Why is it that doomsayers popup every now and then with a completely negative message and somehow manage to get major press. Harry Debes, CEO of Law Software has publicly declared that the sky will fall on SaaS (Software as a Service) companies in 2 years. Personally I think it is either a naive, arrogant or plain stupid statement to say “The SaaS market will ‘collapse’ in two years”.
Firstly, SaaS is happening now, growing at a huge rate, and as business models are getting perfected, profit is now coming to the new SaaS players who are committed and have learnt from the mistakes of the larger SaaS dinosaurs of the past..
With rapid development tools such as CFM, ASP, Ruby on Rails, etc and a very low cost of entry, entering the SaaS space has now become the domain of all developers. Because they can, they will, and this will breed a new business economy full of a variety of SaaS business – everything from cheap, small solutions to larger enterprise tools. The massively competitive landscape is here to stay. It won’t collapse, rather the stronger business models will succeed. Not necessarily the biggest companies, but the stronger models.
It’s a bit of a heavy statement to make that ALL SaaS businesses will collapse. That’s just crazy and an arrogant statement. All businesses have different dynamics and models and whilst I think that the Enterprise space will always be a harder sell, the SME’s and SMB’s are already warming to SaaS and it’s getting further into the SME culture.
You said that history repeats itself and people make the same mistakes. To a point I agree, but history also teaches us lessons and many of us learn from them. The mistakes made in SaaS in the early days by the big players are a very different set of mistakes from the ones being made today. But this time it’s different. In the past, some HUGE mistakes caused an entire industry to stop and rethink.
Nowadays, the cost of entry is low and there are so many opportunities that people just learn, adapt, change or move on to something new. In the past, VC money or major capital constraints meant that many companies didn’t get a second chance. These days, everybody can afford a second, third, forth chance and their learning mistakes don’t collapse the industry in the process.
Some comments I just had to comment on…
“The first time, it was called “service bureaus”. The second time, it was “application service providers”, and now it’s called SaaS.”
– This time around, the culture of business is ready for the technology.
“But it’s pretty much the same thing. And my prediction is that it’ll go the same way as the other two have gone–nowhere.”
– The timing was wrong. Now it’s right for adoption.
“One day Salesforce.com will not deliver its growth projections, and its stock price will tumble in a big hurry. Then, the rest of the [SaaS] industry will collapse.”
– How can you assume the world cares about Salesforce’s stock value? There are MANY profitable SaaS businesses without investment that won’t collapse. Customers are too entrenched – or… wait for it… Just don’t care about Salesforce.
“People are stupid. History has shown it repeats itself, and people make the same mistakes.“
– Correct that STUPID people make the same mistakes. INTELLIGENT people learn from them and go on to build successful businesses.
“It was going to take us seven to 10 years before we made any money. That’s nonsense.”
– Well, you’re doing something wrong. We made money from day one and were profitable in a few short years. Just because you can’t figure it out, don’t assume others can’t.
“And SAP’s Business ByDesign is a disaster. [SAP] said it would have 10,000 customers [for ByDesign] within a couple of years. And yet they have less than 100 today, after all that hype and marketing.”
– Sap is a VERY DIFFERENT selling proposition from most SaaS businesses today – it’s a dinosaur.
“You don’t break-even till the four-and-a-half year mark, but here’s a bigger problem–there’s no guarantee that that customer is still going to be yours in four years’ time.”
– Toughen up! There are no customer guarantees… You don’t OWN the customer.
“Getting signed up as a SaaS customer is fast, but getting out is just as fast. Whereas traditional software is like cocaine–you’re hooked.”
– Rubbish! Some SaaS solutions get you ‘data entrenched’ (like project management software) and plenty of code solutions are easy to get rid of (like antivirus).
I think that we all need to accept that the ‘Cloud Computing’ era is dawning upon us. Sure there will be a few rocky patches along the way as there always is with new tech culture, but it is a changing landscape and those who don’t adapt, will fall behind. Also keep in mind that is is possible to have both a Code and SaaS strategy in play.
So there’s no point being a doomsayer, especially in a new tech culture that will jump on posts like this and tear down the comment. All it’s achieved is that many vocal tech bloggers now have another post to blog about, thus lifting their own blog traffic, scoring another point for the blogosphere and discrediting your thoughts.
Let’s really try to be positive about the future, rather than writing negative posts about how the “SaaS market will ‘collapse’ in two years” – it’s just rubbish…
About The Author:
Julian Stone begin_of_the_skype_highlighting end_of_the_skype_highlighting is the CEO of ProActive Software, developers and creators of the leading web based project management software http://www.proworkflow.com.