MGI Research

Thursday, Apr 25th

Last update06:04:25 PM GMT

Software-as-a-Service (SaaS)

From buzzword to a multi-billion dollar market, software as a service (SaaS) has grown explosively.

  • Will the SaaS revenue growth continue?
  • Can SaaS software move beyond departmental/horizontal applications and displace legacy ERP systems?
  • What are the limits of SaaS applications?
  • How should CIOs evaluate the risks and benefits of SaaS vs on-premise solutions?
  • How can on-premise software vendors successfully transition to SaaS?
  • How can CIOs effectively balance SaaS with their legacy application software portfolios?
  • What are the best practices for evaluating and implementing SaaS solutions?
  • How should SaaS companies be valued? What are the best SaaS valuation metrics?

These are some of the topics addressed in MGI’s research agenda for SaaS.

Companies covered include Salesforce.com, Kenexa, Success Factors, RightNow, WorkDay and many others - public and private.

SaaS Valuation 2013: What Price is Right?

How to Value SaaS Companies?How to Value SaaS Companies?

What are the Key Valuation Drivers for SaaS?

The analysis in our latest edition of "SaaS Valuation 2013: What Price is Right?" offers practical guidelines and formulas on how to value SaaS companies. Included is a detailed analysis of what drives valuation multiples for SaaS companies.

Over the past several years, we have been continuously testing different valuation drivers for SaaS companies. Both the methodology and the results of our valuation work have garnered significant industry recognition and use. Several well-known public acquisitions in the SaaS space have confirmed our Empirical Valuation Model (EVM) that prices companies based on their core operating parameters such as revenue growth. A number of public SaaS M&A transactions of significant size have come very close (within 5%) of the values predicted by EVM. During the last 12-18 months, SaaS companies have experienced a dramatic expansion in valuation multiples and acceleration of growth on both absolute and relative basis vs. on premise software firms.  “SaaS First” for any new business initiative has become the dominant trend. Still in absolute terms, enterprise software spend far outstrips SaaS, indicating that for many business functions market adoption of SaaS remains in early stages. Publicly trading SaaS companies covered in this report represent about $16.5Bil in trailing revenue, $5Bil in deferred revenue and $142Bil in market capitalization.  Revenue growth remains the dominant SaaS valuation factor. The attached research report provides updated valuation benchmarks and revised SaaS valuation formulas.

Attachments: (For Subscribers)
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Download this file (MGI Research SaaS Valuation NOV 2013.pdf)SaaS Valuation 2013: What Price is Right?

Top Ten Trends in Billing Software Solutions

As the billing software industry evolves, ten key trends are driving product selections, effecting project outcomes, and impacting the competitive dynamics. These trends will likely impact the market even more profoundly in 2014. In this research we outline the ten most dominant trends that will drive product selection for billing systems software. (..more)

Oracle and Salesforce.com – Looking Past the Personalities

On June 27, 2013 Oracle and salesforce.com announced a partnership in which salesforce.com plans on standardizing on the Oracle Linux operating system, Exadata engineered systems, the Oracle database, and Java middleware. For its part, Oracle will integrate salesforce.com with Oracle Fusion HCM and Financial Cloud.

Beyond the press and blogosphere hype ("Larry and Marc's Bromance"), the real driver for this deal (and one other that Oracle made recently) is simply millions of dollars in license and support revenue flowing between salesforce.com and Oracle. Salesforce.com is a sizable (but far from top 10) customer of Oracle's.  Salesforce runs on Oracle database technology, and is in the midst of a $30 million implementation of Oracle Financials (on premise, ironically enough).

Cloud Billing Beyond Subscription Economy - 20 Questions with Transverse COO Chris Couch

Chris Couch - Co-Founder and COO of TransverseIn May 2013, we published MGI360tm ratings on a number of  Cloud Billing providers such as Zuora, Aria Systems, Metratech, and Monexa among othrers, as well as a Market Ratings Report (MRR) which provided an in-depth overview of this important emerging space. As a follow up to this research, we have focused on several cloud billing software vendors that were founded by teams coming out of the traditional on-premise billing and customer service management and especially with backgrounds in telecom space. One of these companies is Austin, TX-based Transverse and we have invited one of its cofounders and COO Chris Couch to join us for a 20 Questions session to shed light on the business drivers and dynamics of the complex billing and payments systems. 20 Questions is an MGI Research Interview Series with leading technology industry executives, innovators, and investors. During the 20 Questions, Chris shared approaches to complex billing problems, customer use cases, his views on pricing and competitive dynamics in the cloud billing space.

Attachments: (For Subscribers)
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Download this file (MGI Research 20 Questions with COO of Transverse.pdf)Cloud Billing Beyond Subscription Economy

NetSuite Deepens Commitment to Cloud Billing Software

NetSuite is intensifying its efforts around cloud-based billing management software. NetSuite’s move has implications for users considering NetSuite, existing NetSuite customers, and also for the billing software market more broadly.

NetSuite (NYSE:N, MarketCap: $6.77Bil, MGI Index: 467) has been investing in deepening its capabilities in the billing management software arena, and will be making more marketing noise in the months ahead. With 2012 revenues north of $308 million, a fast growth trajectory, and an emerging position as the leading SaaS supplier of business applications (financials, CRM, ecommerce, and coming soon, manufacturing) NetSuite’s move has implications for users considering NetSuite, existing NetSuite customers, and also for the billing software market more broadly.  MGI Research will be issuing an MGI 360 Rating on NetSuite in the near future. For this research note we ask the question, “Can NetSuite leverage its strengths and become a top rated vendor in billing management”?

 

Attachments: (For Subscribers)
File
Download this file (MGI Research - Netsuite Deepens Committment to Cloud Billing.pdf)NetSuite Deepens Commitment to Cloud Billing Software

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