Recurring revenue is much more stable than license purchases and also less prone to piracy. Adobe's incredibly successful transition (from a share price perspective) is a testament to the value ascribed to recurring revenue models.
In fact, companies that sell services with a recurring revenue component are generally seen as higher margin and more stable across industries. For instance, Aerospace & Defense companies that have a strong "Aftermarket" presence (which really means maintenance, spares, repairs, etc.) generally command higher valuations.
The SaaS hype just takes this to the ultimate level. Digital services have very little costs (relative to their physical counterparts). Recurring digital revenue equates to mind-boggling numbers like Salesforce having >70% gross margins, which is probably the most prominent reason why Tech valuations have skyrocketed in the cloud era
> For instance, Aerospace & Defense companies that have a strong "Aftermarket" presence (which really means maintenance, spares, repairs, etc.) generally command higher valuations.
Not sure whether that's a good example, because that might just be exploiting some weirdness in how government projects get funding approval, and might not be relevant to the wider (and software) world?
In fact, companies that sell services with a recurring revenue component are generally seen as higher margin and more stable across industries. For instance, Aerospace & Defense companies that have a strong "Aftermarket" presence (which really means maintenance, spares, repairs, etc.) generally command higher valuations.
The SaaS hype just takes this to the ultimate level. Digital services have very little costs (relative to their physical counterparts). Recurring digital revenue equates to mind-boggling numbers like Salesforce having >70% gross margins, which is probably the most prominent reason why Tech valuations have skyrocketed in the cloud era