Saturday, September 02, 2006

SaaS and the Market

SoftGram

We were interested to find that 76% of those thinking about or planning to bring a SaaS product to market (Considerers) are firms with less than $25m in annual revenue; only 13% of the firms were $100m or greater.

Technical and Financial

The Considerers are clearer on their technical plans than on their financial plans. 74% said they would use proprietary rather than Open Source software as the basis for their products, and 68% will base their offerings on third-party SaaS components or services. 80% said they would depend on outsourcing for the hosting of their SaaS products, with only 20% undertaking to service their SaaS customers with in-house resources.

Professional services operations are an important part of many software companies; only 11% of our Considerers did not have them. When asked, If you re-deploy your current software as SaaS, will you re-deploy or downsize your professional services operation?, those who did have professional services said they would downsize this part of the company (6%), or that they would re-deploy these personnel (25%), but fully 69% said that there would be no change in the operation. Presumably professional services will be needed to help customers integrate their back- end data bases and business processes into the SaaS product.

SaaS and the Market

The Considerers are bullish on the ability of SaaS to expand their markets.
82% believe that SaaS will enable them to move downmarket in their selling strategy (the motivation, by the way, for Oracle and SAP to enter the SaaS market), and 79% believe that SaaS will enable them to enter new markets.
Microsoft's announced move of Office to SaaS is motivated not only by the desire to control the software and revenue stream more dependably, but also to make Office users of those who cannot afford to buy the current product.

One final indication that the Considerers see SaaS as a corporate play is their anticipated primary means of selling their products: fully 40% expect to do so through a direct sales force. 34% expect Indirect marketing (E-mail, direct mail, web seminars, advertising, etc.) to be their primary means, while 22% said Telesales group. Only 4% chose Reseller programs.

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