Although many people in technology are saying that SaaS is one of the fastest growing segments of the market, Larry Ellison, the founder and CEO of Oracle had some negative comments about the industry lately. I found an article describing Ellison’s feelings by TMCnet’s David Sims while perusing the SaaS Snapshot page on TMCnet.
Ellison does have a point as profits in the SaaS market haven’t been overwhelming but what is perhaps more important is that this business is different than software sales where you book revenue as soon as the customer decides to pick a vendor.
The article has some great comments from Greg Gianforte, CEO of RightNow Technologies who does agree with Ellison to a degree. He further explains the annuity nature of on-demand models makes them profitable in the long-term.
One thing not mentioned in the article is that SalesForce.com is doing a great job extending the SaaS marketplace with partnerships with other vendors such as Google and a host of companies most people have never heard of. Moreover, SalesForce.com continually extends their products into such areas as platform as a service and others.
The article also touches on the strength of cloud computing and how SaaS ties into this relatively new paradigm which is projected to see rapid growth over the next few years.
If there is a risk in the SaaS market it is Google who could conceivably give away software in every category just for the fun of it. The company is constantly putting out better and better software which it doesn’t charge for and eventually we will see this eat into the revenue models of other SaaS companies. In fact, just a few days ago, Google announced a new software program SketchUp which allows free 3D modeling. The product is already being hailed as easy to use and powerful.
And as this trend continues, it won’t matter if software companies are hosted or on-demand… They will have to make software much better than Google to get people to shell out real money for it.