Going To SaaS

Why Software Vendors are "Going SaaS"

The Advantages of SaaS for Software Vendors

Software vendors see their greatest opportunity in SaaS.  New software companies are most often in the SaaS, mobile, or Big Data spaces — not on-premise software.  The SaaS companies such as Salesforce, NetSuite, and Workday are the darlings of the software business by virtue of their technology, high growth, and rapid innovation – plus their market value is stratospheric.

Customers are moving to SaaS.  The trend will accelerate in the coming years as more SaaS offerings become available and the perceived risk of SaaS continues to diminish as predicted in the blog post, “The SaaS Explosion of 2013”.

Customers see greater business value through SaaS:


SaaS Companies Grow Faster

Driven by Customer Demand, the SaaS market is growing several times faster than the on-premise market. This is reflected by the much higher growth, approximately 27% CAGR, of SaaS in the marketplace. The reoccurring subscription model of SaaS together with ever growing new SaaS sales “wins” will further accelerate SaaS revenue growth.

SaaS companies grow faster because:

SaaS Companies are More Agile

Just as customers’ business are more agile utilizing SaaS, SaaS companies can move more quickly than on-premise companies. SaaS products are more complex to build because of the additional requirements of multi-tenancy, operational aspects of SaaS, security, performance, and reliability considerations. However there are third party products that assist in building the core SaaS platform and once that platform is implemented, once the core SaaS architecture is in place, innovation can happen more rapidly:

SaaS Companies have more Predictable Revenue

The SaaS annuity stream drives revenue continuity that isn’t possible for on-premise software companies. As long as SaaS companies provide a great service and remain competitive, attrition can be kept low. Then each new sale builds the revenue on top of an ever increasing revenue stream.

SaaS Companies have Higher Valuations

The financial markets like the SaaS model and large software companies want to acquire SaaS companies to help SaaSify themselves. Both Salesforce and NetSuite have market valuations over ten times their revenue even with a loss in the last fiscal year.

These higher valuations benefit SaaS companies by: