In an interesting editorial
, Jeff Moad quotes Larry Ellison to the effect that Oracle has not managed to make money with "software as a service" (SaaS) applications, and that he thinks it's a major challenge that is probably slowing down some rollouts.
It's a fascinating point - and a sobering one. Investors and customers alike seem to be demanding that software vendors convert to SaaS as soon as possible. The customer benefits are obvious--less hardware; less IT management; easier to expense; software is always up to date. But if it is to work for vendors, the economics have to make sense.
According to Moad, Salesforce.com, SAP, and others simply set prices too low. That surprises me; was the expectation to make it up in volume?
CAD vendors are saluting the SaaS flag with more and more vigor, although bandwidth issues have limited full-blown transition to the new model. Sounds like a squeeze is coming for vendors; if your competitor is offering SaaS, you'll have to, regardless of profitability issues.
I'd love to hear your thoughts about this issue. Please comment.