Private Equity and Its Impact on Software as a Service

I came across this article, and I found it interesting as my industry goes under dramatic change.

Over the last 5 years, business to business software has taken on the SaaS (Software as a Service) model. It makes sense. The software publisher has incentive to adapt to subscriber needs, the consistent cash flow to continually improve the product, the means to support existing customers and adjusts it to ever-changing hardware and operating systems.

Now, the world of private equity has jumped on this megatrend as well. They can see consistent returns, and they can map out a five year plan with relatively predictable revenues. Sounds great for everyone, right? The software publisher fulfills their vision. Customers enjoy the new features. The private equity firm provides a capital boost and cashes out in 4-5 years. Everyone wins. Maybe.

But what if cash flows don’t meet expectations? Or what if previously acceptable returns aren’t enough for institutional investors who expect year-over-year growth? Will they apply pressure to cut costs and increase prices? Who takes the hit?

Choosing the right provider, one that meets our clients’ unique circumstances, is almost always a nuanced and involving process. We’ve been doing this for over 20 years and enjoy these conversations, and we believe our approach is quite unique for the industry. If you’re reviewing your current system’s features, functionalities and relevance to your business processes, feel to press the button and book a discovery call.