CONSUMERS USE MOBILE

PHONES TO GET INFORMATION

AT LEAST 3-4 DAYS PER WEEK

/

1.4GLOBAL CONSUMERS

BIL

LIO

N

WITH TABLETS AND

SMARTPHONES

BY 2016

AB

OU

T

OF WORKERS DO SOME WORK OUTSIDE

OF THE OFFICE

80%NEARLYOF TODAYS GLOBAL WORKFORCE AREANYTIME, ANYWHERE WORKERS WITH 3+

DEVICES, WORK FROM MULTIPLE

LOCATIONS AND USE MANY APPS

29%BELIEVE I.T. IS INEFFECTIVE AT PROVIDING

COLLABORATION, DATA ANALYSIS AND

MOBILITY CAPABILITIES

60%

EM

PLO

YE

ES

GLO

BA

LLY

ARE CONCERNED THAT THE DIGITAL

TORRENT IS COMING FASTER THAN

THEY CAN COPE

51% OF CIOS

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

Mobilethe new normal

Desktop PCs Notebook PCs Tablets

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

Millio

ns

of

un

its

ship

ped

80

60

40

20

Source: IDC Sept 2013 and Microsoft

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 System Revenue

IntelligentSystems

1.7T

B5075212

249834

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 )

Software Revenue Growth Rate in 2017

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

22%

4%

0%

5%

10%

15%

20%

25%

SaaS/PaaSRevenue

Packaged Software

5.5x higherCloud SW

growth than packaged SW

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

transcend time, place, context, and device?

connect customers

The challenge of mobility

Where is the value?

Where do you invest?

Different paths (and economics) to apps

INVESTMENT NATIVE UX MARKET

Native app Empty Full Empty

Native Web Full Empty Full

Cross-platform Half Half Full

Universal app Full Full Half

How will you adapt to a cloud first world

unlocking new markets

as the economics of software shift?

enabling development agility

Increasing deal size with the cloud

Solution on Customer Hardware

Customer has 600k budget

Hardware/maintenance cost = 300k

Software license opportunity = 300k

Solution on Azure

Customer has 600k budget

Azure cost to run = 150k

Software license opportunity = 450k

Leading in a cloud-first world

Strong Focus and CommitmentClear business model and customer segmentation

Investment in dedicated or experienced resources

Seller Incentive To Drive CloudComp 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 ObjectivesPriced with competition and/or existing offerings taken into consideration

Incentive for selling SaaS over other products to accelerate early adoption

Well Integrated and VisibleInternal systems adapted and ready at launch Learn, Try, Buy clear on websiteChannel and field ready with relevant offers and incentives tied to marquee industry event

Cloud and SaaS model adoption

Opportunities

Challenges

Expanding Market Opportunity

Sell directly to business decision makers

More predictable revenue

Lower infrastructure support costs

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

Balancing SaaS delivery with core software and solving customer problems.

Software+ Customer workflows

Core Competencies

Essential value for ISVs to build

As-a-Service(Platform & Infrastructure

Management)

Non-core, but Necessities

Limited value for ISVs to build

ISVs are experiencing more challenges and burdens managing their own infrastructure

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

Software+ Customer workflows

Core Competencies

Essential value for ISVs to build

Choosing the Right Cloud

Platform

Non-core, but Necessities

Limited value for ISVs to build

Application

Architecture

Complexity &

CustomizationComplexity of solutions data layer/app layer

Core vs. new/extended solutions

APIsSolution integration: 3rd party solution integration, APIs support

Customization enabling partners

TenancySingle tenant vs. Multi-tenant

Operations Customer Needs & SLAReliability/Availability

Performance

Security/Compliance

Scalability

SupportEasy on-boarding

Service management: Provisioning, usage metering, billing

DevOpsALM

DevOps collaboration

Versioning

Business Model

& Strategy

Pricing /Cost StructurePricing model monthly, annually

Funding model: CAPEX vs. OPEX

Cost to scale (COGS)

Target MarketTarget market and geo presence, expansion

Macro environment data sovereignty, regulatory compliance

Channel model

Business GoalsCloud First or Cloud Both strategy

Grow organic or through acquisition

Funding get sold, get invested

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

80% of SaaS ISVs are self-hosted today Key Drivers

< 2%Cloud-based infrastructure

(Public Cloud)

Fast time to solutions, rapid deploymentfor new services

Global reach with broad geo coverage

18%Enhanced Managed Services

and Hosted Managed Services

Delegate operations and infra management to capable managed hosting partners

39% Co-location Specific geo coverage or local presence while

maintaining operational control to meet customers expectations and SLA

Infra HW operational efficiency

41% ISV On-premises Complex solution architecture and customization

Full operational control to meet customer expectations and SLA

Cost to scale. CAPEX funding model

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

Complete Hybrid Cloud Platform

ONEConsistent Cloud Platform to Support ISVs Business Needs

< 2%Cloud-based infrastructure

(Public Cloud)

18%Enhanced Managed Services

and Hosted Managed Services

39% Co-location

41% ISV On-premises

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

Microsoft Cloud OS

Customer

ServiceProviderMicrosoft

ConsistentPlatform

ONE

Allows ISVs to expand SaaS business seamlessly with a consistent hybrid platform

The Platform for Your SaaS Business

Common Identity

Integrated Virtualization

Data platform

Multi-Tenant

Flexible Deployment

Microsoft

On-PremisesService

Provider

One

Consistent

Platform

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

Unified Management

Grow your business with Microsoft no matter where you start

Service ProviderMicrosoft Azure Develop Deploy Manage Monitor

On-Premises

Designed for Cloud Applications

Windows Server 2012 R2

Web Applications Remote Desktop Services

Networking Storage Management Active Directory

Virtualization with Hyper-V Multi-Tenancy Availability / Scalability / Security

System Center 2012 R2

Service Provider Foundation API

OS & Application Monitoring

Automation & Self-Service

Infrastructure Provisioning

Foundation for Hosting Service Provider Offers

ISV Control Panels Custom Control Panels Service Management Portal

Service Management API (REST OData)

Compute Storage (File/Block) Network

Application Hosting

(SaaS/PaaS/IaaS)

Desktop Hosting

through RDS

Windows Server 2012 R2 Provides the comprehensive, highly scalable platform

System Center 2012 R2 Provides the cost efficient, unified

management platform

Windows Azure Pack & Service Provider Foundation APIProvides standard management API

24 x 7 x 365 1 billion 20 million 76

280 years

$

$

$

Rp

TL

chf

krkr

$R$

$

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 awarenessKey app adoption

Data

Azure

.NET

Hyper-V

Visual Studio

System Center

Active Directory

Programming languages + tools.NET, Visual Studio, TFS + Git, Java, NodeJS, PHP,

Python, Ruby, C++

Microsoft cloud infrastructure

Web

Mobile

Gaming

Cloud services

Data Analytics

Media

Identity

IaaSWindows VMs

Linux VMs

Storage

Networking

PaaS

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

No other cloud provider offers the breadth of regulatory-related and other trust features across cloud platforms

Routinely collaborate and seek input from regulators to validate our approach

Microsofts services are engineered to help customers to meet their regulatory compliance needs

Microsoft is a thought leader and innovator in the cloud on regulatory compliance

Standard process for development of secure software

International standards

ISO 27034-1

Comprehensive application security program

Flexible controls, measurements and

secure coding requirements

Data security

Lock box processes for Encryption at rest protects data on Microsoft servers

Encryption in transit with SSL/TLS protects data transmitted between customer and Microsoft

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

Physical security

24-hour monitoring of data centers

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

Logical security

Lock box processes for strictly supervised escalation process greatly limits human access to data

Servers run only processes on whitelist, minimizing risk from malicious code

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

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

Remaining competitive

Staying focused

Reducing costs

Managing datacenters

Security, privacy & continuity

Embracing globalization

Improving free cash flow

Boosting capital value

Top of Mind Issues for ISVs

ISVs Must Think Differently for the Cloud

Financial MetricsChurn RateCash flow and cost of saleCustomer Lifetime ValueCommitted Monthly Revenue

Sales & MarketingLicensingCustomer Acquisition and Cost of SaleTry before Buy Click, Try, BuySales CycleReferral Programs

Distribution & SupportDelivery rhythmChannel DynamicsService Level AgreementsSupportBilling

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

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

CMRR

C-PIPE

CAC

Cash Flow

Churn Rate

CLTV

Source: David Skok, Matrix Partners

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

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? Steps in Sales Process How is this Done?

Cloud Sales Process: Customer Led, Support Driven

Business Value For ISVs

Pay as You Go

Enterprise Agreement

Open LicensingResell 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

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.

Partner Success Story: iQmetrixISV Speeds to Market, Trims Costs 30 Percent by Using Open Source Tools,

Cloud Delivery

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 WeilerVice President, Marketing, iQmetrix

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.

ACCEO with OrisoHosting Specialist Helps ISV Bring Existing Applications to the Cloud

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

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

7x Faster Performance Enables Real Time Updates