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New Government Software Models: An Introduction to SaaS and Application Outsourcing. Presented to State of Oregon Oct. 15th, 2009. Rishi Sood Vice President, Government Gartner [email protected] Presentation Outline. State & Local Environment Market Segmentation and Solutions Map

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New government software models an introduction to saas and application outsourcing

New Government Software Models: An Introduction to SaaS and Application Outsourcing

Presented to State of Oregon

Oct. 15th, 2009

Presentation outline
Presentation Outline Application Outsourcing

  • State & Local Environment

  • Market Segmentation and Solutions Map

  • Major Cost Optimization Strategies

  • Budget Battles: Traditional vs. Innovative

  • SaaS and AO: An Introduction

  • Alternative Delivery Models & The Cloud: A Primer

  • SaaS and AO: Working Definitions

  • SaaS and AO: A Comparative Look

  • SaaS Areas of Development

  • SaaS and AO: State & Local Government Users

  • Practical Steps to SaaS

  • Centralized IT and the Agencies: Building Collaborative Spirit

  • Cloud Myths and SaaS Benefits

  • SaaS Differentiation

  • Four Steps to SaaS Today


State local government market segmentation
State & Local Government: Application OutsourcingMarket Segmentation

  • Decentralized Market

  • 50 states

  • 3200+ counties

  • 19000+ cities



City Council









  • Admin. & Finance

  • Tax & Revenue

  • General Services

  • Budget

  • Assessor’s

  • Treasury

  • Transportation

  • Roads

  • Motor Vehicles

  • Ports

  • Public Safety

  • Sheriff’s

  • Police

  • Fire

  • Criminal Justice

  • Courts

  • Corrections

  • Probation

  • Parole

  • Health

  • Human Services

  • Social Services

  • Youth Services

  • Human Resources

  • Labor

  • Worker Comp.

  • Natural Resources

  • Environment

  • Conservation

  • Land

  • Water

  • Forestry

  • Public Works

  • Interior

  • Other Agencies

  • Economic Development


Source: Gartner Dataquest

State local government it solutions map
State & Local Government: Application OutsourcingIT Solutions Map









  • Int. Tax Systems

  • Financial Mgmt.

  • Purchasing

  • Records Mgmt.

  • HR Systems

  • Retirement

  • 311

  • Other

  • Case Mgmt. Systems

  • Eligibility Assessment

  • Fraud Detection

  • Child Welfare

  • Child Care

  • Child Support

  • UI Systems

  • WC Systems

  • Other

  • Medicaid

  • WIC

  • Electronic Lab Systems

  • Disease Surveillance

  • Records Mgmt.

  • BioT Info. Systems

  • Environ. Health

  • Other

  • CAD

  • RMS

  • Biometrics

  • MDTs

  • Mugshot

  • Crime Analysis

  • Video Surveillance

  • Mass Notification

  • Other

  • CJIS

  • Jail Mgmt.

  • Inmate Tracking

  • Jury Mgmt.

  • Court RMS

  • Court Automation

  • Other

  • ITS


  • Fleet Mgmt.

  • Driver’s License

  • Vehicle Registration

  • Project Mgmt. Systems

  • Port Security

  • Other

  • GIS

  • Project Mgmt.

  • Operations Mgmt.

  • CAD

  • HR Systems

  • Other

  • GIS

  • Permitting

  • Envir. Systems

  • Water Resources

  • Forestry Mgmt

  • Land Mgmt.

  • Hazard Waste

  • Other


Source: Gartner Dataquest

State government fiscal issues
State Government Fiscal Issues Application Outsourcing

Total Year End Balances as % of Expenditures, FY2009

<1% (11)

1%-5% (15)

5%-10% (16)

>10% (8)

Mid Year Actions: 42 states made budget cuts totaling $31.5 billion

State General Funds for FY 2010 represent -2.5% over FY 2009

FY 2010: 37 states already anticipate budget gaps

Source: NASBO


Mapping all cost cutting items

Manage Demand Application Outsourcing

Canceling non-viable projects

Project prioritization

Break-up large projects and defer pieces

Create a project management office

Shift to Variable Cost

Enable shared risk / reward contracts

Pay for IT investments with bonds

Consider SaaS for certain applications

Standardize administrative applications

Standardize e-mail

Implementing energy saving measures

Consolidate mainframes

Reduce Labor Cost

Offshore application development

Offshore application maintenance

Automate software distribution

Utilizing fewer contractors and consultants

Reduce Technology Cost

Desktop printer consolidation

Adopting open-source desktop software

Server cons. (physical, rational, capacity)

Convert networks to VPN

Implementing VoIP

Adopting open-source server software

Reuse software components

Discontinue buying proprietary hardware

Restructure email storage

Remove games from PCs and PDAs

High-volume print rationalization / consolidation

Enterprise call center consolidation within government

Call center consolidation across government

Change Operating Model


Cell phone usage

Using tools to reduce travel (e.g. video conferencing)

Centralize application development

Centralize portal management and development

Negotiate enterprise email agreement

Consolidate IT procurement

Improve IS Business Practices

Create a project management office

Create shared disaster recovery centers

Consolidate and renegotiate vendor contracts

Centralize desktop application management

Renegotiate network rates

Create a shared services environment for IT infrastructure


Telecommunications audit

Helpdesk consolidation

Renegotiate shelfware maintenance

Discard unused equipment

Confiscate underused equipment

Defer purchases of desktop products

Mapping all Cost Cutting Items

Link costs to demand

Reduce Resource Costs

Cost containment

Change Operating Practices


Source:Cost Cutting in IT to Cope with Economic Slowdown,Gartner

Budget battles traditional vs the innovative

  • Innovative Application Outsourcing

  • Increase technology penetration to reduce operational cost

  • Partner with third party specialist to improve process

  • Deploy emerging technologies and management models to meet new requirements

Budget Battles: Traditional vs. the Innovative

  • Traditional

  • Across the board budget cuts

  • Increase fees

  • Reduce workforce

  • Raid rainy day funds


Cloud computing definition and perspective

Acquisition Model Cloud, SaaS, and AO


Cloud Computing:

A style of computing where massively scalable and elastic IT-enabled capabilities are provided "as a service" to external customers using Internet technologies*

Business Model

Pay for use

Access ModelInternet

Technical ModelScalable, elastic, shareable

EC2 and S3

Cloud Computing:Definition and Perspective

"All that matters is results; I don't care how it's done."

"I don't want to own assets — I want to pay for elastic use, like a utility."

"I want accessibility from anywhere, from any device."

"It's about economies of scale, with effective and dynamic sharing."

Global-class industrialization of computing resources and services

*It would be easy to add this refining statement: "Where the consumers of the services need only care about what the service does for them, not how it is implemented."


Adams alternatives to traditional approaches

Processes as a Service; the modernized "bureau" Cloud, SaaS, and AO


SaaS; the lead indicator for ADAMs since 2000

"The cloud" becoming the "uber" term for ADAMs. Cloud computing = a style of computing.Cloud services = any type of service leveraging cloud computing

IU: a transitional stage for traditional outsourcing

ADAMs? Alternatives to Traditional Approaches



  • Systems Integration

  • Business process outsourcing

  • In-house custom app. development

  • Application outsourcing

  • On-site, installed software licenses

  • E-mail outsourcing, document management/print outsourcing

  • Hosting, Web hosting, colocation

  • Company-owned and managed infrastructure and IT assets (DC, PCs, network, software)

  • In-house managed networks, network outsourcing

  • Hardware and software leasing

  • Business process utility (BPU)

  • Software as a service (SaaS)

  • Cloud Computing/Cloud Services

  • Community source

  • Appliances (physical and virtual only)

  • Software streaming

  • Infrastructure utility (IU)

  • Storage as a service

  • Grid

  • Utility computing

  • Capacity on demand

  • Communication as a service

  • Remote management services

  • User-owned appliances or PCs


Software as a service a working definition
Software as a Service: A Working Definition Cloud, SaaS, and AO

  • Software as a service:

    • An application owned, delivered and managed remotely by one or more providers

    • Where the provider delivers an application based on a single set of common code and data definitions, which are consumed in a one-to-many model by all contracted customers at any time

    • On a pay-for-use basis or as a subscription based on usage metrics


Application outsourcing a working definition
Application Outsourcing: A Working Definition Cloud, SaaS, and AO

  • Application Outsourcing:

    • An application owned by the customer, managed on premise or remotely by the provider(s)

    • Where the provider delivers an application based on a standardized set of common code and data definitions, which are consumed in a one-to-one model by the customer

    • Paid for generally as a percentage of the annual license fee


Saas and ao a comparative look
Saas and AO: A Comparative Look Cloud, SaaS, and AO

Application Outsourcing


  • Definition

  • An application owned by the customer, managed on premise or remotely by the provider(s), paid for on a percentage of annual license fee.

  • Characteristics

  • "1-2-1"

  • Post-implementation outsourcing

  • Pay for services

  • Annualized payment(s)

  • Client/Server + Web services "wrappers"

  • Definition

  • An application owned, delivered, and managed remotely by the provider(s), multitenant software architecture and contracted on a subscription basis

  • Characteristics

  • "1-2-Many"

  • Pre-implementation outsourcing

  • Pay for service

  • Pay as you go

  • "Net Native"/Web Services/SOA


Saas sweet spot continues to be pragmatists and beginners

  • Departmental focus Cloud, SaaS, and AO

  • Requirements to extend existing SaaS solutions through configuration

  • Integration with solution add-ons but only for departmental requirements

  • Crossdepartmental focus

  • Automate end-to-end processes such as lead to order

  • Mixed deployment Environment


"Replace departmentalon-premises applications"

Master"Weave SaaSinto the fabric of our application portfolio"

  • Replace on-premises applications wherever possible

  • Buy into SaaS ecosystem or suite concept

  • Use SaaS development platforms


"Simple utility applications"


"Eliminateas muchon premisesas we can"

  • Replace low-end software tools

  • IT resource or budget constrained;

SaaS "Sweet Spot" Continuesto be Pragmatists and Beginners

Percentages are estimates only




IT Abilityto Execute




Comprehensive Strategy




Saas hype cycle

MRM On Demand Cloud, SaaS, and AO

SaaS for Contact Center Customer Service

SaaS Portals

On-Demand Sales Force Automation

Communications as a Service

Employee Performance Management

Security SAAS



On-Demand Financial Management Applications

On-Demand Sales Incentive Compensation Management

E-Commerce on Demand

Project & Portfolio Management (PPM) SaaS

E-mail SaaS

SaaS — Business Intelligence

SaaS Data Quality

Web Analytics

Supply and Demand Chain Planning (SaaS)

SaaS Procurement Applications

Distributed Order Management

BPMS-Enabled SaaS


Integration as a Service

Application Platform as a Service

Business Process Hubs

SaaS-enabled Application Platforms

Mobile Applications on Demand

Policy Administration SaaS Options for Life Insurers

On Demand Partner Relationship Management

Multienterprise Business Process Platform

As of June 2008

Peak of

Inflated Expectations

Technology Trigger

Trough of Disillusionment

Plateau of Productivity

Slope of Enlightenment


Years to mainstream adoption:


before plateau

less than 2 years

2 to 5 years

5 to 10 years

more than 10 years

SaaS Hype Cycle


From: "Hype Cycle for Software as a Service, 2008" (G00159149)

Saas growth no longer easy to ignore 2005 2011 worldwide

Other Application Software Cloud, SaaS, and AO

Supply Chain Management

Office Suites and DCC

Enterprise Resource Planning

Customer Relationship Management

Content, Communications and Collaboration

SaaS Growth No Longer Easy to Ignore: 2005-2011, Worldwide

SaaS Revenue





Millions USD














Saas ao representative government users
SaaS/AO: Representative Government Users Cloud, SaaS, and AO

  • State

  • WY Finance

  • MN & OH Econ Agencies

  • TX Dept. Criminal Justice

  • NJ Transit Dept.

  • IL Dept. of Revenue

  • Local

  • Arlington Co, VA, Finance

  • Chicago, IL Housing Authority

  • Schaumburg, IL Finance Department

  • Federal

  • Social Security Agency

  • Army Logistics Mgmt.

  • National Geospatial Agency

  • Commercial

  • American Med Response

  • Greyhound Transport.

  • Mission Federal Credit Union


III. What Should You Do Next… Cloud, SaaS, and AO


Enterprise it and the agencies key attributes to working together

Positive Strategies and Tactics Cloud, SaaS, and AO

Enterprise Wide Framework

Unified Governance Strategy

Future Investment analysis

Collaborative Planning

Joint Prioritization

Adding hosting/specialization

Integration (OP & hosted)

Consulting about SaaS/AO

SaaS/AO Enablement

Hosted custom extensions

Negative Strategies and Tactics

Denial – “This is a fad”

Avoidance – “NIMBY”

Assuming that tomorrow’s CSFs are the same as yesterday’s

Clinging onto the hope that old norms will re-assert themselves

Ignoring the opportunity SaaS/AO presents for re-invention, adaptation, innovation

Placing all or nothing bets

Enterprise IT and the Agencies: Key Attributes to Working Together


Step one recognize the myths
Step One: Recognize the Myths Cloud, SaaS, and AO

"Cloud" is a euphemism for an abstraction. It cannot be touched, bought, or sold

"Clouds" are hardware-based services offering compute, network and storage capacity

A hybrid model will and should dominate for the next 10 years

Everything needs to be in the cloud

Cloud computing is a service delivery and consumption model with multiple attributes

All remote computing or off-premises hosting is cloud computing

Cloud Computing will always save you money

It might save you money but not if used just to replicate on-premises work off premises

Industry Myth

Gartner's Insight


Step two understand the trade offs that saas presents

Upsides Cloud, SaaS, and AO

Pay for what you use

From an operational budget

Basic functionality that you really need, not bells and whistles that you might need

No operational management worries

No infrastructure overhead/management

Medium term lower TCO

Faster implementations

Easier integration*


No asset value

Less central management of the application portfolio

More basic functionality*

Vendor management (incl. oversight of their operational management)

Security concerns

Longer term TCO uncertainties

“OP2OD” (On Premise to On Demand) integration

Step Two: Understand the Trade Offs that SaaS Presents

  • theoretically; particularly of SaaS to SaaS

  • applications written with open APIs

* Sometimes real, sometimes perceived


Step three choose vendors that have separated the engine from the user experience

The front end (i.e., the user experience) must: Cloud, SaaS, and AO

Be highly configurable,with limited requirements for technical skills

Have rich (but notoverwhelming)functional options

Be highly intuitive

Be easy to use (for non- technical audience)

Have an attractiveuser interface

Be straightforward to integrate into other applications

The back end (i.e., the engine) must:

Have a multitenant architecture(i.e., one-to-many)

Have a highly standardized supporting infrastructure

Make extensive use ofRTI approaches(i.e., server emulation, "virtualization," etc.)

Focus on scale and leverage of technology deployment

Step Three: Choose Vendors That Have Separated the 'Engine' From the User Experience


Step four getting started with saas today
Step Four: Getting Started with SaaS Today Cloud, SaaS, and AO



Compare your cost of tech expenses to SaaS providers

Step 1: Savings

Determine potential savings or cost increases

Find three workloads with which you can experiment

Step 2: Portfolio

Determine usage Scenarios

Select applications to align with SaaS strategy

Step 3:


Jump-start your efforts, but do not stop here

Step 4: Use

Immediate impact and feedback

Test SaaS applications with core users


New government software models an introduction to saas and application outsourcing1

New Government Software Models: An Introduction to SaaS and Application Outsourcing

Presented to State of Oregon

Oct. 15th, 2009