In the past I’ve written about the networked social nature of ecosystems and especially cloud ecosystems. I am writing a channel program development guideline for Azure based cloud offerings and it helps me do a first draft in blog format… so any feedback would be appreciated!

We have a tendency to find a magic formula for everything and this applies also to SaaS companies. In my research in this topic, I have

found a few resources that give some direction of how to evaluate the healthiness of a SaaS business. It is easy to conclude that Monthly Recurring Revenue (MRR) or Average Recurring Revenue (ARR) is the driver for everything and this number is combined with Customer Acquisition Costs (CAC) we will eventually see whether the company will make money or not. If we add Average Recurring Cost per Customer (ACS) we have the main elements to figure out what the break-even point by using following formula:

I divided in my previous blog post how a cloud transition will impact an ISV. The first blog entry was about the change in business model and this blog entry is about the impact in financial model. However, it is important to recognize that the financial side has lots of different drivers and I will only portray a few of these in this entry, and deal with some others such as sales related metrics later.