{"id":496,"date":"2008-05-08T07:00:25","date_gmt":"2008-05-08T15:00:25","guid":{"rendered":"http:\/\/www.formtek.com\/blog\/?p=496"},"modified":"2008-05-08T07:00:25","modified_gmt":"2008-05-08T15:00:25","slug":"saas-would-a-recession-bring-good-times-or-bad","status":"publish","type":"post","link":"https:\/\/formtek.com\/blog\/saas-would-a-recession-bring-good-times-or-bad\/","title":{"rendered":"SaaS: Would a Recession Bring Good Times or Bad?"},"content":{"rendered":"

Only last week ZDNet bloggers Farber and Dignan<\/a> described SaaS as a recession-proof industry, quoting Jeff Kaplan of ThinkStrategies as saying that during a recession “many companies could hold back on their capital investments to mitigate their risks. The ability to adopt on-demand services on a pay-as-you-go basis will be a perfect sourcing strategy for businesses seeking greater cost-controls and flexibility.”<\/p>\n

But this week they’re presenting the contrarian opinion. On Monday, Cohen and Company announced their list of ten surprises for 2008, and near the top of the list is the prediction<\/a> that if the US is hit by recession that SaaS companies could be hit very hard. They say that “none of the above claims has been tested in a slowing economy. Enterprise software company activity levels are always volatile and back-end loaded. This challenge is a constant in the software industry \u2014 and applies as much to on-demand software companies as to traditional on-premises software companies.”<\/p>\n

They argue that in a downturn businesses might tend to reduce IT costs and just stick with the software that they’re currently using, or companies may feel more secure in bad times by consolidating their software with single-vendor software houses like Oracle. They also note that HR and Marketing groups are often hit first, and currently those groups are some of the biggest targets of SaaS vendors.<\/p>\n

If a downturn happens, one analyst worries that the shares of companies like Salesforce.com, NetSuite, Concur, Taleo and Vocus which are <\/span>all doing well now, could drop <\/a>30-50 percent.<\/p>\n

Those are the two sides of an interesting argument. We’ll have to wait to see what 2008 brings.<\/p>\n

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Only last week ZDNet bloggers Farber and Dignan described SaaS as a recession-proof industry, quoting Jeff Kaplan of ThinkStrategies as saying that during a recession “many companies could hold back on their capital investments to mitigate their risks. The ability…<\/span><\/p>\n

Read more ›<\/a><\/div>\n

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