Software as a Service Tradeoff Considerations Cost Effective or Liability? Authored and Presented By: Gordon F. Jones Partner: The Stratafusion Group (925) January 24 th, 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.” Infrastructure Business integration Standardization Business flexibility & agility Reduced marginal cost of business unit’s IT 69% Transactional Cut costs Increased throughput 8%8%8%8% Strategic 9% Informational Increased control Better information Better integration Improved quality 14% Increased sales Competitive advantage Market positioning Innovative services

Case Example of Putnam’s Hybrid model Putnam Investments Customer Blue Matrix Grand Central Communications SalesForce.com Web Services – Creating & distributing Analysts Reports leveraging ASP 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

“Dependant” Roles on the Web!

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 Partner: The Stratafusion Group (925) January 24 th, 2006