4 Reasons Why SaaS Will Rule During The Recession

Although most of the world’s economies are just now beginning to feel the effects of the current economic recession, Software as A Service (SaaS) adoption should increase as companies cut back on large expenditures and look for ways to do more with less budget.

Not all SaaS companies will survive the continuing shakeout in the industry; but those that do will gain market share and increased relevance due to the following reasons:

1. Best of Breed Solutions – Most SaaS solutions are purpose built for a particular industry or role. Many firms during the past decade have built out their backoffice capabilities with on premise ERP or Bi solutions for example and need a focused CRM or Supply Chain solution to complete their infrastructure. SaaS solutions are a nice fit for firms that need to add additional software capabilities.
2. Automatic Upgrades – SaaS solutions remove one of the constant pain points of on premise solutions in that the SaaS vendor is responsible for upgrades and creation of new and advanced features. This frees up much needed funds that would be used for consulting fees for upgrades for other strategic  business purposes.
3. Subscription Billing – With the window now closed on large capital expenditures for the foreseeable future at most firms; purpose built SaaS solutions billed out as expense items will help many firms move forward with longstanding software upgrade plans without breaking the budget.
4. Licensing Flexibility – Assuming a firm does not sign an onerous multi- year licensing agreement, SAAS solutions allow for greater flexibility with software licenses. While cutting back on the number of licenses in the short term is nearly impossible with traditional on premise software, SaaS solutions allow firms to increase or decrease the number of licenses (and the TCO) on a monthly or quarterly basis as cash flow and conditions warrant.

1. Barbara Lewis , January 2, 2009:

   SaaS solutions also did well during the last downturn, so there is indeed a strong precedent for SaaS to continue to do well this time. Salesforce.com was growing like gangbusters while the on-premise CRM providers struggled. I would also expect that security and business intelligence providers do well in the downturn, since there is a precedent for them being recession-proof as well.

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2. Ameed Taylor , January 15, 2009:

   Barbara,

   I agree that security and BI providers should fare well over the next few years.
   There will also probably be a lot of consolidation amongst security and BI providers during this time.

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3. Dave , May 21, 2010:

   Well written article. I look forward to reading more of your work.

   Dave
   Surge, LLC
   SaaS Development

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