Boundary Conditions

Someone very clever once wrote, “Human beings are naturally drawn to ‘boundary conditions’ “ – for example, where land meets water, where the earth touches the sky, where space meets time.

In other words, we like to congregate at these boundary conditions; stand on the edge of something and gaze over at something else.

Is that why beach houses are so expensive?

I feel as though the SaaS market is at one of these boundary conditions right now. As we see more and more companies choose on-demand solutions, the ‘old way’ of doing things is giving way to the ‘new way’ of doing them.

It’s not hard to see why this is so: when one considers the lower cost of entry, lower TCO, instantaneous upgrades, plus the freedom and flexibility that come with a subscription-based service model, the exploding popularity of SaaS makes perfect sense.

Evidence of the ‘SaaS explosion’ can be found all over the place. Recently, Penny Crossman wrote a terrific article describing the “almost-meteoric rise of SaaS on Wall Street”.

On the same day last week, Salesforce.com announced not only the acquisition of InStranet (to strengthen its service and support offerings), but also record earnings for their second quarter.

The SaaS market is spectacularly healthy and growing at a dizzying pace. According to IDC’s Worldwide Software On-Demand Forecast 2007-2011 the CAGR is forecast 32% among companies of all sizes, and another analyst (that I'm not able to mention by name) estimates that Software-as-a-Service will grow to a $19.3 billion industry by 2011. This means that SaaS – already a healthy $6 billion industry in 2006, will have more than tripled in size in less than five years.

If we, as an industry, have not already reached our tipping point, it seems to be rapidly approaching.

Won’t you join me at this boundary condition? Let’s gaze over at the old, on-premise world and be glad that we’ve claimed such a valuable piece of beachfront real estate.