"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?

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2 responses to “"SaaS as Recession-proofing Software" Theme Picking Up”

olivermarks September 27, 2008 at 4:29 pm | Permalink

I just posted on ZD Net on this topic:
‘The productivity dilemma’ http://blogs.zdnet.com/collaboration/?p=149
It seems probable that SaaS will be taken a lot more seriously in the next 24 months. It’s going to be interesting…