This almost-inevitable downturn will answer one of the open questions about SaaS/On Demand: How “recession-proof” is Saas, really? Already, an number of SaaS vendors have seen their forecasts taken down, just like normal enterprise vendors (here and here, for example).
Of course, many still believe that SaaS is recession-proof (see Jeff Kaplan posts and comments here and here). I certainly don’t believe that as a blanket statement. In fact, I believe that on demand vendors that focus on edge processes will be in deep trouble. That’s because one of the benefits of SaaS to customers is the ability to stop consuming whenever they like — and edge applications will get stopped first.
It is funny how we don’t hear about the benefits of “consumable” services now that consumability doesn’t exactly match the “SaaS is immune” narrative. Per my earlier rants on this topic (here and here):
The ease with with one can consume services — which certainly does promote usage — is matched by the relative ease with which one can stop consuming services. If one can get in easily, one can get out easily…. Also, trying to mitigate that risk by locking-in revenue with longer subscription periods sounds good, but it makes SaaS/On Demand too strongly resemble an On Premise relationship.
That last sentence is one example of the On Demand catch-22: as SaaS gets more embedded in the enterprise core, the more it behaves like on premise (e.g., SFDC’s lengthening sales cycles).
Filed under: Implementation Costs, On Demand, On Premise, PaaS, SaaS, SAP Tagged: | CNQR, Concur, CRM, Jeff Kaplan, Joe Panettieri, Larry Dignan, N, NetSuite, Rick Sherman, salesforce.com, Seeking Alpha