SaaS providers are beating the economic gloom and are seeing double-digit growth in their subscription revenue, according to a new study by Forrester Research.
"I think SaaS has an element of being recession-proof," said Ray Wang, a Forrester analyst who follows this market. But he includes a number of caveats: Many companies are moving cautiously with small SaaS deployments, short contracts and even month-to-month agreements. "People are likely to be commitment-phobic," he said.
In addition, the revenues are still relatively small. For instance, Ariba saw a 73 percent jump in subscription revenue, from US$18.8(£11.5) million to $32.6(£20) million, in the third quarter of 2008 from the quarter a year ago. Ariba makes spending and contract management software.
But of the 10 companies to which Forrester mapped subscription revenue, most showed gains above 40 percent. NetSuite, a provider of business management and CRM offerings, saw a 44 percent revenue increase, from $28 million to nearly $40.5 million in the third quarter of 2008 from the year-ago quarter. Matching that percentage increase in this study was Salesforce.com, whose subscription revenue over that same period jumped from $176.4 million to $253 million.
And while SaaS is largely thought of as software used by small and midsize businesses, enterprises are the largest users, Wang said. For instance, last year, Singapore-based Flextronics International began implementing Workday's SaaS to replace 80 human resources systems used in 30 countries in support of 200,000 employees.