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Having left my corporate budget responsibilities behind, I hadn't really thought of this.  Today's WSJ has an article on SaaS adoption.  One of the driving factors in large organizations is accounting.  Not, providing accounting services, but how software expense is accounted for:

"Early on, that attracted mostly small businesses that weren't previously using any software at all and could easily justify trying this new approach. But larger companies stayed away, having invested in the late 1990s in traditional software from the likes of Oracle and SAP AG.

Now that's changing, partly because of an accounting quirk. Companies are starting to get rid of their old software at a time when capital-expenditure budgets are tight. Traditional software and the hardware to run it are considered a capital expenditure. But Web-based services are typically sold as a subscription, which means corporate buyers can account for them as a maintenance expense, which falls into a different bucket.

As a result, companies are turning to start-ups such as Ketera, LucidEra Inc. and Workday Inc. that are offering Web-based services for tasks like controlling spending and managing employees. Meanwhile, a handful of older software-as-a-service companies such as Taleo Corp. and RightNow Technologies Inc. have gone public; another, NetSuite Inc., is widely expected to try to do so.

Big software makers like SAP and Oracle are themselves ramping up efforts in the area. Google Inc. is even getting involved, with Web-based word-processing and spreadsheet services for businesses. Research firm Gartner Inc. calculates the world-wide market for software as a service will grow to $19.3 billion by 2011 from $6.3 billion last year."

I don't know about everyone else, but I always found getting capital to be a battle.  But maintenance, well you have to keep the ship afloat.  Interesting to consider if you find yourself in the bootstrapping phase of architecture and/or technology adoption.

Posted by brendamichelson in business • technology trends |Digg This|Add to del.icio.us

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Posted by: Anjali Saini at May 15, 2007 02:18 PM | Permalink