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SaaS: Driver Behind Software Valuations
Mike Braun, former IBMer and now CEO of Intacct, said in a Wall Street Journal interview, that SaaS-modeled companies are exceeding customer expectations. It’s cheaper than on-premise solutions and faster to get up and running. Upgrades are frequent and painless. Administration is easy — no computers or softwares to maintain.
Braun estimates that SaaS implementations cost as much as 50-90 percent less than traditional on-premise implementations. Most of those savings are coming from IT and personnel costs. Small and medium-sized companies are seeing the benefits, and because of that many companies like Salesforce.com are seeing tremendous growth.
And the quick growth is the reason that SaaS companies that have gone public are seeing high stock-market valuations relative to traditional software companies, like SAP AG. Braun expects the growth to continue and for SaaS to grab an ever-growing share of this market segment.
Braun predicts that in the not too distant future, SaaS will grow to capture more than 50 percent of software market share. He expects that we should see that sometime between 2011 and 2013. And that is just the beginning. He thinks that ultimately on-demand software will command 80-90 percent of the total software pie, with the remainder still being handled by very specialized on-premise software.
