Conventional wisdom has held that the current ‘Great Recession’ would help to actually accelerate SaaS adoption, due to the fact that SaaS offers a ‘right-sized, zero-CAPEX alternative to on-premise applications’ as IDC describes it. Many believe it could be the tipping point that finally drives SaaS into the mainstream – this in fact could become a reality if SaaS draws significant new customers to the model, and customer sat rates maintain their current lofty levels. Now that we have a full quarter of market and economic meltdown under our belt so to speak after the September 15th collapse of Lehman, we thought we’d take a look at some of the data to see how the thesis is holding up. First are the announcements from the major publicly traded SaaS vendors that have reported calendar Q4 2008 results to date:
- RightNow announced 25% growth in Q4 revenue year-over-year, with the highest total bookings in any quarter in the last two years.
- Concur reported 19% Q4 revenue growth over 2007, with new customer additions up more than 50% year-over year.
- SuccessFactors achieved profitability for the first time in the quarter, growing revenue 77% over 2007 and growing their user base to 4.5 million unique, paying customers.
- NetSuite reported a Q408 revenue that was a 31% increase over 2007. International revenue actually grew 51% year over year.
This all in an environment where NetSuite notes business spending on equipment and software fell nearly 28%. While granted these results reflect the impact of sales cycles that likely began much earlier than Q4, the fact that this much business actually closed (instead of getting cancelled or deferred) is notable.
The post-crash news from the analyst world is reinforcing what we’re seeing from the vendors and hearing anecdotally as well. IDC has boosted their 2009 growth projection for the SaaS market to 40% from 36% previously, and is now actually estimating that by the end of 2009, 76% of US organizations will have deployed at least one SaaS app.
Salesforce.com has yet to weigh in yet with their Q4 2008 results (currently scheduled to be announced February 25th), which obviously is the most watched bellwether in the SaaS industry. Also, all the vendors above cautioned about their outlook going forward, with several providing downward guidance to prior 2009 earnings forecasts. And finally the unpleasant reality that the Great Recession may have only just begun…