Monday’s Musings: Adoption of SaaS Models May Accelerate with Economic Downturn

Published on October 6, 2008 by R "Ray" Wang

All signs lead to an impending slow down in economic spending.  Whether this will adversely impact IT budgets is not the issue, but how much will the carnage be is the concern being debated.  Regardless, overall funding for new investments appears to be bleak which is why innovative business leaders seeking to fund innovation without significant capital outlays will most likely gravitate to alternative deployment options such as Software as a Service (SaaS) or other OnDemand models because of:

  • Subscription billing – why worry about the cumbersome capital expenditure budgeting process when you can sneak this in with operational expenses?
  • Rapid deployment – avoid the headaches of complicated deployments, the expense of system integration, and the cost of maintaining a data center.
  • Affordable constant innovation – avoid the cost and disruption of upgrades while receiving more frequent delivery of new features and innovation.
  • Purpose built functionality – most SaaS offerings are designed for a specific industry, role, or market segment.  The result – strong capability in micro-verticals and other purpose built scenarios.

The hallmarks of SaaS are hard to ignore, especially during the advent of an economic slow down.  Based on some of the growth rates in the previous quarter, vendors like Amitive, Concur, Intuit, NetSuite, Plexus, SalesForce.com, SuccessFactors, Taleo, and Zoho may have the leg up.

Your POV

Look forward to hearing your comments about how on-premise vendors will fare compared to the SaaS vendors.   If you’ve got an idea or suggestion to share, please comment or send a private email to rwang0@gmail.com.  Look forward to hearing your thoughts!

Copyright © 2008 R Wang. All rights reserved.

  • Ray– one of the hidden beauties of SaaS is that since your vendor has to earn your subscription renewal, they’re going to work more closely with and harder for you. Combine that with CapEx avoidance and predictability of costs, SaaS is the better way to go than traditional software in this time of crisis and change.

    Sean Rollings

  • Hi Ray,

    This is Justin, responsible for BD in software BU, Digital China(0861.HK)
    and base in Beijing office, I noticed your blog for a while and thanks for
    sharing your insight and tips.

    Recently we are experiencing the recession across global market and numbers
    of SMB in China are suffering the tight financing chain, as the most giant
    software distributor in China we also want to do something correct under
    current situation, for instance, we organize a packaged software buddle for
    enterprise and lower their TCO and provide more alternative payment options.
    I am wondering your tips regarding to such the strategy or something you
    think it is feasible to the market.

    Btw, we notice that consumer software market is booming up in internet
    company ways. For instance, 360 safe, a homegrown anti-spyware producer.
    This model is proven quite successful and now I am seeking a potential
    desktop toolkits in global and hope to enlarge our market share in such
    consumer market, your tips is appreciated.

    Looking forward to have a meet in Beijing when you next arrival.

    Thanks.

    Justin Che

  • R- Our new CIO has put a freeze on new, large capital intensive projects. The business GM’s are still looking for a new CRM, incentive comp, talent management, master data management, payroll, and project management solution. Thankfully, these all seem to come in SaaS, though from different vendors. The only one we can’t find is MDM, but we probably should have this in house. SaaS is the way to go, but we will be worried about integrating all these tools in the future. Any recommendations?

  • SalesForcePower User hit the nail on the head, SaaS applications are responsive and scalable, both up and down. I would add that well-run companies address down turns by investing in their growth engines, the sales teams and their tools, so they become more effective. This is what sales analytics (see http://www.cloud9analytics.com/ )is all about, understanding where to focus your sales resources most effectively, in up and down markets alike.

  • I’ve been the biggest fan of SaaS. We use it b/c our IT dept is slow and I frankly don’t have the time to wait. In a recession, I can trim back the number of users I need. I use this for sales comp and planning as well as account management and contacts. When I shrink, the contract shrinks unlike SAP or Oracle which I can never seem to lower my cost of ownership with.

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