Villi Iltchev has an interesting post up titled Why SaaS Consolidation is Not Happening. As more and more money has been invested in SaaS over the past 10 years, the logical expectation is that there would be a corresponding number of exits. Only, the number of material SaaS exits has been relatively small.
Here are a few of the challenges with SaaS consolidation as enumerated by the author:
- Supporting and scaling multiple clouds is daunting.
- Customer Success is the vendor’s responsibility in SaaS.
- Distribution in SaaS is much less impactful.
- Sales productivity does not get better.
I agree and expect to see a number of small-to-medium SaaS companies rolled up over the next five years (see What Happens to Small SaaS Companies). Once the 10 year horizon is done for venture funds, and a number of their SaaS investments are only growing modestly, look for a number of exits to private equity firms that will roll them up and maximize cash flow.
What else? What are some other thoughts on the lack of SaaS consolidation?