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May 04 2007

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McKinsey says buy SaaS

In McKinsey says buy SaaS, Phil Wainewright summarises some research from McKinsey consultants (Time for the IT Industry to Take Notice) that presents some compelling economic arguments in favour of Software-as-a-Service (SaaS): “they say that SaaS has less financial risk for buyers, is cheaper to use and yet just as profitable for vendors.”

The last point is often overlooked, as many of vendors – particularly those deploying SaaS in the construction industry – have yet to achieve significant profits. The McKinsey analysts compared the profitability of leading SaaS vendors with conventional licensed software rivals, and concluded that SaaS vendors’ lower profits simply reflect where they are in their respective growth curves:

“Although SaaS companies may be slightly less profitable than traditional independent software vendors, this is primarily a result of smaller scale … We expect the economics of online delivery to improve as the market grows.”

Permanent link to this article: http://extranetevolution.com/2007/05/mckinsey_says_b/

2 pings

  1. SaaS: the business solution | Extranet Evolution

    […] Springboard research, for example, reflects advice and global trends reported by Mckinsey, Gartner and Saugatuck (among others), indicating greater awareness of SaaS and forecasting […]

  2. McKinsey talks up SaaS again | Extranet Evolution

    […] surveys the new software landscape, by Nick Carr) – almost exactly a year since I last wrote about them in this context. Carr writes: … software-as-a-service is rapidly “becoming […]

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