On The ISV Landscape & Transitioning to SaaS
I just read a post over at PaaSTalk that painted a scary picture in Germany. A recent survey showed that almost half of the ISVs have no plans for SaaS offerings. Granted, some subset of those probably are in a business where SaaS doesn’t fit at this point, but I imagine the remaining ISVs are resisting change.
The problem with resisting is how staying in the on-premise world interacts with what the SaaS paradigm does to market sizes. SaaS is an amortization of sorts when compared to on-premise licenses (from the expense perspective), and as a result absolute market size shrinks or growth rate is dampened because of the marked differences in license costs (think of it as market level cannibilization). As SaaS continues to spread across the space and end users continue to accept the model, resistant ISVs have to battle shrinking market size where their on-premise license charges are significantly disproportionate. I’m not sure how those ISVs intend to deal with this and compete. My guess is that resistant ISVs will have their “lunch eaten” by a new player in the space who clobbers them with a SaaS offering.
One thing I’m curious about is the “why” aspect of those resistant ISVs for which SaaS does make business sense. Is it because of the difficulty of transitioning (cannibilization, rehashing their company to be service focused, etc.)? Is it because they think SaaS is a “fad”? Are the hurdles technical in nature? If you had to guess, why do you think ISVs generally resist the transition?
As the founder of a PaaS company, these curiosities are multi-level: why would some people stay away from SaaS and is there something that a PaaS offering can do to alleviate their concerns?