There are two types of SaaS companies, those that are really ISVs trying to move to the Web and those that are really Web 2.0 companies trying to tap what’s traditionaly been the ISV market. Ironic perhaps, but true.
Web companies calling themselves SaaS are easy to spot – they have no ISV legacy, no perpetual license customers. IMHO, they appear to classify themselves as SaaS as part of attracting higher-end business clients. What separates these companies from other web concerns are their need to deal with customer issue related to data security, business continuity, off site backups and the myriad of other enterprise IT issues that they inherit from their target clientelle. Tough issues, true, but surmountable.
ISV’s trying to move to the Web, however, face a what until now has been a potentially larger hurdle. As established businesses they have fixed expenses and depend upon a steady revenue stream from licenses to cover their cash needs. Converting to subscriptions potentially introduces a chasm in their cashflow. Navigating that chasm must look to a CEO like jumping the Grand Canyon on a tricyle.
That may be changing, though, as I recently got a google alert (love that tool) that lead me to SaaS Capital, who finance SaaS receivables. This is the first firm I’ve seen specifically targeting this space with a greatly needed service. So if you find yourself on that tricyle and hurdling down the ramp at breakneck speed with the chasm ahead of you – they’re worth a look.