Business

Last month I attended a software licensing conference in San Francisco.  One of the sessions I found most encouraging included a forcast for SaaS (Software-as-a-Service) markets.  In particular, the overall view of the presenters was that the current economic climate offers a positive outlook for SaaS businesses.  It makes sense.  SaaS provides businesses with several advantages over traditional software licensing models.  Through SaaS licensing, businesses often experience lower up-front costs, reliable support, no maintenance costs, lower server expense, ongoing operation and control over technology budgets - all things that are highly valued during more challenging economic times.

A large part of my business law practice is in SaaS law and related technolgy law fields representing SaaS providors.  SaaS is one of many types of Internet-based service models.  It is a manner of software deployment where an application is hosted as a service over the Internet.  Customers pay a subscription fee or an on-demand (per use) fee for access to the tool.

Probably the single most advantage for a SaaS providor is that the model allows for an accurate projection of revenues, which in turn allows for reliable budgeting of growth.  Further technology development, hiring decisions, business expansion, and entering new markets are all decisions based on these budgeted forcasts. 

Unfortunately, I am noticing a trend in SaaS markets where sophisticated business customers are pressing for longer payment terms and more ready termination rights in SaaS contract negotiations.  This obviously frustrates the benefit of budgeting based on guaranteed revenue streams.

One other trend I notice is the need for SaaS providors to offer more complete portfolios of services.  For instance, many SaaS tools have added analytics and optimization tools to support their basic services.  Some SaaS providers are finding that strategic partnering with other SaaS providers will allow for more complete services to customers.

Even with these trends, the outlook for SaaS in 2009 looks positive.  I expect for many of Alerding Castor's SaaS clients and Partners-in-Success such as Iasta, ExactTarget, Compendium, Koi Systems, CareerScribe, LightsOut and BlueLock to benefit from the growing demand in the market.