IT StrategyRaj Sheelvant’s blog on harnessing Information Technology to create and sustain competitive advantage for the businesses

Is SaaS Unstoppable?

Big businesses may have reached the tipping point in their acceptance of Software as a Service (SaaS) and large companies are moving beyond the early adapter stage, according to information week article SaaS Market Heats Up. Also, Salesforce.com reported net income of $9.56 million (50% Revenue Growth) on revenues of $247.6 million in the first quarter and said it signed 2,600 companies and organizations as new customers which supports the trend.

“Software as a Service is starting to put the major traditional software industry players to a test. IBM, Oracle, Microsoft, SAP, and other purveyors of on-premises software suites and platforms have considerable installed bases to protect, whether those were organically grown or acquired. Snapping at those vendors’ heels are scores of venture-backed SaaS startups, promising that their Web-delivered sales force automation, marketing automation, business intelligence, procurement, network management, payroll, expense management, HR, and other services are the future of business software.” according to article Down To Business: To SaaS Or Not To SaaS? Not A Simple Question .  These traditional technology vendors that provide software product as a solution are at a cross road. They are under pressure to make their software product into a service. If they move fast they will end up cannibalizing their revenues and shrink profit margins; if they move too late, nimbler competitors will pick off their customers and eventually leave them behind.

This is creative destruction process at work as SaaS adoption becomes inevitable. I don’t think the traditional software vendor can afford to move slowly in making their product into service. Market Segment for product model will begin to shrink and to be relevant, traditional software vendors need to play the new SaaS game.

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Tuesday, May 27th, 2008 at 8:47 pm and is filed under Enterprise Applications, IT Strategy, IT Management, SaaS. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.