A bigger SaaS ecosystem
Brash new on-demand ecosystems like Salesforce.com's AppExchange get a lot of attention, but other more established ecosystems are generating far more in terms of substantive revenues. Probably the biggest in terms of global reach and aggregated revenue is the SaaS ecosystem of Progress Software ISVs.
Progress is one of the software industry's best-kept secrets. Its OpenEdge application platform,Aggregate global SaaS revenues collected by Progress partners are about $300m Sonic Software middleware and DataDirect integration tools make up a formidable combination that's been adopted by a 2000-strong ISV partner base (as well as direct enterprise customers) to serve a largely SMB customer market. Progress was an early proponent of the ASP model and founded a program called ASPen in 1999 to help its ISV partners move towards software-as-a-service. Although the ASPen program faltered when the ASP model went out of fashion, it never completely stopped, and Progress revived it last year as its SaaS enablement program.
Meanwhile over the past five years or so, Progress' software platforms have gone through the same evolution towards service-oriented architecture that industry leaders such as BEA, Oracle, SAP and IBM have followed — perhaps more aggressively in Progress' case since its Sonic ESB product is recognized as a leader in the SOA infrastructure field, and its acquisition of SOA management vendor Actional in January this year further strengthened its SOA credentials. So Progress does far more than merely help its ISV partners host their software online. It also helps them rearchitect their applications to use a true services architecture, so that they can use the best practices of the on-demand SaaS model, including either a fully or partially multi-tenant architecture (there are various ways in which the Progress database can be partitioned).
It's difficult to measure the size of the Progress ecosystem with precision, because Progress has no way of directly tracking what each of the 200 ISVs in its SaaS program are actually doing, but the aggregate global SaaS revenues collected by partners are reckoned to be in the region of $300 million. The figure has to be an estimate, because partners have a lot of freedom in how they implement hosting and licensing, and are not always ready to divulge this kind of commercially sensitive information to Progress. It's a very different setup than AppExchange, for example, where partners are forced to use Salesforce.com's own hosted database and API, and therefore Salesforce.com can track each individual user. Many Progress partners arrange their own hosting; others use Progress-certified hosters, but there are several dozen of those, spread around the globe to serve partners in the countries and regions where they operate.
$300 million averages out to $1.5 million in SaaS revenues for each partner. Of course some are doing more, others less, but the figure reflects the largely domain-specific or vertical market specialisms that Progress ISVs typically focus on. None of these are spectacular growth opportunities, but they build or sustain solid, reliable revenue streams. And while the Progress ecosystem may not have attracted the kind of coverage that's been lavished on AppExchange, its $300 million revenues are at least an order of magnitude more than those so far achieved by AppExchange partners, as far as anyone can tell. No doubt Salesforce.com will close the gap over the next year or two, but the Progress ecosystem is also one to keep an eye on, and I'll be writing more about it in the days and months to come.