So some of this makes sense, but I don't entirely get the focus on recurring/subscription revenue as a new/disruptive thing in the B2B space. Isn't that the 60-year-old standard model for enterprise sales, pioneered by IBM? SaaS is certainly a new delivery model, but a subscription licensing model itself seems pretty well established.

One key difference is due to non-standard data formats and features, software has a far greater lock in. Cell phones might drop 90% of their "recurring" customers over 3 years, but that's because the phone number goes with the client and there isn't much of a down side. With something like an accounting app or a CRM there is often way too much work to move to a new system, so the churn rates are smaller and the profit margins higher.

I agree with that, but that's not a SaaS-specific difference, is it? Classic enterprise solutions like SAP have pretty high lock-in, too.

It's also a new (lower) cost model, which in turn is driving down prices. I've never worked in a true enterprise environment, but I gotta think a lot companies who have spent jillions implementing, say, Oracle CRM are now thinking they should've gone with SalesForce. (Not that I'm a fan of SalesForce's UI or integration tools. But the price is right for a lot of enterprises.)

Um, Salesforce ain't cheap, can cost a grand a year per user. That's pretty much normal enterprise CRM pricing. Notice how the 'custom apps' are only included with enterprise.

http://www.salesforce.com/crm/editions-pricing.jsp

And you still have to pay silly money on top of that for a sandboxed version to test with. 'Cause they ain't very good at the programming/scaling lark. And invented their own really crappy SQL language.

Yeah, but in the days of Siebel (now part of Oracle) you would easily spend $250k on a pile of disks. I remember advising companies who had spent fortunes and not even installed the software. At least with SalesForce you can start small.

SalesForce is certainly not my favorite. They're just the most well known.

Revenue means nothing. Revenue can be gamed. No prudent investor would invest or value a company based on revenue figures alone. Aside from acquisition targets like Instagram, if a company is to be a going concern, it needs to generate sustainable cash flows, not revenue.

Let's see. Take your 1 billion and look at the opportunity cost, and assume that the market at large can earn you a real return of ~4%, which is ... $40 million profit a year, so divide that by your margins and there you go. If you've got Apple-like margins of 30% you're looking at $130 million in revenue a year (+ revenue growth that matches inflation). A software-only company might do it with less; if you're selling more physical goods you're probably going to need more.

Growth can substitute for that for a while, but in the long run that's about the return you're going to need to have to justify a $1 billion market cap to investors, who also have the opportunity to invest somewhere else.

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