Software-as-a-Service (SAAS) is a highly attractive business model for a long-term investor. In most companies, managements need to rebuild the revenue base each year and their costs are, at least for most services businesses, predominantly variable. The outcome of these two factors is a variable topline and a bottom line that has lower long-term leverage potential. And in the technology sector, this combination has created large volatility in operating performance and in stock performance. SaaS, for a technology investor, may be close to nirvana as revenue layers on with high renewal rates allowing for more of the selling and marketing expense going directly to winning new business. And with the highly automated offering that most have, operating leverage is a...
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