In this seven part series, I have described barriers removed and tipping points reached that have resulted in the acceleration of SaaS products being funded and developed in 2012. Customer attitudes have changed making them comfortable with SaaS, and in fact demanding SaaS products. Customers have become more willing to move their most critical business functions to the cloud. End users find new power in the ability to try new SaaS software without having to go through lengthy IT procurement process — the barrier to “trying” new software is greatly reduced.
Larger business will migrate to the cloud more slowly given their inertia and greater concerns of cloud security, reliability issues, and integration issues, but divisions or large companies are embracing SaaS. Smaller companies find it a “no-brainer” to eliminate the IT complexity of managing their own applications. As Amazon AWS evangelists frequently advise, “eliminate the undifferentiated heavy lifting” of managing your own infrastructure to focus on the core business value companies can uniquely provide.
The early SaaS innovations were achieved by startups such as Salesforce and NetSuite who did not have to worry about cannibalizing their base. While some traditional on-premise software companies wish SaaS would just “go away” according to Jim Armstrong of Clearstone Ventures, the appeal of higher company valuations and the necessity to adapt to a new computing model or be left behind is driving their movement to SaaS.
Several companies such as Intuit have moved aggressively to create SaaS products. Intuit’s QuickBooks Online and Turbo Tax Online demonstrate how legacy software companies can successfully move to a hybrid on-premise and SaaS model. Large software companies including Oracle and SAP are making expensive new SaaS acquisitions to accelerate their movement to SaaS. There will also be an acceleration of traditional software companies providing SaaS offerings further increasing the range of SaaS products and providing “big name” comfort to SaaS products.
These factors are driving substantial acceleration beyond the 25% CAGR in SaaS revenue of the last several years.