Thursday, July 31, 2008

Outsource ECommerce Stats

I was talking to a well known Bay Area VC this week and he asked me why a company like Capcom Mobile would have Movaya run their e-commerce site for them rather than do this themselves.

I was somewhat surprised by the question because I assumed that he (as well as every other VC) naturally knew that a large percentage of companies use hosted services rather than run the back-end infrastructure in-house. I mentioned that huge software companies like Microsoft and Symantec outsource some or all of their digital delivery to folks like Digital River (NASDAQ: DRIV).

And today, this study came through from Gartner:

"Within five years, 90% of e-commerce sites will operate at least partly with on-demand software-as-a-service technology—which is available under a monthly subscription rather than licensed and installed on a company’s dedicated infrastructure. The study also notes that by 2013 40% of e-commerce sites will run completely on SaaS technology."

Furthermore, if you look at the earnings reports from Digital River, GSI Commerce and others in this space, they are all doing very well.

As more software gets downloaded to mobile phones, companies like Movaya (who provide these hosted services) will be well positioned to grow revenues and profits at an accelerated rate.

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