Quarterly Financial Tracker: Q2 CY 2009 SaaS Vendors and Purpose Built Solutions Rack Up Big Wins

Most on-premise vendor continue to slip into significant YoY losses in license revenue and overall revenues.  Meanwhile, economic conditions continue to favor SaaS, best-of-breeds, and purpose built solutions. Major themes in the 2009 Calendar Year Q2 include:

  • Economic conditions drive demand for best of breed and point solutions delivered by SaaS deployment.  Consequently, SaaS vendors posted spectacular double digit YoY gains.  Taleo (29.78%) led the pack followed by Blackboard (21.92%), and SalesForce (20.14%).
  • Despite subscription gains for SaaS, professional service revenues dropped as client demand for rapid implementation and discounts in delivery cut deployment costs.  Many vendors reported shorter deployment times.
  • Specialty on-premise vendors JDA Software (8.38%) and IFS (6.00%) delivered significant gains as their purpose built solutions reflect the demand for deeply verticalized software offerings.
  • On-premise vendors continue to rely on maintenance revenues to stabilize or offset huge losses in YoY license revenues.  Customers are nearing a flash point over the high cost for maintenance.  Vendors will need to quickly demonstrate value or take a hit in maintenance renewals.

[caption id="attachment_3363" align="alignnone" width="802" caption="Software Insider Index® Q2 CY 2009 SaaS Vendors"]screen-shot-2010-03-18-at-95444-pm
[caption id="attachment_3364" align="alignnone" width="800" caption="Software Insider Index® Q2 CY 2009 On Premise Vendors"]screen-shot-2009-09-28-at-30312-am[/caption]

The Bottom Line - Worsening Economic Conditions Favor Purpose Built Solutions

Continued economic pressures force customers to choose best of breed and purpose built solutions.  SaaS vendors appear to be the beneficiary as the overall business model aligns with client pain points.  On-premise vendors will also win as they reduce the cost of entry and provide effective price points for purpose built solution modules in demand by clients.  With very little hope for a recovery in 2009, vendors will have to adjust their go-to-market strategies to deal with waning deal sizes.  It'll take more than a hat trick in 2009 to stabilize revenues.  With 4 months to go, vendors should rethink their 2010 strategies to address price points, financing options, and module availability.
Your POV.
As an end user, have you found the deal process to have tipped in favor of the buyer?  Do you continue SaaS solutions with the same level of comfort as on-premise.  As a software vendor, do you feel you have the right go-to-market strategy for 2010?  Feel free to post your comments here or send me an email at rwang0 at gmail dot com for any assistance in contract negotiations with your vendor or the development of a software licensing and pricing strategy for 2010.
* Not responsible for any math errors or erroneous revenue information.  Calendar year estimates based on the quarter nearest the calendar year.  Exchange rates as of September 25th, 2009.  Not responsible for currency flux.  Please read the quarterly filings yourself =)