Monday, February 9, 2009

SaaS Growth Halted Immediately as Executives Flee – or Not...

SaaS Growth Thrown Into Question,” wrote my former colleague (and, despite my past influence, one of the most insightful people I know) John Foley for Information Week's cloud computing blog last Friday.

Shakeup at,” wrote Ben Worthen for the Wall Street Journal's “Digits” blog on the same day.

Tough Times at,” wrote Jeffrey M. Kaplan for “Seeking Alpha,” a fairly cool Web site devoted to stock market opinion and analysis, just today.

Do these folks know something you and I don't? Maybe – but I don't think so.

What got them all cautious was the departure from of Steve Cakebread, now-former president and chief strategy officer, and two senior sales executives, Gary Hanna and Dave Orrico. Oh, and the fact that canceled its European edition of its annual multi-day tent revival/prayer meeting, Dreamforce, in favor of a free, one-day event. And the fact that stock fell about 5% on a day when a lot of other stocks went up.

But seriously, if you were Steve Cakebread, which would you really rather help to run right now?, from which he'd already tried to retire once, or your family-owned, high-profile, high-quality Napa Valley winery? I live in Sonoma County, which is often seen as a friendly competitor to Napa, and I know which one I'd pick – and I'm a big fan of and SaaS in general.

As for Messrs. Hanna and Orrico, with all due respect, it could be and has been argued by others that there might have been too many sales executives at the company anyway, especially given the current economic turbulence.

And regarding replacing Dreamforce Europe with Cloudforce London – well, I've been saying for some time now, most recently in a December 2008 blog posting, that the big trade show is probably going the way of...well, bits on disks versus SaaS, just to pick an analogy at random.

Is in trouble? I seriously doubt it. Is it facing uncertainties, and the prospects of fewer, smaller deals and even some customer churn during the next few months? Almost certainly. But when I look at the range of resources the company has, particularly its ecosystem of partners, the Foundation, and the team still in place, I can't help but believe the company remains a good bet for users, partners, and even investors. Yes, there will be more competition for customer dollars, from companies such as SaaS solution provider Zoho and platform-as-a-service (PaaS) purveyor LongJump. But has enough irons in enough fires, and enough bright, clever people committed to its success and that of its customers, that it will weather this storm just fine.

What does it all mean, then? If you're a user considering SaaS with little to no investment in solutions, it “couldn't hoit” to look at some alternatives, including those from the two other vendors I just mentioned. If your company is already invested in solutions and relationships, don't panic – just ensure your contractual terms are known, well-documented, and sufficiently favorable to and protective of your company.

And if you're wondering if overall growth of the SaaS/PaaS/on-demand software market is in jeopardy? Well, I'm still predicting growth in 2009 and beyond. It may be slower than the past few months, and it may be distributed across more companies than I and others may have originally thought. But the basic dynamics remain the same – companies want to do more with less, and SaaS and its related technologies enable that more easily and economically than almost any alternative. And Jeffrey Kaplan apparently agrees with me. In his above-referenced blog entry, he states:

“I’m convinced will withstand the current crisis, just as I’m confident that the SaaS and broader cloud computing market will prosper long-term despite of today’s economic challenges. is still the biggest and among the most influential players in the SaaS and cloud computing market, and I’d much rather be in the on-demand services sector than in either the housing or automotive industries.”

Mr. Kaplan adds that critical to the survival and success of SaaS companies will be their abilities to focus on tangible benefits, such as cost savings or higher sales productivity, operating efficiency, and/or customer satisfaction. These are the kinds of things you should focus on, too, if you're trying to consider or promote SaaS solutions at your company, whatever its core business or size. Meanwhile, let's stop wasting time speculating, and build better business infrastructures and service level agreements (SLAs) for managing vendor relationships effectively, while we wait for credible public statements, from and elsewhere.

At least, that's what I think. What about you?

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