SaaS-y Money
I've been reading Sam Ramji of Microsoft's Emerging Business Team as of late....
One of the posts that really caught my eye was one on VCs and SaaS. Quoting:
John Hummer actually said it more directly, at the SDForum event on SaaS back in March 2005: "If you are going to pitch me a software deal, it had better be Software as a Service." Emergence Capital is a $125 million fund established solely to finance SaaS plays. BAVP made their interest clear way back in 2003.
Add to this the fact that many partners I've spoken with have said that the software side of their portfolios currently include between 1/3 and 1/2 SaaS plays, and the reason to focus on this is obvious: the trend is only accelerating. IDC forecasts the delivery segment (not "market") to reach $10.7B by 2009.
It can be argued that this is a new bubble, but unlike Web 2.0 (which sure smells like a bubble right now but perhaps it's an echo boom) it is a software value shift that is fundamental and easy to grasp, whether or not you're a member of the digerati.
The numbers and VC money and market sizing is fun - but that last sentence is really important. What we're all seeing is a "software value shift" -- as enterprises grow to be more and more networked, they are being forced to remove friction from all possible points. Software as a product to be integrated into an existing IT environment carries with it tremendous friction. Software that delivers a result and can virtualize management, so as to *appear* to be running within my organization has an inherently lower bar of friction.
The importance of this should not be underestimated. Look at Open Source (the other side of the value shift coin) - open source software is removing friction around pricing and proprietary code (i.e., its commoditizing easily chunked off pieces of the stack). Similarly, SaaS is *just beginning* to remove friction around delivery and user experience.
In some senses, SaaS is riding a wave similar to the one that Apple is on. The markets (ie, end-users) have gotten over the larger chasms of technology adoption -- user experience and delivery of results is now far more important than it ever has been.
The value in software is shifting from the value locked inside the lines of code to the value released by an easy to install, set up, use and maintain application.
One of the posts that really caught my eye was one on VCs and SaaS. Quoting:
John Hummer actually said it more directly, at the SDForum event on SaaS back in March 2005: "If you are going to pitch me a software deal, it had better be Software as a Service." Emergence Capital is a $125 million fund established solely to finance SaaS plays. BAVP made their interest clear way back in 2003.
Add to this the fact that many partners I've spoken with have said that the software side of their portfolios currently include between 1/3 and 1/2 SaaS plays, and the reason to focus on this is obvious: the trend is only accelerating. IDC forecasts the delivery segment (not "market") to reach $10.7B by 2009.
It can be argued that this is a new bubble, but unlike Web 2.0 (which sure smells like a bubble right now but perhaps it's an echo boom) it is a software value shift that is fundamental and easy to grasp, whether or not you're a member of the digerati.
The numbers and VC money and market sizing is fun - but that last sentence is really important. What we're all seeing is a "software value shift" -- as enterprises grow to be more and more networked, they are being forced to remove friction from all possible points. Software as a product to be integrated into an existing IT environment carries with it tremendous friction. Software that delivers a result and can virtualize management, so as to *appear* to be running within my organization has an inherently lower bar of friction.
The importance of this should not be underestimated. Look at Open Source (the other side of the value shift coin) - open source software is removing friction around pricing and proprietary code (i.e., its commoditizing easily chunked off pieces of the stack). Similarly, SaaS is *just beginning* to remove friction around delivery and user experience.
In some senses, SaaS is riding a wave similar to the one that Apple is on. The markets (ie, end-users) have gotten over the larger chasms of technology adoption -- user experience and delivery of results is now far more important than it ever has been.
The value in software is shifting from the value locked inside the lines of code to the value released by an easy to install, set up, use and maintain application.
posted by ejn at
1:01 PM
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