Came across a couple of posts analyzing SaaS economics, there is some real interesting content out there. Two specific posts of interest are one by Dennis Howlett titled SaaS economics Part 1: it’s not looking promising based on the research done by David Skok who, in collaboration with investment banker Pacific Crest Securities and Open View, an expansion stage VC firm and another by Tomasz Tunguz titled Benchmarking Veeva's S-1 - How 7 Key SaaS Metrics Stack Up. Both are very informative reads. But would like to focus on one specific area regarding their comments around the use of Force.com for developing SaaS applications or ISV apps on top of.
One view is the operational costs of delivering SaaS application using Force.com Platform:
The other view is R&D costs for a company that uses Force.com as their platform to build the SaaS Application, using Veeva's datapoint:
Some interesting data points:
- research says that companies building their own infrastructure are growing at median rate of 27% while those using third parties enjoy growth of 56%
- Amazon is often held up to be the gold standard for providing best value and so it proves, coming in at 6% of revenue. The surprise was the cost of Force.com operations at a whopping 15% and well above anything else
- Veeva’s (developed on Force.com platform) investment in R&D has averaged 12% over the past four years, 42% lower than the median during the same period.
- Veeva is the most profitable company in this basket of public SaaS companies. Over years 3-6 from founding, the business recorded a median profitability of 12.3% and was profitable in each of the four years.