Fear Factor May Slow SaaS Adoption


Gartner believes that the tough economy may push more companies toward software-as-a-service in the next few years, as they look for ways to cut discretionary spending. It's proved popular with existing users, based on a recent survey in which 90 percent of respondents said they planned to maintain or increase their SaaS investments, notes Gartner.


This prediction couldn't be more logical. In tough times, however, logic sometimes flies out the window. Enterprise software buyers, not terribly trendy to begin with, become even more risk-averse for fear of making a costly mistake, reports SilliconValley.com. Such feelings are understandable, considering that some small SaaS providers may vanish in the coming months, say some experts.


Referring to a recent conference in Silicon Valley, consultant and longtime SaaS booster Jeff Kaplan says:

There was so much angst in the air.

Revenues are off even at large and financially stable SaaS providers like NetSuite, notes ZDNet's Larry Dignan. He quotes Thomas Weisel analyst Tom Roderick, who says he was "somewhat taken aback" by the scope of a Q3 decline in bookings at NetSuite.


It's a similar picture at SaaS darling Salesforce.com, as I wrote in October. It won't get better for Salesforce any time soon, opines Dignan, as it has been increasingly chasing big corporate accounts -- you know, the companies that are now halting IT spending. SaaS providers stand a better chance in areas where they are not trying to displace giants like Oracle and SAP, concludes Dignan.


The moral of the story: It's going to be a tough couple of quarters ahead for nearly everyone. SaaS providers are no exception.