The recession has highlighted the importance of SaaS and its cost efficiencies. In a report released this week, Global Industry Analysts projects the SaaS in enterprise application software (EAS) market to reach $23.15 billion by 2015.
According to Gartner, the content, communications and collaboration segment accounts for the largest amount of SaaS revenue and generated $2.6 billion in revenue in 2009. Some leading vendors in this area are Citrix and InterCall, which recently acquired event streaming company Stream57.
The second largest SaaS revenue generator is customer relationship management (CRM) with $2.3 billion in revenue in 2009, and the leading vendors are Salesforce.com and RightNow. Enterprise resource planning (ERP) is the third-largest SaaS revenue generator with $1.3 billion revenue in 2009. Even traditional ERP vendors such as SAP and Oracle are turning to SaaS delivery methods to compensate for slower growth in on-premise ERP. In 2007, SAP launched Business ByDesign to target SMBs, and the company plans to revamp it and make it volume-ready this year. SAP should make some SaaS acquisitions to accelerate its growth and thwart the competition. But it has been slow to open its $7 billion wallet for acquisitions. The former CEO, Leo Apotheker, recently resigned and Jim Snabe and Bill McDermott have been named as co-CEOs. Will a change in management also mean a change in the company’s acquisition strategy? SaaS ERP vendors include Intacct, NetSuite, ADP, Coda, and Glovia.
SaaS is also pushing into niche areas such as expense management. Concur, a provider of employee expense management software with annual revenue of $247.6 million, is one of the best-performing SaaS companies. Ariba and KDS are some other vendors in this niche area.
Let’s now look at the recent performance of Citrix, NetSuite, and Concur. Last quarter’s coverage of these companies is available here.
Last month, Citrix (NASDAQ:CTXS) reported that its revenue in 2009 increased 2% y-o-y to $1.58 billion and annual profit was $191 million or $1.03 per share. The company had a strong fourth quarter driven by demand for desktop virtualization as well as the launch of the XenDesktop server. Fourth quarter revenue increased 9% to $451 million and profit grew 46% to $88 million or $0.47 per share.
Citrix recently launched an online interactive training solution, GoToTraining, which targets the $678.1 million Web conferencing market for educational and corporate training. This market is expected to grow to $1.6 billion in 2014. Citrix ended the year with more than $1 billion in cash and other investments. Its virtualization and conferencing offerings make it an attractive acquisition target for larger vendors like IBM, SAP, and Oracle, but I would rather like to see it acquiring smaller SaaS players and become a consolidator itself.
Citrix expects 2010 revenue of $1.74 billion to $1.76 billion and EPS of $1.33 to $1.34. The company expects first quarter revenue to decline to about $405 million to $410 million. The stock is currently trading around $44, the same levels as its 52-week high reached on January 19. Market cap is about $8 billion.
NetSuite, (NYSE:N) which had one of the largest SaaS IPOs, recently reported annual revenue of $166.5 million, up 9%, while net loss widened to $23.3 million or $0.38 per share. Fourth quarter revenue increased 3% to $43 million, but the company disappointed the market with its first quarter forecast. It expects Q1 revenue of $43 million to $44 million and 2010 revenue of $180 million to $185 million. NetSuite ended the year with $123 million in cash. The stock is currently trading around $13 after hitting a 52-week high of $18 on January 14. Market cap is about $800 million.
Concur (NASDAQ:CNQR) recently reported a strong first quarter with revenue growing 16% to $67.7 million. Net income increased to $6.5 million, or $0.12 per share from $5.8 million, or $0.11 per share last year. The company ended the quarter with $118 million in cash.
Concur expects net income per share for the second quarter of fiscal 2010 to be $0.10. It recently entered into a deal with Amadeus, a leading global technology and distribution partner to the travel industry. This deal will help Concur to provide integrated solutions and expand its global presence. The travel industry is expected to recover by 2011, and Concur is rightly investing for global expansion. My interview with CEO Steve Singh is here. The stock is trading around $39 with market cap of about $2 billion. It hit a 52-week high of $43.82 on December 24.
SaaS has proved to be a cost-effective business model that most companies are eager to adopt. The market reflects the upbeat sentiment for SaaS. Apart from the companies covered here, other SaaS companies such as SuccessFactors, Taleo, RightNow, Salesforce.com, and athenahealth are also trading close to their 52-week highs.