Scott Bolick, George Gilbert and Rahul Sood of Tech Strategy Partners have assessed the economic model of software as a service (SaaS) in their recent post on Sandhill.com. It is worth reading. Their conclusion is the the SaaS model is likely a superior economic model, particularly once scaled. They estimate that SaaS vendor operating margins will range between 34%-40% in its mature manifestation. These margins are superior to the traditional model as evidenced by SAP with a 27% operating margin and Oracle at a 34% operating margin.
