Why is it that doomsayers popup every now and then with a completely negative message and somehow manage to get major press. Harry Debes, CEO of Law Software has publicly declared that the sky will fall on SaaS (Software as a Service) companies in 2 years. Personally I think it is either a naive, arrogant or plain stupid statement to say “The SaaS market will ‘collapse’ in two years”.

1. Naive

Firstly, SaaS is happening now, growing at a huge rate, and as business models are getting perfected, profit is now coming to the new SaaS players who are committed and have learnt from the mistakes of the larger SaaS dinosaurs of the past..

With rapid development tools such as CFM, ASP, Ruby on Rails, etc and a very low cost of entry, entering the SaaS space has now become the domain of all developers. Because they can, they will, and this will breed a new business economy full of a variety of SaaS business – everything from cheap, small solutions to larger enterprise tools. The massively competitive landscape is here to stay. It won’t collapse, rather the stronger business models will succeed. Not necessarily the biggest companies, but the stronger models.

2. Arrogant

It’s a bit of a heavy statement to make that ALL SaaS businesses will collapse. That’s just crazy and an arrogant statement. All businesses have different dynamics and models and whilst I think that the Enterprise space will always be a harder sell, the SME’s and SMB’s are already warming to SaaS and it’s getting further into the SME culture.

3. Stupid

You said that history repeats itself and people make the same mistakes. To a point I agree, but history also teaches us lessons and many of us learn from them. The mistakes made in SaaS in the early days by the big players are a very different set of mistakes from the ones being made today. But this time it’s different. In the past, some HUGE mistakes caused an entire industry to stop and rethink.

Nowadays, the cost of entry is low and there are so many opportunities that people just learn, adapt, change or move on to something new. In the past, VC money or major capital constraints meant that many companies didn’t get a second chance.  These days, everybody can afford a second, third, forth chance and their learning mistakes don’t collapse the industry in the process.

Some comments I just had to comment on…

“The first time, it was called “service bureaus”. The second time, it was “application service providers”, and now it’s called SaaS.”
– This time around, the culture of business is ready for the technology.

“But it’s pretty much the same thing. And my prediction is that it’ll go the same way as the other two have gone–nowhere.”
– The timing was wrong. Now it’s right for adoption.

“One day Salesforce.com will not deliver its growth projections, and its stock price will tumble in a big hurry. Then, the rest of the [SaaS] industry will collapse.”
– How can you assume the world cares about Salesforce’s stock value? There are MANY profitable SaaS businesses without investment that won’t collapse. Customers are too entrenched – or… wait for it… Just don’t care about Salesforce.

“People are stupid. History has shown it repeats itself, and people make the same mistakes.
– Correct that STUPID people make the same mistakes. INTELLIGENT people learn from them and go on to build successful businesses.

“It was going to take us seven to 10 years before we made any money. That’s nonsense.”
– Well, you’re doing something wrong. We made money from day one and were profitable in a few short years. Just because you can’t figure it out, don’t assume others can’t.

“And SAP’s Business ByDesign is a disaster. [SAP] said it would have 10,000 customers [for ByDesign] within a couple of years. And yet they have less than 100 today, after all that hype and marketing.”
– Sap is a VERY DIFFERENT selling proposition from most SaaS businesses today – it’s a dinosaur.

“You don’t break-even till the four-and-a-half year mark, but here’s a bigger problem–there’s no guarantee that that customer is still going to be yours in four years’ time.”
– Toughen up! There are no customer guarantees… You don’t OWN the customer.

“Getting signed up as a SaaS customer is fast, but getting out is just as fast. Whereas traditional software is like cocaine–you’re hooked.”
– Rubbish! Some SaaS solutions get you ‘data entrenched’ (like project management software) and plenty of code solutions are easy to get rid of (like antivirus).

I think that we all need to accept that the ‘Cloud Computing’ era is dawning upon us. Sure there will be a few rocky patches along the way as there always is with new tech culture, but it is a changing landscape and those who don’t adapt, will fall behind.  Also keep in mind that is is possible to have both a Code and SaaS strategy in play.

So there’s no point being a doomsayer, especially in a new tech culture that will jump on posts like this and tear down the comment. All it’s achieved is that many vocal tech bloggers now have another post to blog about, thus lifting their own blog traffic, scoring another point for the blogosphere and discrediting your thoughts.

Let’s really try to be positive about the future, rather than writing negative posts about how the “SaaS market will ‘collapse’ in two years” – it’s just rubbish…

About the author:
Julian Stone, CEO – Project Management Software visionary for: ProActiveSoftware.com, ProWorkflow.com & Julian101.com

Julian Stone

Julian Stone here, CEO of www.proactivesoftware.com, developers of www.proworkflow.com (Project management software). I’m a chronic serial creative thinker and have a passion for creativity, business and entrepreneurship. Since the early days at school til the current adult days I’ve been involved with many businesses, in many forms, but the real passion I have is designing ideas from scratch and seeing them through to completion. I love startup businesses and their associated challenges; the fact that the more you learn, the more you realize you don’t know! Every day is an opportunity to meet a new person, learn a new skill, tackle a new challenge! My personal background is 15yrs in graphic design, ad agencies, 3d animation, video editing, multimedia, print, prepress and other creative persuits. About 1999 I was made redundant, mostly due to a failing internet company I was working for at the time. It was also about the time of many ‘.com boms’ where many startups failed due to a distinct lack of any real business plans, paths to revenue or just crazy and unrealistic business ideas. I saw from the inside out, what happens when a company collapses. It was messy, complicated and a lot of people were hurt, both emotionally and financially. However, amidst all this came a blessing! I met my wife, Sarah, who was was also working for the company. Out on the street at age 25 and not many jobs available, it was ’sink or swim’. I chose to ’swim’, and started contracting initially, then business, and haven’t looked back. There have been hard years, and I’ve learned a lot, but heading down the business path rather than employee path was the best decision I’ve made career-wise. I’ve surrounded myself with many like-minded friends and look forward to an exciting ride ahead! This blog is designed to discuss my thoughts on matters (yes, I’m very opinionated) and to share lessons I’ve learned from people, books, experience or the school of life. ;-)

8 Comments
  • Someone has to colour in the tail of the technology adoption curve. We need guys like Harry to represent the back-end of the curve that will follow the damn steep curve we are seeing now thanks to Google, Salesforce, Zoho amongst many others.

  • From someone who has been in the SaaS business for almost ten years I’ll jump in and confirm that it won’t happen. Not only is our business growing like never before but during the various nuclear phases the economy had over the years customers stuck with us because they were getting great service, at a low price and it would cost them more to evaluate a new system and move. Unlike software companies our revenue subscription based and is not connected to capital buying cycles. Nothing happens “quickly” here. It’s pretty much steady as she goes month after month. I’d like to hear what they have planned for us 24 months from now LOL?!

    What the doomsayers don’t get is that the new breed of apps are significantly better than before and companies now have a “trust” track record; these are making a huge difference in purchasing cycles and adoption rates.

  • It migth not collapse – I’d be surprised if it existed in a year – surely they’ll have replaced SAAS with another silly acronym by then? ‘Hosted applications’, ‘SAAS’ …

  • I think they just did. http://en.wikipedia.org/wiki/Cloud_computing is being voted up as we speak…

    “Cloud computing is a general concept that incorporates software as a service, Web 2.0 and other recent, well-known technology trends.”

  • Talk about head in the sand. We have customers telling us that they’re mandated to move everything to SaaS in the next 12 months. And the economics of SaaS vs. intall/client hosted simply don’t support his theory.

  • I’m not sure of the motivations for Harry Debes prediction of the death of SaaS, but having left a long career in enterprise software (Stellent, Sybase, PeopleSoft, etc.) for a SaaS-based company, I can assure you that I have never been so excited about the prospects of the on-demand market. At SpringCM, we’ve seen a strong uptick in the market acceptance of SaaS in the past year. As Liz Pearce pointed out, some customers (including large enterprises) are mandating SaaS solutions. So for the established SaaS vendors, the future is very bright indeed.

  • Harry Debes is an incumbant who is scared of the future rather than embracing it for the new opportunities it offers

    SaaS allows small vendors to build “parts” of the larger cloud computing puzzle which once connected will give much more functionality and flexibility than anything currently available, at a fraction of the cost.

    SME/SMB’s are going to be the real winners as tools which have always been well outside there financial reach now become accessible to them.

  • Complete waste of space with his own agenda.

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