A quote from this article caught my eye:

"If SAP sells a system today for $1 million, they recognize the million dollars on the day they sell it and it goes into the revenue for that quarter," he said. "If they were to sell that same system as a software as a service, they may get $20,000 per month for the next 10 years."

Hmmmm... my experience with $1 million+ ERP solutions is that a significant portion of that revenue is in Professional Services, which must be recognized incrementally anyway.

Also, the larger ERP vendors are deriving the majority of their revenue from annual maintenance contracts, not new license sales. So they essentially have to resell their solution to the customer every year, creating a volatile environment for forecasting future revenue.

Yes... a month-to-month SaaS model means that a customer can leave at their convenience anytime. Is this what vendors are concerned about? The benefit of this model is that it drives innovation, higher quality of service, and forces vendors to deliver a dollar of value for every dollar billed.