“On Demand Software Delivery” describes software delivered to the customer via a network (like the internet) as a service. This was originally a revolutionary concept in the late 1990’s. The software market is now in an evolutionary stage as businesses and the software vendors serving them become serious about On Demand Software Delivery. The current market has proven that On Demand Delivery is in demand now and demand will grow substantially in the coming years. Research firm IDC predicts that by 2008, subscription license revenues will hit $43 billion worldwide, or 34% of the total software market.

Jamcracker Inc. was a pioneer during the initial revolution with a clear and simple vision: allow business to consume applications like a utility via the On Demand model. The vision was clear and simple, but as the first major player in this new model, Jamcracker found the implementation complex and difficult.

Jamcracker has taken all it has learned about delivering software On Demand — from a business, operational, and engineering perspective — and developed an On Demand Enablement Kit to assist software vendors and in developing their own On Demand solutions.

While On Demand software delivery prevents many of the headaches that installed packages create for the customer, it presents new headaches for software vendors as they try to figure out how to deliver cost effective On Demand Solutions.

With only a few “established” On Demand vendors, this is uncharted territory for most software companies, but market demands will require all of them to venture into this model. What follows are some of the best practices Jamcracker established for successfully deploying On Demand Software delivery.

Business Model Challenges: Software companies must create a plan for successful introduction of On Demand solutions through new channels without distracting existing channels or cannibalizing existing license sales opportunities. They must also have a good grasp of how the new model will increase top line revenue.

Developing new distribution channels for On Demand solutions is key to increasing top line revenue. To develop new On Demand channels Jamcracker advises software companies to:

• Minimize capital required for partners to begin selling the solution
• Maximize partner’s ability to independently demonstrate and extend the product
• Ensure partners can manage the implementation process and own the move-add-change (MAC) requirements not handled by the customer
• Allow partners to build value-added services on top of your solution by bundling their own services or by adding business process/vertical expertise

To avoid distracting existing channels or hurting existing license sales, Jamcracker recommends targeting new markets like small business by creating a lower entry price point and a pay-as-you-go model. You can also simplify the product to better serve limited IT staffs. Simplifying the product and restricting the functionality will also prevent overlap with existing and future licensed products.

To help software companies simulate the delivery of a set of offerings in the On Demand delivery model, Jamcracker has developed a business-modeling tool as part of its On Demand Enablement Kit. The business-modeling tool includes ways to analyze projected adoption rates in conjunction with pricing, product mix, and channel mix variables.

The model also aids in estimating the cost infrastructure as the business begins to scale and user counts rise. The model includes a P&L statement, a channel partner P&L statement, and key metrics including breakeven point and cash out requirements. Software vendors developing an on demand solution must consider all of these business factors as part of their planning if they wish to be successful with this evolving delivery method.

Operation’s Challenges: An effective and flexible Operations Infrastructure is critical. The operational infrastructure and associated management are the greatest contributors to cost of goods sold and the most difficult to manage. For an effective infrastructure, you must have standardization of processes, increased automation, improved accuracy and lower component costs:

• Standardize key administrative workflow processes at the onset and refine them over time; Jamcracker doesn’t recommend a phased approach requiring new tools and process as you begin to achieve volume—a crucial time to be efficient and not burdened with managing change
• Build automation into as many tasks as possible to speed task completion, reduce personnel costs and minimize costly human errors in the order-to-bill processes
• Improve the accuracy of common processes; errors are expensive and lead to customer dissatisfaction; for processes not easily automated, strive to simplify the workflow and implement better process checks; review all of your non-standard cases where high error rates are common
• Deploy your infrastructure on “commercial off the shelf” products wherever possible to help keep costs down; research solutions that support Linux and other open source components, as they are now mature and reliable and can be deployed at much lower costs than comparable Unix and Windows systems

On Demand Software delivery will continue to evolve faster than the rest of the IT market. You must be able to adjust your offering quickly. Whether you are adding new distribution channels or new On Demand solutions, flexibility will separate the best providers from the rest.

Most software vendors want On Demand solutions to expand their available market, often through new channels. Your infrastructure must be flexible enough to allow channel partners to resell and re-brand your On Demand offering. In addition to creating an infrastructure that can support your channels, it should integrate with the customer’s own infrastructure (especially for the large-enterprise sale) and it should have the ability to delegate user management and application administration:

• Design your infrastructure to deploy new services and add new providers easily allowing you to broaden your portfolio and allowing downstream partners to sell their own solutions in addition to your On Demand offering —all from a single instance of the infrastructure
• Ensure integration with the customer’s existing infrastructure if you want to sell to larger enterprises; you must support connectivity to a customer or partner’s directory, HRIS system or other user profile data source as a standard process
• Build in the ability to activate new users and manage MAC work through multiple methods to lower costs and increase customer satisfaction; the ability to delegate administration of MAC functions is a key to customer satisfaction

For its own managed services business, Jamcracker built an integrated platform, designed to maximize efficiency and flexibility in the operational aspects of delivering On Demand solutions. Jamcracker now sells the platform, called Pivot Path, as a commercial software product designed to assist software vendors to easily transition to an On Demand Software Delivery model. With Pivot Path Jamcracker reduced operating expenses for its managed service business by 65%.

Pivot Path fuses the key operational processes of user management, provisioning, and service management with a flexible integration framework. This On Demand Delivery Platform is capable of automating many all of the administrative tasks associated with the order-to-bill business processes required to support the On Demand business model.

Application Architecture Challenges: Software vendors must develop versions of existing and future products that support multi-tenancy at the business logic, data, and administrative levels. As with any new complicated infrastructure and architecture designs, Jamcracker recommends seeking consulting services from companies with domain expertise and to keep the following in mind when developing your application architecture:

• Build a reusable set of administrative components for on boarding users and managing MAC, this is critical even before your application is business logic and data multi-tenant.
• Leverage a common set of services for user access management across each software instance in your managed service environment; this is critical for your On Demand solution, but less important for software installed within the enterprise
• Architect your solution so channel partners can “own” their own customer implementation and MAC work; this is vital for cost containment and enables channel partners to maintain a close relationship with their customer
• Address both application data levels and business process levels of integration within your design; the application data level is where customers will integrate your solution with other applications in their environment; the business process level is where customers will integrate your user add and delete business processes with their existing directory or HRIS system
• It is important to keep the above in mind as you develop your On Demand solution. As with any IT infrastructure architecture design it is best to seek the services of a consultant like Jamcracker with a solid foundation in On Demand Software Delivery that can help you design a near- and long-term, scalable architecture for your On Demand strategy.

Who Will Lead The Evolution?

On Demand Software Delivery is here and it will grow substantially in the coming years. Recent announcements by nearly all of the biggest software vendors about On Demand Software Delivery shows that the success of companies like SalesForce.com and RightNow Technologies has caught everyone’s attention — customers and software vendors alike. You know who started the revolution, which software companies will evolve to be the leaders?

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