Last week Pacific Crest held its annual technology conference in Vail. Pacific Crest always manages to bring a strong collection of public and private companies, particularly companies offering SaaS applications and internet solutions. Of particular personal interest was the SaaS workshop that was held during the conference’s second day and which this year attracted over 50 participants. From my notes:
- While the 2001 recession was a boon to the outsource companies that came to prominence by addressing the Y2K problem, the 2008 recession will prove to be a boon to the SaaS companies as many corporations are moving to SaaS applications as the cut costs and demand faster ROI from their software investments.
- Interesting numbers from a
survey conducted by Pacific Crest
- 60% of surveyed CIOs are deploying SaaS applications but there was still a sense among the participating SaaS company executives that, by and large, CIOs still don’t understand the true benefit of SaaS.
- User satisfaction with SaaS applications at 49% (YTD 2009) up from 40% during 2008.
- Renewal rates holding steady at 80% Y/Y.
- 60% of SMB customers self-implement the SaaS application they license. For those customers who use system integrators to help with the deployment of SaaS applications, the implementation services are 1:1 of the SaaS license costs. The implementation services costs for on-premise enterprise software stand at 3:1 of the corresponding license costs.
- SaaS initiatives will consume 25% of IT budgets in 2009 (vs 16% in 2008) and 28% of the 2010 budgets. Pacific Crest is expecting roughly flat IT budgets for 2009 and a 5% increase during 2010.
- Revenue growth and bookings growth among public SaaS companies are slipping (Y/Y revenue growth at 16% for the current quarter, as opposed to 28% for 3Q08, and Y/Y bookings growth at -4% for the current quarter, as opposed to 28% for 3Q08). However, the smoothness of the revenue numbers, even during the deteriorating economy, further validate why the markets and investors are so taken by the SaaS model.
- During the current economic climate SaaS companies are aggressively establishing “farmer” sales teams to better deal with renewals, i.e., to try to ensure that the renewals will happen.
- Reasons customers use SaaS (in priority order): faster implementation, immediate access to the most recent version of the software, lower TCO, lower IT costs, reliability (very interesting), security (even more interesting since in the past security had been listed as one of the inhibitors to SaaS adoption), ease of integration with existing infrastructure, and ability to quickly customize the software (another interesting response since again customization was perceived as a weak point for SaaS applications).
- Top application areas for SaaS (in priority order): CRM (including industry-specific CRM applications), collaboration (seen as a battle between Webex/Cisco and Microsoft), BI (including web analytics), e-procurement, other enterprise applications.