In a recent earnings sign, Oracle founder Larry Ellison “dissed” the SaaS industry, calling it a laggard that isn’t really living up to the hype. “If you look at the leader, Salesforce.com, they don’t produce very much money and they’ve been at it for nearly 10 years,” he said in widely-reported remarks, adding that “it’s tough to point to any software-as-a-service provider that’s doing a good job of improving its profitability.” The irony, besides the fact that Larry has sunk a lot of his own wealth into Salesforce, is that Oracle finally made money from its own on-demand applications that past quarter.

He admitted as much: “We continue to get better at it and grow the commerce,” he said. “[But] it’s not really growing any raster than our overall trade,” and it certainly isn’t growing as fast as some had predicted, he famous sourly.

Well, what does go precisely as predicted, other than presidential elections in some

communist countries? Is the SaaS trade model, which is of great interest to CRM vendors, really destined for mediocrity?

“I bet whether you dig around you will find a quote from Ken Olsen on microcomputers and personal computers that will look pretty similar,” said Denis Pombriant, famous CRM analyst with Beagle Research when asked for his take on Sir Lawrence’s judgments. “The point is that it’s a paradigm shift, and early birds in these shifts don’t always get wealthy, at least not right absent.”

Chris Selland, VP of Marketing and trade Development for more traditional software vendor EasyLobby and a long-time keen observer of the CRM scene, famous that currently, at least, “he’s not wrong. SaaS is ultimately an economies-of-scale commerce — the first client is very expensive to bring up, but each additional client on a SaaS platform should have a much smaller marginal cost.”

Profit margins…

Original post by Peter Svensson