M-P

Sector Overview: SaaS

This is a good overview. The SaaS space has a lot of positive aspects and I believe - as I've written elsewhere on SA - that there will be some consolidation in '09. The potential for a SaaS player on an Oracle-like scale is coming ... a massive cloud in the sky that can exploit their distributed computing power and secure data centers will gain some economies and efficiencies. Many of the security concerns and uptime issues have been remedied - as bandwidth expands globally, the issue around speed and concurrent users should improve. The challenge with SaaS is also one of its advantages - it's easy to propagate new versions and functionality, but it can hard to get the uptake and adoption on all the new functionality - coming at a quarterly clip. As a lesson from Siebel Systems, the SaaS players need to be careful at not getting into a functionality race with themselves and hurting some of their key benefits -turn-key implementations, easy to use and understand, solid adoption. As each of the major players gain more enterprise customers, they will have better lock-in (more integration) and more stable annuity streams. Watch the customer lists/names.