June 23rd, 2011 by Craig Vodnik
Everywhere you look these days, there’s an article about Software-as-a-Service (SaaS). That’s because the market is booming – Forrester Research reports that the market for SaaS will grow from 7 percent of the $354 billion software market in 2010 to 17 percent of the $476 billion software market by 2013. By any measure, this is an impressive increase!
SaaS also implies a change in business model from single-licensed software purchases to subscription software service that likely results in more revenue for companies who succeed in the market. Of course, those who grasp the SaaS opportunity now are in the best position to thrive.
All software categories, however, are not equally set up for SaaS success. Categories such as sales force automation have seen great upheaval in the last 10 years by SaaS-delivered products like Salesforce.com and SugarCRM. Other categories such as banking and operating systems have not seen (nor likely will see) much SaaS penetration at all. In some cases, data security or laws prevent organizations from effectively moving data to the cloud and avert the success of SaaS.
If your products are conducive to SaaS, now is the time to get on the SaaS wagon. Don’t leave time or space for competitors to move in – Establish your SaaS strategy now!
Surepayroll, the leading SaaS provider of payroll processing for small and medium sized businesses, was recently acquired by PayChex for $115 million. SurePayroll is a 10-year old company that was eating into the SMB market space of its bigger payroll competitors because of its SaaS nature. Does your business have an extra hundred million to buy up a SaaS rival? Most companies don’t have that kind of money lying around, even more reason to create a proactive SaaS strategy for their organization.
There are many SaaS-appropriate segments within the business-to-consumer (B2C) space. For example, the online backup industry is undergoing major tumult at the moment. The days when customers would buy backup drives for their computers are moving to the rearview mirror due to SaaS backup companies like Carbonite, Mozy, SOSOnlineBackup and iDrive. These SaaS offerings charge regular service fees and take the hassle out of being your own hardware repairman by storing your precious files in the cloud – a perfect fit for a SaaS solution.
However, business-to-business (B2B) companies undergo a more complex experience because they require support for channels, ERP system buying, sales agent tracking and more. Companies that sell B2B products, which are usually higher priced and have more complex sales, have thus far been reluctant to dive en masse into the SaaS arena.
This could be a fatal mistake because when it comes to B2B software, business customers want to lower total cost of ownership (TCO), and SaaS products offer exactly that.
According to “Software Vendors: The Shift to SaaS,” a Forrester Consulting study commissioned by cleverbridge, 55 percent of corporations using SaaS said that TCO reduction was important and 57 percent of corporations using SaaS said that lower overall costs were an important factor in the decision to choose SaaS products. It doesn’t take Nostradamus to see that SaaS is likely to grow tremendously in the B2B space within the next few years.
For these reasons and more, cleverbridge (full disclosure: cleverbridge is the machine behind this blog) decided to investigate the market trends around what buyers and sellers of B2B software were experiencing with respect to SaaS solutions. This investigation led to the commissioned study conducted by Forrester Consulting on behalf of cleverbridge AG, “Software Vendors: The Shift to SaaS.” By evaluating the benefits and opportunities and investigating the issues and threats of SaaS, this in-depth report provides the data needed to decide whether or not SaaS is right for your business.
As part of this effort, Forrester Principal Analyst Brian Walker will participate in a podcast discussing the market opportunity for B2B software companies to offer SaaS-delivered solutions. And on Wednesday, July 13, Brian will lead a one-hour webinar to discuss key findings from the study and answer your questions regarding this report.
We believe that you will find the research and conclusions of this report extremely valuable in devising your market strategy for selling B2B software products in this evolving market. We would love your feedback and insight on this developing topic. Please feel free to post comments below!
Keystone: SaaS isn’t right for every company. But now is the time to gather the data and knowledge needed to make a decision about your SaaS strategy – before it’s too late.