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The model has proven to be especially attractive for organizations that lack the financial resources and IT infrastructure to deploy and maintain enterprise business applications, such as Customer/Member Relationship Management, in-house. In a recent study about the total cost of ownership of enterprise applications, Gartner Inc. found that 80 percent of the cost of deploying and maintaining in-house applications is not due to licensing costs, but additional costs related to hardware and administration of the software.(2)
The SaaS model offers organizations, without the costs associated with in-house deployment, access over the Internet to enterprise business applications, such as Intarsia, for a fixed monthly subscription fee. The result is a cost-effective solution that has the potential to deliver a quick return on investment (ROI) while freeing the institution to focus on its core competencies. According to a study from Nucleus Research(2), more than 80 percent of companies that outsourced CRM applications achieve a positive ROI.

In the financial services market, small and mid-size institutions have identified CRM/MRM as a priority strategic initiative to improve customer retention and profitability in a marketplace dominated by increasing competition. The SaaS model has been heralded by many as the key to providing those institutions with a low-risk, easy to implement and use CRM/MRM solution.

SEDONA's distribution partners have experienced growing demand from their financial services institution clients to offer their Intarsia-based CRM/MRM solutions as SaaS. Since SEDONA's distribution partners began offering Intarsia as SaaS in late 2005, SEDONA has signed more than $750,000 in new SaaS contracts. Due to increases in SaaS deployment, SEDONA recorded approximately $552,000 in deferred revenue for monthly subscription fees in 2007 from its distribution partners' SaaS contracts. This deferred revenue will be recognized ratably over the life of the contracts, which average 36-60 months. This represents a 34% increase over the deferred revenue for monthly subscription fees reported one year ago.

Furthermore, in 2007, 38% of SEDONA's license revenues were derived from monthly subscription fees of SaaS deployment, compared to 15% in 2006.

Increased market demand, combined with a larger number of distribution partners offering Intarsia as a SaaS, leads SEDONA to anticipate continued growth in subscription fees.

SEDONA President and CEO Marco Emrich commented, "The growing acceptance of the SaaS deployment model for CRM/MRM application in the financial services market is an important component of SEDONA's future growth. The recurring revenue stream generated by the SaaS model combined with the revenue generated by in-house sales will provide the foundation for us to achieve our financial objectives."

1. "SaaS Model" also referred to as Application Services Provider (ASP) model
2. Reference: Insidecrm.com: "Hosted CRM Buyer's Guide," 2007