Thursday, October 02, 2008

Little considered aspect of Software as a Service

Making technology investments in tough times
Some commentators have opined that more customers will turn to SaaS-based solutions inasmuch as the cash crunch will hit buyers' capital ("CapEx") budgets first. If that's the case with you, you'll want to weigh reduced initial cash outlays against potentially higher operating costs on a long-term basis under a SaaS model. Depending on the type of service provider, you're shifting at least part of the capital burden to your SaaS vendor, so you'll want to weigh their liquidity very carefully.

More generally, it's prudent to examine the financial health of all your major technology suppliers, current and prospective. We've always counseled looking more closely at balance sheets rather than profit-and-loss statements. Many vendors still remain cash-rich, even as they become customer-poor. I'm no financial expert, but I'd value short-term assets over things like "goodwill."

Keep in mind that bigger does not always mean more solvent.

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