JOURNAL OF SOFTWARE (JSW)
ISSN : 1796-217X
Volume : 3    Issue : 5    Date : May 2008

Is SOA Superior? Evidence from SaaS Financial Statements
Thomas W. Hall
Page(s): 1-10
Full Text:
PDF (303 KB)


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.

Index Terms
software, SOA, service oriented architecture, SaaS, Software-as-a-Service, pricing strategy, financial
statements, information technology, performance, business process outsourcing