Bay Area tech profits from software shift - San Francisco Business Times:

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All eyes this week are on the SanFrancisco on-demand provide of software over the Internet that crossed $1 billion in earningds in 2008, as it was set to releases its first quarter earnings. The company earlietr predicted revenue would grow tobetween $1.3 billiomn and $1.33 billion. Aside from Salesforce, a long list of smaller San Francisco-area software-as-a-service both public and private, have grown revenue, and many have continuefd to hire.
The list includee San Mateo-based , a vendor of busines s managementsoftware suites; San Carlos-based price management firm ; Pleasanton-baseds AdventNet with its Zoho line of online business Oakland-based trade management firm ; Qualys of Redwood an online security firm; and San Bruno-based , a marketint firm focused on , a staffing management software reported this month that its firs t quarter earnings were up 34 percent over the same period last year to $48.1 million. “Thes SaaS or on-demand software model absolutely resonates with customers in this economy due to the greater cost effectiveneses and ease ofimplementation vs.
traditional perpetualk license software,” said Taleo CEO Michael Gregoire. The company said it signee up 166 new customers in the first quarter and predicter full fiscal 2009 revenue would rise 30 percent tobetween $145 million and $146 million. The companyu posted a $2.2 milliobn loss, largely due to the acquisition of another Started 10 years ago arouned the same timeas Salesforce.com, Taleo hirede 222 people last year, another 30 in the firstt quarter of this and it expects to hire 50 to 100 more by year’sx end. Total headcount is 910, including abouty 350 at its Dublibn headquarters.
this month issued a report predictinv that the market for softwares as a service wouldreach $9.6 billiom in 2009, a 21.9 percent increase from 2008 revenuer of $6.6 billion. According to Gartner, the market will show consistent growthgthrough 2013, when worldwide SaaS revenue will tota $16 billion for enterprise application markets. IDC foundr that across the board, SaaS companiese in the fourth quarter of 2008 had theie bestperformance ever. As a result, the sectotr was one of the few for which the firm increased its growtu target for 2009 to40 percent.
The trend has promptedf traditional licensed softwaregiants , and SAP to all expand theifr online offerings, with varying degrees of success. Even , historicall y a seller of networking and communications technologyuand services, now has a suite of online SaaS collaboratio n tools, including WebEx Connect. “I view this as a key growthn enginefor us,” said Michaelo Clark, western region general managee for Microsoft’s small and mid-market although he predicted a mix of online and on-premise software will be In a tough economy, the subscription paymentg model provides stability and bolsters profitability, said Brendan an analyst with investment bank .
Companiews like Taleo complain, nevertheless, that accountingg rules require that expenses incurred winnin customers berecognized immediately, but subscriptiobn payments cannot be counted until they are actuallhy received. They say that being cash-flowq positive is what really matters, and that SEC filinge can be misleading, showing companies as unprofitable when they are in fact San Mateo-based has shown losses in ever fiscal period since it started in 2001. The companyh posted a net lossof $5.7 million during the quarterd ended March 31, for a totap accumulated deficit of $211.9 million. Last fall, as the econom y slowed, the company cut 168 jobs, bringing its headcountf to 600.
Still, SuccessFactors was boasting recently that it enjoyef record first quarter revenueof $35.2 up 50 percent over the previous year.