Wednesday, December 5, 2007

SaaS resistant to economic downturn, On Premise not so.

An article by Sean Gallagher in reports that

"Goldman Sachs last week downgraded the vast majority of the software companies it tracks from "attractive" to "neutral" last week. "

What is notable about this report is that Goldman Sachs indicated they favored Software as as Service (SaaS) vendors to be more immune to the projected economic downtown attributed to the Finance and Mortgage problems being faced.

"The ability to quickly and easily turn on new applications with a
significantly lower initial cost of ownership makes SaaS an attractive offering for small- and mid-sized businesses," Friar and her team wrote, "significantly expanding the market for software applications. More broadly, and including enterprises, these benefits are likely to be key in a slower economic environment where purchasers of software may be increasingly skeptical of significant upfront investments which we anticipate to characterize 2008."

The same couldn't be said about On Premise, as the article also indicated that On Premise ISVs were more vulnerable to IT spending cuts.

This ties in well with the Unreasonable Men's Post on Will SaaS go the way of of ASP's, which indicates that SaaS is more than just hype and is here to stay. Although these Unreasonable guys accurately post that SaaS is more than a just cost saving device, this very feature makes it a more attractive option in uncertain economic times.