News this month that Amazon is about to acquire French package delivery service Colis Prive is further evidence that the boundaries of e-commerce are in a significant state of flux. While Amazon is reaching closer to the customer and investing further in the very non-virtual world of warehousing and delivery, traditional players such as Visa and UPS are extending their reach into the e-commerce value chain from the other direction. From a merchant’s perspective, the move is very much towards a best-in-class approach to solutions, with Amazon among the very few that are in a position to own versus outsource, given the scale requirements needed to deliver many of the capabilities that are proving to be high-value differentiators at the service levels the marketplace is demanding.
E-commerce today is a multi-trillion dollar market. Global business-to-consumer e-commerce transactions were over $1.6 trillion last year while business-to-business transactions were over $5 trillion. As such, the e-services industry continues to explode, and we’re seeing some notable shifts in what it takes to win as a service provider in this vast and cut-throat market.
Integrated or connected, what is the difference?
In the world of enterprise software, the term “integrated” is used liberally to describe systems that “connect” and pass data to each other. But the word integrated suggests these systems are actually woven together, which is rarely the case. At Bulger Partners, we debate these nuances frequently, and most of what we see in software today are connections, not integrations.
Every software sector has experienced, and continues to experience, some level of consolidation. Often, as we’ll discuss below, the consolidation is driven by the desire or need to expand product capabilities and deliver additional solutions to customers. Every organization evaluates build versus buy strategies, and often there are compelling reasons to acquire an existing platform rather than build it from scratch.
An interesting case study can be found in the Human Capital Management (HCM) industry, where rapid and increasingly expensive consolidation occurred between 2005 and 2012. While this consolidation created connectivity between offerings and has no doubt improved the offerings of the HCM industry, new demands from vendors will require enterprise software companies to take the next step towards true integration.
In the world of Enterprise Software, on-premises solutions are becoming rare.
The economies of scale that comes with the cloud combined with the innovation
and agility of fully SaaS ISVs has led to a world of primarily SaaS-based enterprise
applications. However, there are vestiges, particularly with large conglomerate ISVs
(Oracle, IBM, Microsoft, SAP), of classic on-premises solutions and deployments.
5 SaaS-ready revenue models you should know about
In previous articles we have explored and promoted the benefits of applications software companies pursuing an all-SaaS model. One of the benefits we touched on was the number and variety of revenue models available to SaaS companies, many of which for architectural and infrastructure reasons are not available to non-SaaS equivalents. In this article, we explore those revenue models and their benefits in more detail. (more…)
And why all Applications Software Companies will soon be SaaS
Our Thesis: We spend a lot of time helping both companies and investors think through SaaS Transformations. Our general thesis is that SaaS transformations represent a significant opportunity for investors and operators alike to capitalize on the growth opportunities, efficiencies, and valuation differential experienced by SaaS companies. This thesis is comprised of the following supporting arguments:
The Technological Advantages of Migrating to SaaS
For ISVs, the conversion to SaaS has long been known to hold several widely agreed upon benefits. Regular “recurring” revenue is something that Wall Street has embraced, as evidenced by the 4-8x multiples enjoyed by most SaaS firms while their “regular” counterparts enjoy multiples in the 2-4x range. With overall SaaS revenue still growing at rates over 25% annually, we are clearly still in the middle of the sea change.