SaaS Starting to Weaken, But You Don’t Want to Be Traditional Enterprise Software

According to Barb Darrow, the growth in the value of software-as-a-service (SaaS) companies is slowing down.  However, the sector, as measured, still showed good growth last year according to new data .

‘ “The SaaS numbers for 2012 looked particularly robust compared to the enterprise value of traditional IT vendors which are trying to negotiate a tricky transition from hardware providers to more well-rounded IT services companies, ” said Marty Wolf, president of martinwolf Global M&A Advisors, a company that consults on merger and acquisition strategies.’

The fact of the matter is that the SaaS boom is well into its tenth year, and growth cycles don’t last forever.  I suspect that many of the larger SaaS players, such as Salesforce.com and NetSuite, will put out numbers more like enterprise software players did when their markets began to slow down.  That said, they would still be hugely valuable and profitable companies.

However, as Barb’s article points out, those who will have it the worst in the years to come are enterprise software players that can’t seem to get their cloud computing acts together.  Thus, many of them won’t make successful transitions to SaaS or IaaS and find that, as their market changes around them, they fade away over time.  Their biggest roadblocks to a successful transition to a service-based model will be the technical limitations on their software’s ability to move to the cloud, and their inability to change the “big software” culture.  You don’t want to be those guys.

 

 

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David S. Linthicum

SVP Cloud Technology Partners

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  1. “many of them won’t make successful transitions to SaaS or IaaS and find that, as their market changes around them, they fade away over time” — This.

    This has been happening to a plethora of companies who used to be ‘upcoming and promising’ for the last decade or so. Most of them have faded away into oblivion not because the product wasn’t good on feature set, but because it couldn’t keep pace with the warp speed of infrastructure innovations.

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