Firm-level performance and productivity analysis for software-as-a-service companies

Abstract

The Software-as-a-Service (SaaS) business model is that, the vendors host their software application on their own servers, release it to several customers at one time through the internet using a multi-tenant architecture, and charge the customers by a recurring monthly subscription model. This new software management model has been place great expectation on as a more efficient software business model and as a future trend of the industry. This research uses firm level financial data of software vendors from 2002 to 2007. We categorize software vendors into three groups: pure-SaaS vendor, mixed-SaaS vendor, and non-SaaS vendor. This categorization is used as the most critical dummy variable of the following analysis. We first build a performance model for SaaS business and study the effect of different business model on firm performance. Then we analyze how these three models affect the productivity of the vendor company. We build two Cobb-Douglas production models b