Software continues climb into cloud

By Aarthi Rayapura August 9, 2016

According to analyst firm IDC, SaaS delivery will dramatically outpace the delivery of traditional software over the next several years. More specifically, the SaaS model will account for $1 of every $4.59 spent on software by 2019 and will have grown to more than $112 billion in revenue by that time, up from $48.8 billion in 2014 (a CAGR of 18.3 percent).

SaaS confers numerous benefits on businesses, allowing them to enhance efficiency, reduce IT costs and increase scalability by tasking ISVs and other vendors with software hosting and management, while focusing on their own core competencies and mission-critical operations.

One big trend that’s allowed SaaS companies and their channel partners to grow – and grow big – is the movement toward a subscription economy, wherein traditional one-off sales of products and services are being replaced by subscriptions and the recurring revenue they generate.

Take Tableau, a Fremont, CA-based business intelligence company whose stock fell more than six percent last week on news that its second-quarter earnings had missed the mark in terms of analyst expectations. But Tableau’s stock didn’t stay that far down for long. After an earnings call with analysts, during which company executives explained that revenue from Tableau’s cloud-based (that is, subscription-based) product had more than doubled from the same period a year ago, the stock climbed up to $56 per share, where it stuck. That was less than one percent down from its closing price.

In an article about Tableau’s earnings that ran in The Seattle Times, Brent Thill, a Wall Street analyst at UBS Investment Bank, commented that investors are heartened by the subscription approach because it signals that revenue is coming in at a steadier clip than it would with traditional software licenses.

For Zuora, a company that’s made subscriptions its business since 2007, this rings true. The Foster City, CA-based company’s website claims that its subscription-management software is enabling “21st century businesses around the world, from startups to enterprises, in any industry to launch and monetize any subscription products and services”.

Zuora customers come from an array of verticals, including cloud infrastructure (Infrascale), communications (Pexip), education (Lynda.com), the Internet of Things (Schneider Electric) and media (Time Inc. in the UK).
Read the full article at: www.channelnomics.com

And download IDC VP Amy Konary’s¬†report –¬†IDC MaturityScape: Subscription Business Model Management