Economy Starting to Impact SaaS, Open Source

Economy Starting to Impact SaaS, Open Source

Bulls and BearsNobody, it seems, is immune to an economic slowdown.

As the Bulls and Bears do battle on Wall Street, certain technology sectors will hold up better than others during a slowing economy.

Managed services seems to be holding its own, and Autotask's CEO remained upbeat during a call with me yesterday. But two other hot buttons -- Software as a Service and Open Source -- are now coming under Wall Street's skeptical microscope.

Yes, I've predicted that companies like Red Hat and Salesforce.com (along with MSP platform providers) will weather the economic storm better than traditional closed-source or on-premise software companies. However...

...Goldman Sachs is slightly hedging its bets. Two examples:

  • The big investment firm expects Red Hat to meet earnings estimates this year but predicts 2009 earnings may come up slightly short of expectations.
  • Goldman Sachs also predicts RightNow, a SaaS specialist, will see its profits dip into the red this year due to the economy. Goldman had previously expected RightNow to deliver a small profit in 2008.
Barron's offers a more extensive look at Goldman Sachs' earnings guidance for software companies here.

Autotask: Standing Tall

The Barron's piece is the latest warning that the economy will impact the software industry. However, anecdotal evidence continues to suggest that MSP platform providers are holding up well. Autotask, for instance, had its biggest revenue month ever in December and the company's sales pipeline has remained strong this month, notes CEO Bob Godgart.

During a call I had with Godgart yesterday, he noted that Autotask's business continues to grow 5 percent per month. And in recent months, Autotask has diversified its revenue stream, introducing Autotask Go! (an entry-level solution) to complement Autotask Pro (the company's standard product offering).

Next up, Autotask plans to introduce Pro Plus, a higher-end solution that includes bundled services from Autotask. Code-named Jumbo, Pro Plus is "the third leg" of a stool that allows Autotask to compete in small, midsize and large solutions provider settings, notes Godgart.
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