"SaaS as Recession-proofing Software" Theme Picking Up

It looks like I may have started ( actually, just re-started) a trend discussing How Software Can Be Resilient to Recession.

Sramana Mitra @ Forbes talks about 'SaaS-ing' Back At The Economy:

Some of the robustness of SaaS companies comes from the fact that the sector caters heavily to small businesses. This is because their customer base is more spread out and not as concentrated as the large enterprise technology vendors, especially those with heavy exposure to the financial sector. "It is not a pyramid, it is a thumbtack; it is all at the bottom," says PayCycle CEO Jim Heeger. "That is where the action is because there are so many companies to deal with down there."

Sramana focuses largely on the SMB space, while my argument for the SaaS model's resilience was more enterprise-y:

The secret is the business model: pay-as-you-go. SaaS offers lower risk to enter, no initial cash layout, the subscription fees come out of OPEX vs. CAPEX, and is often approved by the User, not the mysterious Economic Buyer. The barrier of entry is much lower: once you’re in, it’s up to you to grow.

In fact I suspect the looming downturn will accelerate the structural changes in the software industry: SaaS players will thrive, traditional on-premise vendors will shrink, many will disappear.

Fellow Enterprise Irregular Ismael Ghalimi makes a very similar point, and his not as hesitant as I was using the "Big R" word (emphasis mine):

Since we’re now officially in a recession, it’s time for everyone to revisit their plans. Some will gain, but most will lose, and some to be really affected by the downturn are enterprise software vendors selling expensive perpetual licenses for their products. The problem will get even worse for those selling expensive BPM software that can only be deployed by expensive consultants on the vendors’ payrolls.

With the recession coming, IT budgets will be cut, and only the most critical projects are likely to be funded. Projects that require expensive software to be acquired and expensive consultants to be paid will be canned. Vendors relying on such projects will go out of business, unless they find ways to significantly reduce costs internally.

Very well said. Ismael then uses the opportunity to make a cocky offer to his competitors:

So here is my offer to my competitors: get in touch with our Vice President of Business Development (Robert Sepanloo, 650-596-1800), and ask him what it would take for you to replace your aging process server by our own. We’ll price it for a fraction of what you’re currently spending for maintaining yours, and our engineers will help you in the migration. That way, your engineers will be able to focus on your core application, which is the best thing you can do to best serve your customers in times like these.

Gutsy. But hey, who said anything about not being an aggressive marketer in a Recession? smile_wink