Tight Economy Could Spell Opportunity for On-Demand AppsBy Renee Boucher Ferguson | Posted 2008-03-21 Email Print
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The economic downturn could be good news for software-as-a-service vendors if businesses turn to on-demand software to save money.
Technology stocks are sustaining substantial losses in the current economy, particularly in the on-demand sector, which is down about 30 percent year-to-date, according to one stock index.
But the state of the economy could be good news for SAAS (software as a service) vendors if a simple premise holds true: that companies really do save money with on-demand software and in a tight economy they will turn to on-demand applications to save cash.
The answer to the long-term cost savings question of SAAS is somewhat difficult to determine and can differ by market segment or type of application deployed, according to industry watchers.
"For companies with 100 users, they definitely see a savings in two areas. Total cost of ownership and the total economic impact on return on investment [are] higher for SAAS," said Forrester analyst Ray Wang. "Where it gets dicey is for companies with 500 employees and 250 users or more. At that point it's a lifestyle decision."
In its most recent earnings call Feb. 27, Salesforce.com CEO Marc Benioff characterized the company's fourth quarter as "the most incredible quarter for winning business in our history."