SaaS: Just a Better Way to Work

Analyst firms such as IDC are now talking about what we've been seeing for a while - the economy is terrible, but for SaaS companies in dominant positions in their markets, things are actually REALLY GOOD.

A recent IDC report revised its market size projections, as stated in ZDNet's Phil Wainwright's January 30th, 2009 blog post: "SaaS is surging in the downturn". IDC was bullish before, and they are now even more positive as they see companies driving towards the SaaS model out of necessity. IDC forecasts that SaaS will grow by more than 40% this year!

IDC says:

... the harsh economic climate will actually accelerate the growth prospects for the software as a service (SaaS) model as vendors position offerings as right-sized, zero-CAPEX alternatives to on-premise applications. Buyers will opt for easy-to-use subscription services which meter current use, not future capacity, and vendors and partners will look for new products and recurring revenue streams.

Companies like Central Desktop and Marketo are seeing nice growth in the 150% range. At DocuSign, we saw even more growth and had an incredibly strong Q4.

As far as the future goes, the following quote from the article is interesting, as it mirrors my experience:
“I will be surprised, very surprised, if an appreciable number of SaaS customers dump their on-demand applications in favor of on-premise solutions when the economy eventually rights itself. The excellent renewal rates enjoyed by SaaS leaders show that, once bitten by the SaaS bug, there's little impetus to go back to on-premise solutions.”

I have been starting, running, and fully engulfed in SaaS companies for the past several years. This counter-cycle is real. In the 1990's when we had a great solution that would save time, increase transaction volume, and more, customers were just too busy to listen. They did not need more effective systems, they needed a vacation - things were great. NOW... Well, now they are not planning a vacation. They are trying to figure out how to streamline business processes using technologies like electronic signatures and online contract execution to keep staff, cut costs, and make the staff they can keep as efficient as possible.

Photo courtesy of flickr user Jeff Kubina, used under Creative Commons