SaaS Growth – Some Grey in this Silver Lining?

I just read a TMC article about a new Datamonitor report on the double-digit growth rates around SaaS CRM and other applications.

I like that report was not one of those “SaaS is the only way to go in this economy!!!” type reports. It was a little more honest and balanced in my opinion. Rather than take the SaaS growth numbers and throw a SaaS party – the report instead warns vendors that even with the growth, SaaS is not a security blanket. SaaS will not necessarily bring a company profitable growth.

And that is the important thing to think about. Top line growth – as the report suggest – does not always mean a strong bottom line performance. It took SaaS leaders like Salesforce.com nearly a decade to hit its first profitable quarters. And that was after spending hundreds of millions of dollars in infrastructure, sales and marketing.

But I think there are some things we’ve learned in the last 10 years that will allow many vendors to provide SaaS options in a scalable and profitable manner. And I think we are seeing more workable hybrid offerings, where SaaS is not the ONLY option, but rather one of a number of delivery or management options for end users. More open source components are available today than in the late 1990s, and I do believe that virtualization technologies are promising a more customizable approach to SaaS than with older multi-tenant options.

So, all told, SaaS growth is a good thing. But what the SaaS CRM providers make with this growth in terms of profitable momentum is a whole ‘nother story…

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