a service, customer acquisition costs are frequently the single largest expense on the income statement. For that reason it’s important to measure and track how quickly you are able to recapture those costs from each customer. According to Bessemer, the “non-official” standard in the market is that the sales and marketing costs should be recouped within a year, with the following year covering the cost of administration, product development etc.
“Any good pilot (CEO) knows that you can’t fly in cloudy weather without an instrument rating, yet many CEOs are attempting to do exactly that.”
With respect to CLTV, the idea that companies should consider the lifetime value of their customers has become one of the core premises of nurture marketing over the past decade. New business acquisition is important, but sustaining and growing the customer relationship over time is critical to the subscription-based revenue model. The goal is to have a continued stream of profitable payments that will increase in value over time as the customer upgrades their account and takes on additional products and services. Together, CMRR, Cash flow, CPipe, Churn, CAC, and CLTV make up the “6 C’s of Cloud Finance.“ To learn more details about calculating and using these metrics, you can download “CAC Ratio - One Number to
Manage your SaaS S&M Spend” or “Measuring Growth Businesses with Recurring Revenues” at http://www.bvp.com/cloud.
Distribution and Support
With delivery over the internet and instant upgrades, promised SLAs and 24/7 support the cloud business needs an entirely different model from the existing on-premises one. One of the clear benefits of the cloud computing hype is that you don’t have to deliver on those promises yourself. Mature, global companies have invested billions of dollars in cloud infrastructure to offer very cost effective alternatives.
Stability and portability are particularly critical items to evaluate, and you should be cautious to leverage any proprietary tools and services that encourage lock-in, as portability is your best protection against future performance or pricing issues. Considerations in choosing your platform will include:
Application Deployment. Who is responsible for rollout of new applications or software
upgrades?
Change Management. Who is responsible for patching, upgrades and tracking?
Database Management. Who manages the databases, including Oracle, Microsoft SQL and
MySQL?
Performance Management. How is performance monitoring and management handled?
Application Optimization. What are the expectations of application performance?
Compliance. What level of system compliance (SAS 70 and PCI) do you need to offer customers?
“Every Cloud company is in the service business, and therefore your customer service can be the difference between failure (churn) and huge success via high retention and up sells.”
Plan: Sales and Marketing Strategy
To grow your business you can either expand into new markets or sell additional products to your existing customers. One of the attractions of the cloud is that it allows you to do both at the same time.
Existing Customers. Potential to expand revenue opportunities with existing clients, include:
Offer existing on-premises customers a hybrid model or transition to SaaS,
Promote additional SKUs with new products and add-ons to existing products,
Provide “data-as-a-service” using data collected across the customer base to derive benchmarks offered back through comparative dashboard metrics.
New Customers. The real growth potential of SaaS comes with opportunity to dramatically expand your
market approach, including:
Scale to offer SMB targeted applications to Enterprise customers and vice versa,
Enter new geographic or vertical markets,
Tap into new channel partners,
Take advantage of application marketplaces.
Marketing. In your approach to acquire new clients, remember that the basic rules of marketing still
apply, including:
Clearly identify and define your target market — make it granular and define buyer personas,
Focus your message on the benefits to the buyer, not the features of your solution,
To draw people to your website, create valuable content that will interest your target market,
Make it easy for your prospects to find out more and to purchase.
With cloud-based applications, the mechanics of proving the value of your application becomes easier. Online demos and free trials are straightforward to deliver so customers can see the value in the application for themselves.
“By definition, your sales prospects are online - Savvy online marketing is a core competence (sometimes the only one) of every successful Cloud business.”
In all of your messaging, keep in mind that your product is a promise of future benefits. With Software as a Service, your customers need to believe that you will continue to deliver the value that they are paying for today and the expectation that the value will increase over time. Deliver on that promise and you will keep your customers for a long time.
Application marketplaces. One of the benefits of the SaaS model is access to the increasing number of
application marketplaces. While your hosting vendor may offer you a primary outlet for your applications, be sure to research opportunities for participation in industry and channel marketplaces. Find every outlet that your target user visits and look for opportunities to offer your application.
Sales and Marketing Best Practices
The Forrester Research study of ISVs found that several practices accelerated sales for new SaaS
applications. As you plan your sales and marketing consider if any of the following will help you build your customer base more quickly.
Promote the application before it is ready for customer use. High achieving ISVs promoted their
products early to build competitive differentiation, give customers time to consider adopting a cloud offering and generate awareness in new market segments.
Develop new sales channels. The ISV’s trying to reach new, broad or geographically distant markets
found success by tapping into channels serving common customers. Examples of channels include systems integrators, Web agencies, building automation specialists and private-label distributors.
Make it easy for customers to try the product. Thirty day trials, a free version with limited features and
proof-of-concept deployments give the customer the opportunity to test drive. In the software market anymore, not having a trial version is the exception.
“What is the sales and marketing strategy making you consider going to the cloud? Is it because you want to reach new markets? Is it because you want to lower costs? Is it because customers are asking? What is the business reason?”
Francesco Rietta, US Azure Partnerships Business Development Manager Microsoft
Plan: Technical Decisions
Architecture
While a deep dive into the architectural decisions that you will need to make is beyond the scope of this paper, your key considerations, include:
User Experience. Applications need to be easy to use and provide high performance.
Cross-Browser Compatibility. Programs must work with multiple browser platforms and versions.
Single Tenant vs. Multi-Tenant Architecture. The software should support one single customer
or should support multiple customers. When you are making the single versus multi-tenant decision, you need to think about your application from an architecture perspective and also from a business practices perspective. How the shared deployment model impacts the way you sell to customers.
Reliability and Availability. With anytime, anywhere access SaaS needs to be fully functional with
availability 24x7x365.
Interoperability. SaaS software needs to be easy to integrate with other applications.
Extensibility. Customers expect customizable applications to fit the end user's needs.
Security. Security within the SaaS model is a customer concern, software must alleviate this worry.
Scalability. Through SaaS, users can be rapidly and elastically provisioned, in some cases
automatically, to quickly scale out and rapidly released to quickly scale in.
As an additional note on scalability, while all applications can realize benefits from moving to the cloud, applications with certain workload patterns are particularly well suited to the cloud, including:
On and off. Parallel processing applications, when large amounts of capacity are needed for a very
“The ability to slide computing power up and down is a lot more granular in the cloud.”
Tim Buntel, Platform Strategy Advisor
Growing fast. Start-up applications which may start with a few customers but grow quickly to add
many customers.
Spiky. Unpredictable bursts of usage commonly experienced with consumer applications like
online games and social networks. Or, usage with predictable bursts like seasonal applications such as shopping websites.
To fully understand the commitment that will be required to move or develop your application for the cloud, a trusted partner with experience helping other ISVs in similar markets as your own will be best source of information.
Execute: Partner for Speed
As mentioned at the beginning of this paper, transitioning your applications to the cloud enables you to focus on the value that you add to the customer in terms of your industry and functional expertise. Migration of the application follows the same logic. As a one-time event in the lifecycle of your product, tapping into the expertise of a partner who understands the challenges and best practices of porting applications to the cloud allows you to maintain focus on your core competencies.
What makes a good cloud partner?
To find the right partner for your cloud application development project, focus on the experience that the developer can prove. There is certainly no shortage of on and offshore development companies that will represent their expertise in whatever platform you choose. The true differentiator that will save you time, money and headaches is experience – proven experience.
The partners you consider should be able to provide you with:
Current vendor certifications and endorsements that demonstrate technical expertise,
Clearly defined project deliverable and cost definitions,
Examples of projects within your industry,
Recent customer references — and invite you to speak with any number of customers.
Experienced partners will be able to make recommendations on architecture that will best serve your customer’s requirements, advise you on usage and security management and optimize your applications to support growth.
“We were limited in our ability to expand. If we didn’t jump on the benefits the cloud has to offer today, we wouldn’t be around in five years. We needed a partner to help us choose a cloud platform and to rewrite our systems to run in that environment.”
David Pisanick, Vice President of Technology at Food Service Solutions
Execute: The Microsoft Azure Platform
Windows Azure is an open and flexible cloud platform that enables you to quickly build, deploy and manage applications across a global network of Microsoft-managed datacenters. You can build
applications using any language, tool or framework. And, you can integrate your public cloud applications with your existing IT environment.
Any language. Any form. Windows Azure enables you to use any language, framework or tool to build
applications with ready-to-go SDKs for Linux, iOS, Java as well as SDKs for devices including iOS, Android, WindowsPhone and Windows8.
Your deployment. Your choice. Windows Azure offers deployment on your terms — no matter what
cloud infrastructure scenario is best for your business model — supporting IaaS, PaaS, SaaS and Hybrid deployment options.
Always up. Always on. Windows Azure delivers a 99.95% monthly SLA and enables you to build and run highly available applications without focusing on the infrastructure. Automatic OS and service patching, built in network load balancing and resiliency to hardware failure keep operations smooth. Upgrading your application can be managed without any required downtime.
Unlimited servers. Unlimited storage. Windows Azure enables you to easily scale your applications to
any size. The fully automated self-service platform allows you to provision resources within minutes to elastically grow or shrink usage based on your needs.
Windows Azure lets you focus on your application instead of the infrastructure.
“The scalability and flexibility of the Windows Azure platform means we can increase our customer count with minimal impact on the cost of doing business: for us that equates to higher profit margins.”
Jacques Nack Ngue, eClaris Founder and
Execute: Microsoft Resources
The Windows Azure Marketplace. The Windows Azure Marketplace is a global online market where ISVs
and Data Publishers can publish and sell Windows Azure applications, services, building block
components and premium datasets. The Marketplace provides partners a global online sales channel to rapidly accelerate the return on their Windows Azure platform investments, to land new customers, new markets and new revenue opportunities. The Windows Azure Marketplace is a one-stop location
supported by Microsoft to help you succeed. Visit the Windows Azure Marketplace for more information.
Windows Azure blog. http://www.windowsazure.com/en-us/community/blog/
Windows Azure related white papers. http://www.windowsazure.com/en-us/develop/net/other-resources/white-papers/
Microsoft® BizSpark®. Microsoft’s BizSpark program helps software startups succeed by giving them
access to software development tools, connecting them with key industry players, and providing marketing visibility. The program also includes access to Windows Azure, a flexible, comprehensive, and powerful cloud platform for the creation of web applications and services. In addition, BizSpark offers technical support, business training and a network of over 2,000 partners to connect members with incubators, investors, advisors, government agencies and hosters. Since it was established in 2008, more than 45,000 companies in over 100 countries have joined BizSpark. Visit Microsoft BizSpark for more information.
Windows Azure pricing. Pricing Calculator
Educational webinars. Understand how your business can succeed with SaaS through five 30 minute
Footnotes
1. National Institute of Standards and Technology, http://csrc.nist.gov/groups/SNS/cloud-computing/cloud-def-v15.doc
2. The ISV Business Case For The Windows Azure Platform: A Total Economic Impact Analysis http://blogs.msdn.com/b/windowsazure/archive/2011/07/12/new-forrester-report-outlines-the-isv-business-case-for-windows-azure.aspx
3. Bessemer’s Top 10 Laws of Cloud Computing and SaaS, www.bvp.com/cloud
The Next Step
With a good understanding of the basics, the next step is to determine the best solution for your business. At Hanu, we specialize in helping ISVs build their businesses with cloud-based applications, taking full advantage of the Microsoft technology stack. Our services are designed to fit your cloud journey.
The Cloud Assessment
The Hanu Cloud Assessment guides you through the critical questions about your application that will impact your cloud approach. Application characteristics, current infrastructure, data foundation, integration and security requirements are all factored in.
Results from the Hanu Cloud Assessment Tool deliver expert advice on whether you should:
Migrate your solution to the cloud – or not.
Go with a Public, Private or Hybrid deployment model.
Take more ownership with IaaS (Infrastructure as a Service) or take advantage of the benefits of PaaS (Platform as a Service).
Based on your answers to 25 questions in 5 categories, the Hanu Cloud Assessment Tool will present
Avoid, Neutral, Good, Better or Best recommendations for your cloud choices. Take the assessment today. It’s free, without any obligation.
Cloud Strategy Assessment (CSA)
This one day session involves key members of the Hanu Cloud team and your organization. Through review and discussion of your business objectives, current IT organizational state and priority workloads, Hanu will:
Identify applications and databases for Cloud migration
Help you analyze the cost benefits (TCO and ROI) of the Cloud
Demonstrate how you can leverage Windows Azure
““The Azure Circle partner program recognizes Hanu Software’s commitment to helping our shared customers take full advantage of the benefits of cloud services,” Francesco Rietti, Business Development Manager for Microsoft US Azure
Partnerships.”
Francesco Rietta, US Azure Partnerships Business Development Manager
Architecture Design Session (ADS)
Your key decision makers and technology architects will meet with the Hanu Cloud experts for guidance in designing a cost-effective and agile Cloud solution that will improve the flexibility and scalability of your IT organization. Keeping your business goals and technical requirements in mind, the objectives of the ADS are to:
Help you validate your Cloud technology approach and accelerate your technical decisions
Ensure business and technical requirements are aligned
Discuss the main architecture benefits and risks
Plan a high-level architecture framework for your Cloud solution
Proof-of-Concept (PoC)
The Hanu Cloud development team will leverage the Windows Azure platform to build a working reference implementation of the Cloud solution determined to be the best fit for your organization. The goal of the PoC offering is to build your confidence in Hanu, Windows Azure, and Cloud computing prior to a full commitment to Cloud Application Development or Migration. Once you see the benefits of a Cloud application and like what you see, Hanu will work with you to move to the next step in your journey to the Cloud – adopting the Cloud.
About Hanu Software
Proven capabilities and expertise. Hanu is a member of Microsoft Corporation’s elite Windows
Azure Circle program, the highest level of Microsoft’s Cloud Accelerate Partner program designed to validate the credentials of highly trained and tested partner organizations.
Unparalleled professional support. Hanu has a dedicated team of project management,
engineering and testing experts assigned to you and your product. We take pride in helping you take your business to the next level.
An accelerated approach. Through our experience working with ISV cloud transitions, Hanu has
developed a set of migration tools to ensure rapid, cost-effective migrations.
“Hanu had the core competency to deliver what we envisioned. They conducted the software development effort in a very professional way; everything was well documented and executed.”
Jacques Nack Ngue, eClaris Founder and
Success Stories
Hanu clients have been selected by Microsoft for recent case studies, including:
eClaris. eClaris is an eDiscovery consulting company, helping law firms manage the increasing
volume of digital evidence and meet evolving regulatory guidelines. eClaris developed a
proprietary eDiscovery project management tool which they wanted to offer to law firms through a Saas model. eClaris engaged Hanu to move PHIGRID to the cloud. Click to read more.
Food Service Solutions. Serving the education market, Food Service Solutions simplifies student
meal payment for parents and school districts through prepaid account and cafeteria POS (Point of Sale) systems. To remain competitive, Food Service Solutions engaged Hanu to develop a secure cloud-based solution that would eliminate the school’s hardware component and simplify management of the two solutions. Click to read more.
We have many more success stories that we can share. Please visit our website or email [email protected] to learn more.
Hanu Software
Headquarters & Onshore Technology Center
5 Independence Way, Suite 300 Princeton, NJ 08540
P: (800) 520-1816 F: (609) 945-2390
About Windows Azure
The Windows Azure platform includes a cloud services operating system and a set of developer services, which provide the functionality to build applications that span from consumer Web to enterprise
scenarios. Windows Azure and SQL Azure are the key components of the Windows Azure platform. The Windows Azure platform includes the following developer services:
• Compute. Web and Worker roles to host applications around the world. • Database. Highly available and scalable relational cloud database service.
• Virtual machine. Deploy custom Windows Server 2008 R2 images to Windows Azure. • Storage. Persistent and durable storage in the cloud via four core services.
• Content delivery network. Deliver high-bandwidth content through 24 global physical nodes. • Caching. Distributed, in-memory application cache service.
• Virtual network. Networking functionality to connect on-premises and cloud applications. • Service bus. Secure messaging capabilities for distributed and hybrid applications.
• Access control. Standards-based service for identity and access control.
• Business intelligence. Develop and deploy operational reports to the cloud using familiar tools. • Marketplace. Buy and sell finished applications, data sets, components, and more.
