Is SOA Superior? Evidence from SaaS Financial Statements

Journal of Software, 2008

10 Pages Posted: 12 Aug 2008

See all articles by Thomas W. Hall

Thomas W. Hall

Christopher Newport University

Date Written: August, 12 2008

Abstract

We use audited financial statements to examine claims that service-oriented architecture (SOA) leads to higher profits relative to traditional software delivery models. Specifically, we examine vendors that rely on the Software-as-a-Service (SaaS) pricing model, and compare their performance to other firms that still use the traditional perpetual license model. We find that, relative to their peers, SaaS firms tend to have lower costs of goods sold as a portion of revenues. Compared to their software firm peers, SaaS firms are also younger, smaller, possess less financial leverage, and have higher costs (sales, general, and administrative) relative to revenues. Pure, per-unit costs of hosted SOA applications do not appear to be lower, however, compared to firms that specialize in retail provision of mass market software. This leads us to conclude that, despite the predictions of the most ardent adherents of SOA and SaaS, traditional vendors with sufficient economies of scale will not be intrinsically threatened by the new model.

Keywords: software-as-a-service, service-oriented software, financial performance

JEL Classification: L11, L86, M41, O30

Suggested Citation

Hall, Thomas William, Is SOA Superior? Evidence from SaaS Financial Statements (August, 12 2008). Journal of Software, 2008, Available at SSRN: https://ssrn.com/abstract=1220264

Thomas William Hall (Contact Author)

Christopher Newport University ( email )

United States

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