SaaS predictions for 2014

News of hybrid SaaS, PaaS and happier customers is all on tap

By , IDG News Service |  Software

While there's no indication Salesforce.com will offer an on-premises option -- and indeed, such a thing seems almost inconceivable considering the company's "No Software" logo and marketing campaign around the convenience of SaaS -- the HP partnership is clearly meant to give big companies that still have jitters about traditional SaaS a happy medium.

As in all cases, customer demand will dictate SaaS vendors' next moves.

Geographic depth: It was no accident that Oracle co-President Mark Hurd mentioned during the company's recent earnings call that it now has 17 data centers around the world. Vendors want enterprise customers to know their SaaS offerings are built for disaster recovery and are broadly available.

Expect "a flurry of announcements" in 2014 from SaaS vendors regarding data center openings around the world, said China Martens, an independent business applications analyst, via email. "This is another move likely to benefit end-user firms. Some firms at present may not be able to proceed with a regional or global rollout of SaaS apps because of a lack of local data center support, which may be mandated by national data storage or privacy laws."

Keeping customers happy: On-premises software vendors such as Oracle and SAP are now honing their knowledge of something SaaS vendors such as NetSuite and Salesforce.com had to learn years earlier: How to run a software business based on annual subscriptions, not perpetual software licenses and annual maintenance.

The latter model provides companies with big one-time payments followed by highly profitable support fees. With SaaS, the money flows into a vendor's coffers in a much different manner, and it's arguably also easier for dissatisfied customers to move to a rival product compared to an on-premises deployment.

As a result, SaaS vendors have suffered from "churn," or customer turnover. In 2014, there will be increased focus on ways to keep customers happy and in the fold, according to Karan Mehandru, general partner at venture capital firm Trinity Ventures.

Next year "will further awareness that the purchase of software by a customer is not the end of the transaction but rather the beginning of a relationship that lasts for years," he wrote in a recent blog post. "Customer service and success will be at the forefront of the customer relationship management process where terms like retention, upsells and churn reduction get more air time in board meetings and management sessions than ever before."

Consolidation in marketing, HCM: Expect a higher pace of merger and acquisition activity in the SaaS market "as vendors buy up their competitors and partners," Martens said.

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