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Quarterly Financial Tracker: Q3 CY 2010 Enterprise Software Vendors Solidify Performance Turnaround

Published on November 19, 2010 by R "Ray" Wang

The super majority (26 of 27) of publicly traded software vendors in the Software Insider Index® delivered turnaround stories for Q3 Cy 2010 year-over-year (YoY) performance. SaaS vendors and middleware vendors led the charge with solid double digit gains against tough comps. Performance of on-premises apps vendors reflected the easy comps from a dismal 2009 downturn. An analysis of the 2010 CY Q2 2010 results show:

SaaS Vendors Continue To Crush All Expectations In Subscriber Growth (Figure 1.)

SaaS vendors showed massive gains in subscription revenue at on-premises vendor expense. SuccessFactors (33.22%) continued the lead in quarterly revenue gains followed by a record breaking Salesforce.com quarter (29.81%). Kenexa (25.97%) and RightNow (25.46%) also demonstrated above 25% YoY quarterly gains.
Subscription license growth has become the norm for both SaaS and On-Premises vendors looking at SaaS revenue.
On premises vendors w/ subscriptions showed traction. SAP reported $101M of subscription revenue and JDA software reported $5.758M in subscription revenues.
Of note, Saba (3.89%) and Kenexa (25.97%) were added to the Software Insider Index® this quarter

Figure 1. SaaS Vendors Continue To Crush All Expectations In Subscriber Growth (Right click to view full image)

Traditionally On Premises Apps Vendors Fare Well As Technology Spending Picks Up

JDA Software (65.29%) continues to benefit from retail and supply chain vendor consolidation. However, JDA’s growth came from maintenance revenue, not new license gains. In fact, the ratio of maintenance to license revenues remains dangerously high at 3.94. The good news – focused efforts around SaaS options also grew. Meanwhile, rival Manhattan Associates saw gains with (13.35%) YoY quarterly growth with respectable new license gains.
SAP (19.74%) showed a huge turnaround with significant gains. However, new license growth came mostly from analytics revenues and not from core apps such as ERP, CRM, SCM.
Traditional bellwethers CA (17.21%) and Oracle (15.82%) showed above 15%, healthy YoY quarterly gains.
SMB vendors showed mixed results with Epicor (16.28%) leading the pack through gains in Epicor 9 and significant new license growth of 47.07%. Epicor and Microsoft Dynamics (not listed) have been beneficiaries of the two-tier apps strategy movement. On the other hand, IFS (5.34%), Lawson (3.35%), and Deltek (1.74%) barely moved the needle in revenues. Deltek’s 21.38% new license growth reflected a structural shift in the business as new license gains make up maintenance losses.
Four vendors continue to enter dangerous trends with maintenance to license revenue ratios above 3: Manhattan (4.42), JDA (3.94) Lawson (3.86), Oracle (3.24)

Figure 2. On Premises Apps Vendors Fare Well As Technology Spending Picks Up (Right click to view full image)

Middleware Vendors Benefit From Optimization Mandates (Figure 3.)

VMware (45.84%), Informatica (30.68%), and Software AG (28.89%) crush numbers as demand for middleware, virtualization, and integration continue to gain traction.
All middleware vendors maintain healthy maintenance to license revenue ratios below 2.0: SoftwareAG (.65), VMware (1.08), Informatica (1.31), Progress (1.82).

Figure 3. Middleware Vendors Benefit From Optimization Mandates

(Right click to view full image) Copyright © 2010 R Wang and Insider Associates, LLC. All rights reserved.

The Bottom Line – Enterprise Software Is Back

Quarterly Financial Tracker: Q2 CY 2010 – SaaS Vendors Still Show Massive YoY Growth

Published on August 20, 2010 by R "Ray" Wang

The majority of 22 publicly traded software vendors demonstrated solid year-over-year (YoY) quarterly growth from Q2 2009 (see Figure 1). Every SaaS vendor in the Software Insider Index® drove 14% to 26% growth (see Figure 2) despite the pick up in on-premises license sales. Highlights for the 2010 CY Q2 2010 results:

On-Premises Trends

JDA Software (59.19%) and Manhattan Associates (32.93%) continue to ride the CPG, retail, and supply chain investment wave. Manhattan solidified a significant turnaround in 2 quarters of growth.
Large mega vendor bellwethers Oracle (12.95%) and SAP (12.34%) showed significant double digit growth. SAP’s license gains of 17.31% demonstrate a turnaround in the sales team. All indications point to BOBJ and the non-EMEA regions driving sales growth.
The SMB vendors shared mixed results with Epicor (8.68%), Lawson (5.81%), and CDC Software (3.92%) continuing to grow key license revenues. While IFS total revenue gains were low in the 1.40%, IFS grew license revenue by a whopping 19.77%.
Unfortunately, other SMB vendors Exact (-4.99%) and Deltek (-7.07%) showed negative revenue momentum. These vendors not only lost ground in license revenue but also saw declines in traditionally stable maintenance revenue.
Maintenance fee growth remains healthy for most vendors as new programs to show value to customers gain traction.

SaaS Trends

SaaS vendors continue to grow in mid to high double digit growth rates for subscription revenue. SuccessFactors (26.81%), Salesforce.com (24.78%), and Concur (20.49%) moved past 20% year over year quarterly growth.
Ariba ($93.2M) nears the $100M per quarter revenue benchmark as Blackboard ($101.5M) continues to grow from this achievement in Q1 2010.
RightNow (19.58%), NetSuite (16.83%), Ultimate Software (15.67%), and Taleo (14.63%) all showed solid quarters of growth, though these growth percentages show slight declines.


Figure 1. Software Insider Index® On Premise Vendors: Q2 CY 2010


(Right click to view full image)
Copyright © 2010 R Wang and Insider Associates, LLC. All rights reserved.

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Research Report: Microsoft Partners – Before Adopting Azure, Understand the 12 Benefits And Risks

Published on July 11, 2010 by R "Ray" Wang

It’s All About The Cloud At WPC10

Attendees at this year’s Microsoft Worldwide Partner Conference 2010 in Washington, D.C. already expect Windows Azure development to be a key theme throughout this annual pilgrimage. Microsoft has made significant investments into the cloud. Many executives from the Redmond, WA, software giant have publicly stated that 90% of its development will be focused on the Cloud by 2012. Delivery of the Cloud begins with the Azure platform which includes three main offerings:

Microsoft Windows Azure
Microsoft SQL Azure (formerly SQL Services)
Microsoft Windows Azure Platform: AppFabric (formerly .NET Services).

Therefore, Microsoft partners must determine their strategy based on what part of the cloud they plan to compete in and which Azure services to leverage. As with any cloud platform, the four layers include infrastructure, orchestration, creation, and consumption (see Figure 1):

Infrastructure. At a minimum, Windows Azure provides the infrastructure as a service. Data center investments and the related capital expense (capex) is replace with oeprational expenses (opex). Most partners will take advantage of Azure at the infrastructure level or consider alternatives such as Amazon EC2 or even self provision hosting on partner servers and hardware.
Orchestration. Microsoft Windows Azure Platform: AppFabric delivers the key “middleware” layers. AppFabric includes an enterprise service bus to connect across network and organizational boundaries. AppFabric also delivers access control security for federated authorization. Most partners will leverage these PaaS tools. However, non-Microsoft tools could include advanced SaaS integration, complex event processing, business process management, and richer BI tools. The Windows AppFabric July release now supports Adobe Flash and Microsoft SilverLight.
Creation. Most partners will build solutions via VisualStudio and Microsoft SQL Azure (formerly SQL Services). Other creation tools could include Windows Phone7 and even Java. Most partners expect to use the majority of tools from Microsoft and augment with third party solutions as needed.
Consumption. Here’s where partners will create value added solutions for sale to customers. Partners must build applications that create market driven differentiators. For most partners, the value added solutions in the consumption layer will provide the highest margin and return on investment (ROI).

.NET:.NET (tongue and cheek here) – Microsoft partners and developers can transfer existing skill sets and move to the cloud with ease, once Microsoft irons out the business model for partners on Azure.

Figure 1. Partners Must Determine Which Layer To Place Strategic Bets

screen-shot-2010-03-22-at-105927-pm

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Quarterly Financial Tracker: Q1 CY 2010 – Software’s Back With Double Digit Gains In License Growth

Published on May 27, 2010 by R "Ray" Wang

The majority of 21 publicly traded software vendors managed to show year-over-year (YoY) gains over the dismal beating from calendar year (CY) Q1 2009. SaaS vendor maintained their double digit gains while on-premise vendors mostly showed positive traction (see Figure 1) and (see Figure 2). Highlights for the 2010 CY Q1 2010 results:

Big gains in YoY license revenue for on-premise vendors such as Manhattan Associates (188.64%) and JDA (87.43%) reflect the investments being made in retail and supply chain. Manhattan’s gains are the greatest across the board as they demonstrate a turnaround from last year.
Meanwhile, SMB bell-weathers Lawson (28.10%), Deltek (24.75%), and Epicor (23.21%) signal return of key license sales in on-premise. Concurrently, Oracle (20.45%) and SAP (11.oo%) demonstrate a strong recovery in enterprise license revenue growth in on-premise.
Maintenance fee growth for on-premise vendors hold steady with mostly single digit YoY gains except JDA Software (32.71%) and SAP (11.34%).
SaaS vendors kept steady growth in the double digits for subscription revenue. UltimateSoftware (27.80%), RightNow (26.80%), Salesforce.com (24.47%), and SuccessFactors (24.29%) led the charge.
Overall growth rates on a YoY revenue basis have stabilized for most SaaS vendors at the mid teens to twenties.
Of interesting note, professional services fees for on-premise vendors match or double the license revenue. SaaS vendor professional services revenue are well below 1x license revenues, closer to 10% or less.


Figure 1. Software Insider Index® On Premise Vendors: Q1 CY 2010*


(Right click to view full image)
Copyright © 2010 R Wang and Insider Associates, LLC. All rights reserved.
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Software Insider Index™ (SII): 2009 SII Top 35 Enterprise Business Apps Vendors™

Published on March 18, 2010 by R "Ray" Wang

2009 Results In Major Revenue Declines For On Premise And Officially The Year Of SaaS

A review of last year’s financial performance should erase any doubts about the viability of SaaS as a deployment option and a business model. Traditional on-premise business apps vendors took the brunt of the beating earlier in the year but have slowly recovered. This year’s Software Insider Index™ (SII) highlights two major themes:

Legacy On-Premise Vendors Retain Operating Margins But Lose Revenue Share. Almost every on-premise software vendor lost revenue on a year-over-year (YoY) basis in 2009 (see Figure 1). IFS (3.87%) and SAS Institute (2.21%) grew in the midst of the financial onslaught. SAP is still double the size of Oracle in apps revenue! Vendors such as QAD (-31.42%) and Manhattan Associates (-26.84%)saw the worst YoY declines (see Figure 2). Most vendors relied on their maintenance and support to bolster their revenues. For example, CDC, Epicor, Exact, Lawson, Manhattan, Oracle, QAD, and SAP exceeded a 1:2 ratio in new license to maintenance revenue. Why? Customers chose not to upgrade, purchase new licenses, and expand their footprint. Despite the downturn, most vendors survived with operating margins between 10% an 50%, well above those achieved by SaaS vendors. Traditional vendors clearly felt pressure from SaaS/Cloud.
SaaS Models Prove Themselves In 2009. Meanwhile, every SaaS vendor grew, from Ariba with the lowest YoY revenue growth (0.44%) to SuccessFactors with the highest (38.73%). Overall the SaaS vendors tracked in the 2009 SII grew 7.98% in YoY revenue. SaaS deployments expanded in all areas from CRM to HCM to spend management. Of note, Salesforce.com exceeded the $1.3B mark, a milestone for the SaaS industry.

Figure 1. Software Insider Index^TM (SII) Top 35 Enterprise Business Apps Vendors^TM (Calendar Year Revenue)

Copyright © 2010 R Wang and Insider Associates, LLC. All rights reserved.

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Quarterly Financial Tracker: Q4 CY 2009 SaaS Vendors Continue To Trump On Premises Vendors In YoY Growth

Published on February 24, 2010 by R "Ray" Wang

The Year Of SaaS Shows… And Yes, In This Economy.

The recession continued to take its toll on software sales with a slight impact to the SaaS vendors. Growth rates have come down from the high 30′s to the low 20′s. But with “flat” the new growth metric in this down economy, SaaS vendor results remain impressive. On the other hand, traditional on-premises vendors see some light at the end of the tunnel. License revenues have started to stabilize on a year-over-year basis. Major events in the 2009 Calendar Year (CY) Q4 include:

In YoY quarterly revenue growth, Taleo (23.29%) led the pack followed by SalesForce (22.26%), and Blackboard (17.66%) (see Figure 1).
Salesforce.com achieves $1.4B in revenues for CY 2009. As the biggest SaaS vendor in the market, Salesforce.com is bigger than Microsoft Dynamics, Lawson, and Unit 4 (Agresso). To put this in perspective, Salesforce.com’s revenue alone is at the size of all the other public SaaS vendors listed in the Software Insider Index.
Most on-premises vendors stabilized declines in new license revenue (see Figure 2). Keep in mind that on-premises vendors have remained profitable in this downturn. Maintenance continues to provide a cash cushion for most on-premises vendors.
License revenues versus maintenance revenues for some vendors such as Deltek, Epicor, Exact, JDA Software, Lawson Software, Manhattan Associates, and Oracle reach or exceed 1:2 ratios. The result – lagging growth in acquiring new customers on latest releases.
IFS leads with a (21.38%) gain on YoY license revenue with Manhattan (3.21%), Epicor (2.32%), and Oracle (1.92%) following with positive license revenue for calendar year Q4

Figure 1. Most SaaS Vendors Continue Break Neck Growth

Figure 2. Many On Premises Vendors Rely On Maintenance To Bolster Sagging License Revenues

The Bottom Line – Clients Now Expect On-Premises Vendors To Have A “SaaS” Option

As we tally up the winners and losers for 2009, SaaS vendors have shown to the industry what’s required for success in today’s tough economic condition. The secret to their success transcends subscription pricing, cloud services, rapid levels of innovation, and point solutions. In fact, the success in SaaS comes from the attention to the relationship and the willingness to take a customer friendly stance. On-premises vendors who have delivered on a partnership with their customers have known this for years. However, they risk being consumed by the new business models of SaaS and Cloud. Customers expect their vendors to deliver hybrid options; and private and public clouds. Expect on-premises vendors without a Cloud deployment option to fade away in this decade as they become the legacy vendors they replaced in the client/server and Internet eras.

Your POV.

As an end user, have you seen the pace of SaaS adoption increase in your organization? Do you continue SaaS solutions with the same level of comfort as on-premises. As a software vendor, do you feel you have the right go-to-market cloud strategy for 2010? Please let us know if you need help with your enterprise apps strategy by:

Develop your SaaS apps strategy
Assist with SaaS contract strategies and the Customer Bill of Rights: SaaS
Improving innovation via SaaS and other deployment options

You can post or send on to rwang0 at gmail dot com or r at softwaresinsider dot org and we’ll keep your anonymity.

* Not responsible for any math errors or erroneous revenue information. Calendar year estimates based on the quarter nearest the calendar year. Exchange rates as of February 24th, 2010. Not responsible for currency flux. Please read the quarterly filings yourself =)

Related resources and links

Take the new and improved survey on 3rd party maintenance

2009 Calendar Year Q3

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2009 Calendar Year Q1

2008 Calendar Year Q4

2008 Calendar Year Q3

2008 Calendar Year Q2

2008 Calendar Year Q1

Quarterly Financial Tracker: Q3 CY 2009 SaaS Vendors Face Some Headwinds, On-Premise Still In The Tank

Published on November 18, 2009 by R "Ray" Wang

Purchasing in Q3 reflected both economic downturn and summer doldrums. While on-premise vendors continued massive double digit declines in year-over-year new license revenue, SaaS vendors faced some pressures in keeping up with tremendous growth. However, long term economic outlook still favor SaaS players and early indications on Q4 budget flush indicate that SaaS and Cloud are top of mind. Major themes in the 2009 Calendar Year Q3 include:

On the SaaS front, Salesforce.com (19.55%) continues to lead the pack followed by Blackboard (18.44%) and Concur at (12.94%) (see Figure 1). While SaaS vendors still experienced growth, Concur (12.94%), Ultimate Software (9.76%), and Taleo (8.77%), NetSuite (3.22%) experienced drops in rate of growth. Taleo and NetSuite faced the biggest drops in Q3.
Tracked publicly traded SaaS vendors represented $756.2M in Q3 software revenues.
On-premise vendors showing gains in EPS despite revenue drops (see Figure 2).
Specialty on-premise vendors JDA Software (-2.63%) and IFS (-5.07%) reversed license growth and lost year-over-year quarterly gains.
Lawson Software reversed a license free fall showing growth in Q3 (22.77%). Healthcare and HCM continued to bolster its license growth and come back.
Maintenance revenues continue to float losses in license revenue for on-premise vendors. Growth in maintenance continues to slow.

Figure 1. SaaS Vendors Face Q3 Headwinds And Growth Slows Vs Q2

2009 Q3 Calendar Year SaaS Revenues

2009 Q3 Calendar Year SaaS Revenues - Copyright © 2009 R Wang and Insider Associates, LLC. All rights reserved.

2009 Q2 Calendar Year SaaS Revenues

2009 Q2 Calendar Year SaaS Revenues - Copyright © 2009 R Wang and Insider Associates, LLC. All rights reserved.

Figure 2. On-premise Vendors Face Continued Market Brutality

2009 Q3 Calendar Year On-Premise Revenues - Copyright © 2009 R Wang and Insider Associates, LLC. All rights reserved.

The Bottom Line For Users – Expect Continued Discounts in Q4

A poor Q3 will bring good news to buyers in Q4 as vendors will continue to heavily discount licenses and professional services while delivering more value to retain maintenance margins. Conversations with 41 CIO’s indicate that a Q4 budget flush is in the works. The conditions favor end users as poor economic conditions, realization by vendors, and need to invest will yield a great buying season.

The Bottom Line For Vendors – Start The Subscription Revenue Model Shift

It’s time to go on a SaaS offensive. The train has left, but its not too late. Expect hardware vendors, telecom providers, and other companies looking to gain software multiples to enter the market via SaaS. 2010 will bring significant acquisitions in this space as well as more proliferation of SaaS offerings and PaaS delivery models. Best of breed solutions delivered via SaaS will cut into on-premise market share. Cloud computing will not be an end all be all. Hybrid deployment will continue to be the norm.

Your POV.

Ready for some great renewal conversations in Q4? Feel free to post your comments here or send me an email at rwang0 at gmail dot com for any assistance in contract negotiations with your vendor or the development of a software licensing and pricing strategy for 2010.

* Not responsible for any math errors or erroneous revenue information. Calendar year estimates based on the quarter nearest the calendar year. Exchange rates as of November 189th, 2009. Not responsible for currency flux. Please read the quarterly filings yourself =)

Wednesday’s Whispers: People Whispers October 2009

Published on October 21, 2009 by R "Ray" Wang

PEOPLE WHISPERS: MOVES, PROMOTIONS, AND MILESTONES*

Congratulations to all! Good to see that the job scenarios continue to improve in software/tech as a number of individuals made organizational changes and promotions. As always, thanks for your emails and alerts. If you’ve got a change or know of a promotion, keep dropping me a line! If you need a referral, and we’ve worked together in the past, don’t hesitate to reach out to me via Linked In.

Steve Apfelberg is now Vice President of Marketing at Yammer, Inc. Steve brings a wealth of marketing experiences from serving last as Chief Marketing Officer, SVP of Business Development at Callidus Software Other software experiences include time with Siebel, Remedy, and Oracle.

Rose Aulik was recently promoted from strategic business development manager to Outsourcing Business Solutions Manager for Epicor.

Sachin Bery is now Principal Consultant at Infosys Technologies Ltd. Sachin has built an 8-year career at Infosys serving as a consultant.

Jim Bozzini has been promoted to Senior Vice President, Operations and Services for Workday.

Jim Dellamore joins Deltek as Executive Vice President for Global Services from GXS where he served as a Senior Vice President of Global Solutions Delivery. Prior to working at GXS, Mr. Dellamore was Group Vice President, Consulting, at Oracle Corporation, where he managed the $450 million PeopleSoft consulting business.

Ned Desmond became Advisor at Silent Cal Productions in July 2009. Former roles include serving as President at Time Inc. Interactive, President and Editor at Business 2.0, and a Vice president at Infoseek.com.

Phil Fehrst left AMR Research to become an AVP for strategy with Cognizant Technologies. The former star analyst brings significant experience in the IT BPO and outsourcing contract space and will be reporting directly to the CEO.

Tim Fortier named IFS North America Vice President of Sales. Fortier brings 20 years of sales management experience from J.D. Edwards, PeopleSoft, AFS Technologies and most recently Borland Software.

Chuck Gillespie is now Adjunct Professor at IUPUI. Chuck was responsible for HR technology at Peoplebase and served as President of Vigor.

Simon Griffiths joined SYSPRO as a Product and Industry Marketing Consultant. Griffiths previously served as a SYSPRO reseller in South Africa. Other roles include stints at JD Edwards and a Microsoft Dynamics NAV partner.

Ray Grigsby joins Rimini Street as Vice President of Global Support Services Delivery for JD Edwards Software Products. Grigsby’s served previous roles as a Vice President for JD Edwards Support services. Grigsby was the executive overseeing the implementation, upgrade, and support of a full range of World and OneWorld (EnterpriseOne) releases for the largest and most complex domestic and global implementations.

Brian Haven became Vice President, Strategy at iCrossing in July 2009. Brian brings social computing and customer engagement experiences from Forrester, Catapult Thinking, and InnoVentry.

Tony Kender rejoins SAP as a National VP Sales at SAP America. Tony served roles as a Senior VP at Oracle, Director at SAP, and Senior Director at ADP.

Alex Koshy is now Business Development Executive at Synaptris. Koshi served previous roles as a Pre-Sales Consultant for MS Dynamics ERP and Resource Lead for Microsoft Dynamics Competancy at Mahindra Satyam.

Kirk Laughlin became Founder/ Editorial Director at Nearshore Americas in June 2009. Kirk’s served senior roles as Managing Director/ VP of Live Events, Senior Editorial Director, Custom Media at Ziff Davis Enterprise, Editor in Chief at America’s Network Magazine, and Editor-in-Chief at Cygnus Business Media

Leighanne Levensaler joins Workday as Vice President, HCM Strategy. She formerly served as a principal analyst covering Talent Management for Bersin & Associates. Prior to joining Bersin & Associates, she led the Learning Consulting Practice at SystemLink Enterprise Solutions. Leighanne has also held positions at SmartForce, Edutrek International/AUI and Deloitte Consulting.

Emily Marchant is now Cofounder | Investor Relationship Manager at the FundingPartnership. Previous roles include a stint as Global Business Development Manager FLB at Forrester Research, Business Development Manager at Dianomi, Sales Manager at Emedia, and various roles at Informa Telecoms and Media.

Jeff Onesto is now Director of Product Marketing at OptionEase. Jeff’s brings industry experiences from his various positions as Director of Sales & Marketing at Advanced Systems Integration, Business Development Executive at Collins Computing, and Business Development Manager at Jefferson Wells International

Milind Padalkar has updated their current title to Global Practice Head – Oracle at HCL America. Padalkar previously served as the Senior Vice President & Head of Enterprise Applications at Patni Computer Systems.

Mahesh Rajasekharan is now Chief Operating Officer at SumTotal Systems. He served 12 years at i2 with roles ranging from Vice President of High Tech Industry Group, Senior Director Operations and Solution Sales, and Senior Director for High Tech Industry Marketing.

Norman Scobie is now SAP Project/Integration Manager at HP Enterprise Services. Previous work includes Aerospace & Defense Industry Solution Expert at SAP, Program Manager at Eurofighter, and Software Manager at BAE Systems

Mike Stankey joins Workday as president and COO from Greylock Partners. Mike spent five years as chairman and CEO of PolyServe, a storage virtualization software company. Prior to PolyServe, Mike was senior vice president of North American sales for PeopleSoft, driving more than $1 billion in sales and services revenues.

Laurene Stevens became Product Strategy Analyst at Ultimate Software in May 2009. Laurene’s served as a senior applications consultant for Sage Software.

Jason Zintak became the Executive Vice President for Sales and Marketing at JDA Software on August 18th, 2009. Zintak most recently served as the executive vice president of sales at HCL Axon. Other senior-level software sales executive and management includde roles at Capgemini, SAP and Blue Martini Software.

Your POV

Got a scoop or something to share? Please post or send on to rwang0 at gmail dot com and we’ll keep your anonymity.

* Not responsible for any factual errors or omissions. However, happy to correct any errors upon email receipt.

Quarterly Financial Tracker: Q2 CY 2009 SaaS Vendors and Purpose Built Solutions Rack Up Big Wins

Published on September 28, 2009 by R "Ray" Wang

Most on-premise vendor continue to slip into significant YoY losses in license revenue and overall revenues. Meanwhile, economic conditions continue to favor SaaS, best-of-breeds, and purpose built solutions. Major themes in the 2009 Calendar Year Q2 include:

Economic conditions drive demand for best of breed and point solutions delivered by SaaS deployment. Consequently, SaaS vendors posted spectacular double digit YoY gains. Taleo (29.78%) led the pack followed by Blackboard (21.92%), and SalesForce (20.14%).
Despite subscription gains for SaaS, professional service revenues dropped as client demand for rapid implementation and discounts in delivery cut deployment costs. Many vendors reported shorter deployment times.
Specialty on-premise vendors JDA Software (8.38%) and IFS (6.00%) delivered significant gains as their purpose built solutions reflect the demand for deeply verticalized software offerings.
On-premise vendors continue to rely on maintenance revenues to stabilize or offset huge losses in YoY license revenues. Customers are nearing a flash point over the high cost for maintenance. Vendors will need to quickly demonstrate value or take a hit in maintenance renewals.

Software Insider Index® Q2 CY 2009 SaaS Vendors

Software Insider Index® Q2 CY 2009 On Premise Vendors

The Bottom Line – Worsening Economic Conditions Favor Purpose Built Solutions

Continued economic pressures force customers to choose best of breed and purpose built solutions. SaaS vendors appear to be the beneficiary as the overall business model aligns with client pain points. On-premise vendors will also win as they reduce the cost of entry and provide effective price points for purpose built solution modules in demand by clients. With very little hope for a recovery in 2009, vendors will have to adjust their go-to-market strategies to deal with waning deal sizes. It’ll take more than a hat trick in 2009 to stabilize revenues. With 4 months to go, vendors should rethink their 2010 strategies to address price points, financing options, and module availability.

Your POV.

As an end user, have you found the deal process to have tipped in favor of the buyer? Do you continue SaaS solutions with the same level of comfort as on-premise. As a software vendor, do you feel you have the right go-to-market strategy for 2010? Feel free to post your comments here or send me an email at rwang0 at gmail dot com for any assistance in contract negotiations with your vendor or the development of a software licensing and pricing strategy for 2010.

* Not responsible for any math errors or erroneous revenue information. Calendar year estimates based on the quarter nearest the calendar year. Exchange rates as of September 25th, 2009. Not responsible for currency flux. Please read the quarterly filings yourself =)

Quarterly Financial Tracker: Q1 CY 2009 Slowdown Impacts All Vendors, SaaS Still Experiencing Strong Double Digit Growth

Published on May 24, 2009 by R "Ray" Wang

Most software vendor license revenues took a beating this CY Q1 when compared to 2008. SaaS vendors managed to post double digit gains while only a handful of on premise vendors eeked out a positive gain. Major highlights in the 2009 Calendar Year Q1 include

Big losses in YoY license revenue for on premise vendors such as Manhattan Associates (-73.12%), QAD (-54.37%), Deltek (33.99%), CDC Software (33.77%), and SAP (32.80%) signal significant long term weakness in attracting new business.
Few winners in YoY license revenue for on premise vendors. IFS (13.41%), Intuit Quick Books (5.23%), and Sungard (2.53%) showed positive traction amidst a morass of bad news.
On premise vendors stabilized maintenance revenues from major losses. Some vendors including Epicor (49.25%), Deltek (26.09%), and IFS (20.25%) managed to show significant gains.
SaaS vendors cleaned house despite the challenging market. Taleo (34.20%), Blackboard (26.25%), Concur (25.61%), Salesforce.com (23.14%), and NetSuite (21.83%), led the growth race in YoY total revenue.
Growth rates on a YoY basis have slowed for most SaaS vendors, though when factoring the economic forces, these gains reflect truly substantial success.

Software Insider Index® Q1 CY 2009 On Premise Vendors

2009 Calendar Year Q1 SaaS Software Insider Index®

Software Insider Index® Q1 CY 2009 SaaS Vendors

The bottom line – SaaS goes mainstream in 2009 and on-premise vendors must offer hybrid deployment options

SaaS vendor growth continues to defy the ball and chain forces of the macro economy. Though overall growth rates are less than the year before, the SaaS model gains favor with all sizes of enterprises and in all industries. Rapid implementation, subscription pricing model, and constant innovation drive significant interest. This leaves on premise vendors in a precarious situation. Without support for SaaS or other hybrid deployment options, expect customers to wall off their current vendors and pipe in new innovation around the edges with SaaS.

Your POV.

Do you find your vendor sales person becoming more aggressive with their sales tactics? Have you held back on new purchases or upgrades? Is this the year you go full out on SaaS? Feel free to post your comments here or send me an email at rwang0 at gmail dot com .

* Not responsible for any math errors or erroneous revenue information. Calendar year estimates based on the quarter nearest the calendar year. Exchange rates as of February 25th, 2009. Not responsible for currency flux. Please read the quarterly filings yourself =)