Lecere Corporation (fka LCRE)

[darealmr]

where software applications can help us track shipments across multiple countries, manage large inventories, train employees, and even help us form good working relationships with customers. For decades, companies have run software on their own internal infrastructures or computer networks. In recent years, traditional software license purchases have begun to seem antiquated, as many vendors and customers have migrated to a software as a service business model. Software as a service, or 'SaaS', is a software application delivery model by which an enterprise vendor develops a web-based software application, and then hosts and operates that application over the Internet for use by its customers. Customers do not need to buy software licenses or additional infrastructure equipment, and typically only pay monthly fees (also referred to as annuity payments) for using the software. It is important to note that SaaS typically encapsulates enterprise as opposed to consumer-oriented web-hosted software, which is generally known as web 2.0. According to a leading research firm, the SaaS market reached $6.3B in 2006; still a small fraction of the over $300B licensed software industry. However, growth in SaaS since 2000 has averaged 26% CAGR, while licensed software growth has remained relatively flat. Demand for SaaS is being driven by real business needs — namely its ability to drive down IT-related costs, decrease deployment times, and foster innovation.


As SaaS adoption continues to accelerate, traditional software application vendors or ISV’s could face fierce competition from SaaS upstarts looking to steal market share. Over time, they could see their existing customers defect, and prospective new customers balk at their product delivery options (or lack thereof) – resulting in lower revenues, operating margins, and profits. Alternatively, ISV's could adopt SaaS models -- hence risking the cannibalization of their own software license revenue. Consequently, the disruption of ISV’s offerings would hurt the demand for technology software service/consulting firms, who earn profits by integrating, customizing, maintaining, and upgrading traditional licensed software. On the other hand, pure play SaaS software companies, third - party application hosts, and Internet technology providers all stand to gain with accelerated SaaS adoption.
Kinds of SaaS
Business Applications
The Business Applications industry represents software that helps various businesses accomplish their tasks quickly and accurately. Magic Formula stocks in this industry include global leaders such as Microsoft (MSFT), Accenture (ACN), and Electronic Data Systems (EDS), as well as smaller niche players like STARLIMS Technologies (LIMS) and American Software (AMSWA). This is a pretty broad range of providers. Microsoft, of course, makes the ubiquitous Windows operating system and Office productivity software that is used by the vast majority of businesses today. Compare this broad based offering to STARLIMS, which focuses on a very specific niche - laboratory data management.

Business Applications as a sector is difficult to merit. The best opportunities here are either those companies with a large installed base or a very specific niche. For example, American Software produces Enterprise Resource Planning (ERP) software, a way for clients to track their resources and allocate them efficiently. However, this market is controlled by software giant SAP AG (SAP), who has much larger financial resources, name recognition, and client base. For the companies with a large installed base, like Microsoft, switching costs are high because it would require a lot of time and money to re-train employees to use a new system. Additionally, since everyone knows Microsoft tools, the network effect is in place, making adoption of Microsoft's software necessary for smooth sharing of information across business segments or with customers.




http://www.wikinvest.com/concept/Software_as_a_Service