Software as a Service: An Economic Life Raft?

Can software as a service (SaaS) and managed services keep you afloat during a sinking economy? That continues to be the buzz on Wall Street and across the blogosphere. I'm not predicting a recession -- I've always been a glass-half-full type of guy -- and I also don't want to hype SaaS and managed services as a cure-all for economic wounds. With all of those caveats in mind, I do believe solutions providers should focus on SaaS, managed services and open source as their three cornerstones in 2008. Here's why.

If the economy slows, CIOs will surely take steps to delay or even cancel big internal IT projects -- particularly complex application development efforts. In stark contrast, SaaS provides CIOs with predictable monthly costs and on-time deployments, and the risk of hidden costs is very low.

With these benefits in mind, SaaS remains a hot topic on Wall Street. Earlier today, Barron's mentioned that Salesforce.com appears to be a pretty safe bet during an iffy economy. I tend to agree. Big software companies will surely follow Salesforce.com into the SaaS market. I continue to hear, for instance, that Symantec will launch the Symantec Protection Network (here's a list of our Symantec Protection Network editorial coverage) in a matter of weeks.

Meanwhile, SaaS will continue to converge with managed services, as solutions providers meld their network management capabilities with application deployment expertise. Jeff Kaplan describes this convergence in his Think IT Services blog. Overall it's a great read -- though Jeff's statement that "services are recession proof" is a bit extreme. Sorry folks, I don't believe any IT industry or services industry is recession proof.

We're also seeing the convergence of open source with SaaS and managed services. SugarCRM, for instance, is a fast-growing open source application provider that ranks among the top 10 you should be watching, according to our sister site, TheVARguy.com. In fact, SugarCRM offers its software as either an on-premises or on-demand solution. Dozens of VARs already offer SugarCRM has a hosted solution.

On the managed services front, companies like Untangle are promoting open source security solutions as robust, community-enhanced alternatives to closed-source technology. Untangle has lined up about 50 new managed services partners since September 2007, lifting its partner ranks to about 60 companies -- about half of which have already generated sales for Untangle.

So, are managed services and SaaS the perfect antidote to a sick economy? I think not. But if I had to position my business right now in the channel, the safest bets do indeed remain SaaS, managed services and open source.

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