According to Gartner, 90% of e-commerce sites will use SaaS by 2013 and by 2011, 25 percent of new business software will be delivered as SaaS. Its not hard to understand why this is happening and Nicholas Carr in The Big Switch: Rewiring the World, from Edison to Google summed up SaaS appeal nicely by observing that corporate executives and end-users agree: IT is a needless hassle, it should be as easy as electricity and be as reliable as a utility.
At Corum we look at the world through the lens of M&A. We keep detailed profiles on potential buyers in all the software niches describing their interest. Our profiles tell us increasing numbers of both strategic and value buyers love the predictability of subscription services since it allows for better forecasting of revenue and lower cost of maintenance and support and thus more accurate business planning. Bottom line, its easier for them to trust the numbers.
Licensed software revenue on the other hand, is much more likely to be unpredictable, maintenance costs are higher and sales are more subject to technical, business and even seasonal cycles that make it hard for buyers to rely on the proposed acquisitions financial forecasts. The take away should be this. In virtually every market niche there is a growing preference on the part of software company buyers to SaaS technology and businesses. As the trend evolves companies lacking at least a SaaS component to their business will increasingly be viewed primarily as an opportunity to acquire customers that could be converted to a SaaS model and they will not command the price of a SaaS business.