February 4, 2009

1. Blue Skies?Clearing the Air on Cloud Computing and SaaSParallels SummitMandalay Bay, Las Vegas, NevadaBill McNeeFounder and CEObill.mcnee@saugatech.com Strategic Advisor to Leading IT Vendors February 4, 2009 Westport, CT Phone: 203-454-3900 info@saugatech.com

2. Cloudy Language • WALL STREET JOURNAL BIZTECH BLOG • “Overuse of the Term 'Cloud Computing' Clouds Meaning of the Tech Buzz Phrase” (September 23, 2008) • “Microsoft Comes up with Yet Another Meaning for ‘Cloud Computing’ ” (October 2, 2008) • The “ubiquitous buzzword . . . that everyone seems to interpret as a different animal.” Forbes • According to Gartner, Cloud Computing is “creating a lot of confusion in the market” • “There is a clear consensus that there is no real consensus on what cloud computing is.” Irving Wladawsky Berger, Chairman Emeritus – IBM Academy of Technology Page: 2

3. CIOs on Cloud Computing Recent Saugatuck interviews with CIOs revealed: • “Cloud computing is anything the user wants it to be. OK, that's probably more facetious than you wanted to hear. But it really is true – cloud computing means the availability of IT, delivered as a service, from a provider unknown to or unseen by the user. It can be us in house; it can be IBM; it can be SalesForce.com…” Divisional CIO, Top-5 US brokerage / financial services firm • “Cloud computing is the outsourcing of IT infrastructure. I see the cloud including SaaS and computing, Storage, etc. I don't know that we would outsource IT management to a cloud provider…” CIO, mid-sized US manufacturing firm (with 7 small subsidiaries) • “When I think of “Cloud Computing, I think of it as the ability to dream software solution dreams.  I then think of rendering it in a language of my choice.  And finally, being able to somehow magically "push" code into the "Internet Cloud", without fore-knowledge or regard for any of the layers underlying my code (DBMS, OS, connectivity or Computer)… The leading vendors are Google, Facebook, Amazon.com, and Salesforce.” CIO, Global Retailer • “Cloud Computing is about on-demand infrastructure that can be flexibly deployedbased on my computing needs. Longer-term, it is all about building and deploying new apps in the cloud – as we shift the way we deploy IT from internally-managed datacenters to centralized utilities... Amazon and Google are the early compute-focused players, but Cloud Computing will cross the entire ecosystem of providers within a short time…” SVP Fin/HR Apps at Top-5 US Bank Source: Saugatuck Technology Page: 3

4. 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Beyond Software-as-a-Service The focus of SaaS shifts over time from cost-effective delivery of stand-alone application services (Wave I), to integrated business solutions enabled by web services APIs and ESBs (Wave II), to workflow- and collaboration-enabled business transformation (Wave III), leading to measured, monitored and managed business processes (Wave IV). By 2012, Cloud Computing will capture at least twenty five percent of IT spending growth. Beyond Software-as-a-Service: Cloud Computing High SaaS 1.0 SaaS 2.0 Cloud Computing Wave III: 2008-2013 Workflow-Enabled Business Transformation Wave IV: 2011-2016 Measured, Monitored, Managed Business Processes Wave I: 2001-2006 Cost-Effective Software Delivery Wave II: 2005-2010 Integrated Business Solutions • Post-SaaS Adoption • End-to-End Cloud Business Processes • Intelligent Hubs Linking Platforms • Virtualization on Mobile Devices • Elastic Cloud Infrastructure • Standards for Workload Portability • SLAs for Composite Service Offerings • Support at Business Process Level • Ubiquitous SaaS Adoption • Focus on Business Transformation • ISV to SaaS Enablement • Server and Application Virtualization • SaaS Development Platforms (PaaS) • Public Cloud Infrastructure (IaaS) • Cloud Collaboration Platforms • Customized, Personalized Workflow Adoption • Mainstream SaaS Adoption • Integrated w/ Business • SaaS Integration Platforms • Business Marketplaces and SaaS Ecosystems • Customization Capability • Focus on Integration • Early SaaS Adoption • Stand-alone Apps • Multi-tenancy • Limited Configurability • Focus on TCO / rapid deployment Low Source: Saugatuck Technology Page: 4

5. Key Findings – Recent Saugatuck SaaS & Cloud Research Saugatuck Insights: • Despite the economic meltdown, purchase plans for SaaS and Cloud Computing remain strong in 2009 and for 2010 – across all geographic and customer segments. • A new ecosystem is forming around Cloud Computing that will transform the IT sector. This inevitable transformation will result in a multi-level ecosystem, ranging from technology suppliers through Cloud Computing providers to business services providers. • While Cloud Computing is emerging (Wave IV), SaaS adoption has clearly moved “beyond the tipping-point” (Waves I-III) – Accelerating “mainstream” adoption of SaaS shifts demand to core business systems, not only among SMBs but also Large Enterprises. • Hybrid application architectures emerge – SaaS increasingly linked with on-premise data, applications and processes through Web Services-based Integration APIs. • SaaS Analytics, dashboards and BI/performance management tools driving a metrics-based approach to business services. • A new SaaS-based business services delivery model is emerging – as onshore and offshore BPO providers are forced to rationalize their one-to-one outsourcing models, reduce costs and bring greater process efficiency to their clients. • The most aggressive adopters of SaaS are low-to-midsized SMBs with 100-499 employees. A small, emerging group of SMBs, labeled by Saugatuck as “The New SMB,” forego traditional IT and immediately establish themselves with SaaS- and cloud-based IT. • Cloud Computing, SaaS and Mobility are helping to make the “boundary-free enterprise” a reality. Source: Saugatuck Technology Page: 5

6. SaaS Technology Considerations by Geography Source: Saugatuck Technology Inc., 2009 SaaS Survey (Dec ‘08), N=1788 Saugatuck Insight: Notable differences in the key technology considerations driving demand across geographies, especially among Asian executives. Mobile device support, multi-tenancy, Web 2.0 mashups and appliances are more important in Europe and much more important in Asia than in the United States. Page: 6

7. Post-Crash Business Drivers for SaaS Purchases • Key Drivers • Cost • Support • Speed Source: Saugatuck Technology Inc., 2009 SaaS Survey (Dec ‘08), N=1788, TOP THREE so results equal more than 100% Saugatuck Insight: Far and away the most important business driver of SaaS solution purchases is Implementation Cost. Given this global survey was taken 8-10 weeks after the start of the economic collapse (in mid-September 2008), it is not surprising to see this result. At the same time, it is interesting to note that buyers rank the relationship with existing channel / implementation partners and brand name vendors at the low-end of business drivers, along with multi-year pricing incentives and billing flexibility. Page: 7

8. Top 3 SaaS Solutions by Company Size Source: Saugatuck Technology Inc., 2009 SaaS Survey (Dec ‘08), N=1788 Saugatuck Insight: In 2009, Collaboration, Mobility Management, Customer Service and Talent & Performance Management are top priority SaaS purchases. However, through 2011, Collaboration, Customer Service, Finance / Accounting and HR Benefits are the top priority SaaS solutions – reflecting a growing shift in demand over time to core business systems. Chart: 8

9. SaaS and Core SaaS and Core Business Systems Between 2009 and 2012, at least 40 percent of upper mid- to large-enterprises will seriously evaluate SaaS-based “core” financial solutions, as well as broader operational systems and requirements (e.g., order management, procurement, ERP, HR). High • Key catalysts that will drive mid-to-largeenterprises to migrate to SaaS-based • financial systems (“Core” and “Non-Core”) • Dramatically lower costs • Simplification of the upgrade / release management process • Powerful integration tools (apps / data) • Advances in SaaS application customization capabilities to support personalized workflows • Easier access to next-gen technology and architectural advances Adoption of SaaS for Collaboration, Self-Service, CRM and SFA “Upper-Mid” to “Large” Enterprise “Small” to “Mid” Enterprise Broad SaaS Adoption Curve Adoption of SaaS for “Core” and “Non- Core” Financial Systems / Operational Processes SaaS “Tipping-Point” (General Market) Early Mainstream Adoption Early Adoption Mainstream Adoption Low 2014 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Saugatuck Technology Chart: 9 Chart: 9

10. Saugatuck Cloud Ecosystem Model Level 4; BPO / Managed Services. Specialized expertise often delivered in conjunction with a Cloud-based solution, e.g., Mobility as a Service, Cloud-based security. Level 3:SaaS (Waves I-III) and related services. Business solutions delivered from the Cloud, typically in a multi-tenant architecture, and billed under subscription model. Level 2: Cloud development, PaaS, SaaS integration, Service Hubs, including billing, administration, aggregation, security and mobility solutions, systems and infrastructure management, data warehousing, data access and analysis, and related professional services. Level 1: Cloud-based On-Demand infrastructure providers and platforms that host SaaS and other on-demand solutions and provide service offerings to manage infrastructure platforms (collocation); Level 0: Suppliers of hardware, system software and utilities, data center management software, networking equipment, hardware and software, and associated services Source: Saugatuck Technology Page: 10

11. “. . . –as-a-Service” Taxonomy IaaS Infrastructure-as-a-Service PaaS Platform-as-a-Service SaaS Software-as-a-Service ITaaS IT-as-a-Service Business Process Outsourcing, Managed Services, Business & Information Services Business Process Outsourcing, Managed Services, Business & Information Services Business Process Outsourcing, Managed Services, Business & Information Services Business Process Outsourcing, Managed Services, Business & Information Services Level 4 Level 4 Level 4 Level 4 Level 3 Level 3 Level 3 Level 3 Software as a Service, and Related Services Software as a Service, and Related Services Software as a Service, and Related Services Software as a Service, and Related Services Cloud Development, SaaS Integration, Services Hubs, e.g., Billing, Security, Mobility, and Related Services Cloud Development, SaaS Integration, Services Hubs, e.g., Billing, Security, Mobility, and Related Services Cloud Development, SaaS Integration, Services Hubs, e.g., Billing, Security, Mobility, and Related Services Cloud Development, SaaS Integration, Services Hubs, e.g., Billing, Security, Mobility, and Related Services Level 2 Level 2 Level 2 Level 2 Cloud Infrastructure, e.g., Hosting, Execution and Storage, And Related Services Cloud Infrastructure, e.g., Hosting, Execution and Storage, And Related Services Cloud Infrastructure, e.g., Hosting, Execution and Storage, And Related Services Cloud Infrastructure, e.g., Hosting, Execution and Storage, And Related Services Level 1 Level 1 Level 1 Level 1 Hardware, Software, Networking and Services Hardware, Software, Networking and Services Hardware, Software, Networking and Services Hardware, Software, Networking and Services Level 0 Level 0 Level 0 Level 0 Source: Saugatuck Technology Saugatuck Insight: IaaS providers (Level 1) serve as channels for integration, security, mobility, billing & payments, and other Level 2 providers. PaaS providers (Level 2) may also refer or offer Level 1 hosting services, either through partnership, portability or platform capabilities of their own. SaaS providers (Level 3) may partner with Level 2 billing and payments or security providers or with Level 4 BPO / MSP providers. ITaaS providers may offer the full range of ecosystem services. Page: 11

12. The Three Legs of “Platform-as-a-Service” ISV / SaaS Enablement Cloud Development Cloud Infrastructure Source: Saugatuck Technology Page: 12

13. Cloud / “SaaS-mic” Shift” For the Channel Value Proposition Business Model Source: Saugatuck Technology Page: 13

14. Saugatuck Planning Positions (SPPs) By 2013, at least 20 percent of enterprise IT workloads – that historically would have operated on-premise – will be run in the Public Cloud, providing significantly enhanced functionality, lower costs, fewer staff, and reduced carbon footprint. Through YE 2012, Private Cloud deployments by enterprises will equal or exceed enterprise adoption and utilization of Public Cloud infrastructure solutions. By 2013, up to 60 percent of mid-to-large size enterprises will invest in Private Clouds. Cloud-based security and mobility solutions will be broadly accepted in the mainstream and by enterprises of all sizes by 2012. Through YE 2009, less than half of enterprises adopting cloud computing will see cost savings of 20 percent or more – especially when considering not just compute resources, but total IT management costs. By 2012, 70 percent or more of all businesses with greater than 100 employees will have deployed at least one SaaS application. By 2012, half the companies considered “Cloud Master Brands" will be pure-play Cloud or SaaS providers; the remaining will be traditional Master Brands who have repurposed and extended their businesses to be relevant in the new IT order. Through 2012, best-of- breed SaaS providers with pre-built integration capabilities enable de facto suites that challenge the market share of pure-play SaaS suites, except for SMBs. By YE 2010, 30 percent or more of SaaS and Open Source start-ups that currently have annual subscription revenues streams of $5 million or less will fail, along with 50 percent or more of those focusing on Enterprise Social Computing. The dual impact of a crippling economy and a changing business model drives significant industry consolidation in the channel – with 20 percent of ISV channel partners and 15 percent of hosting providers ceasing to be viable or acquired by YE 2010. Source: Saugatuck Technology Chart: 14

15. How to Contact: Regional Sales Offices • • • US OFFICES Headquarters Saugatuck Technology Inc. 49 Riverside Ave. Westport, CT 06880 USA (P) +1.203.454.3900 Regional Sales: Al.Vanek@Saugatech.com Silicon Valley Saugatuck Technology Inc. 5201 Great America Parkway, Suite 320Santa Clara, CA 95054 USA (P) +1.408.727.9700 Regional Sales: Andrew.Jeffs@Saugatech.com INTERNATIONAL Germany Saugatuck Technology Inc. Bluecherstr. 4D 65343 Eltville am RheinGermany(P) +49.6123.630285 Regional Sales: frank.sempert@saugatech.com • Are you getting the best research, insight, and advice on disruptive IT? • Register to receive Saugatuck’s complimentary Research Alerts, and browse our comprehensive Research Library on topics such as SaaS, Open Source, Web 2.0, SOA and Utility Computing (among other). • To Register:http://research.saugatech.com/cgi-bin/order/signup3.pl • To Browse the Library:http://www.saugatech.com/researchbytopic.htm • To Learn About Saugatuck’s CRS Subscription Research Service: http://www.saugatech.com/crs.htm