Right on the heels of my previous post – SAP announced that it is purchasing SuccessFactors, the second most prominent pure-play SaaS company after Salesforce.com, for $3.4B.

The most amazing aspect of this deal is that it represents a 10.3 multiple over this year’s revenue of $330M (a 63% premium over Friday’s stock price) and 8.5x over next year’s projected revenue of $400M (a 52% premium)! For comparison  - most legacy on- premise software vendors are trading at 2-3x (4X at the absolute most).

This is the biggest transaction of its kind to date and represent the most significant validation of the transformative nature of SaaS and Cloud-based software.

Clearly, by paying a rich purchase price, SAP is embracing what it’s co-CEOs have stated publicly: that it must evolve quickly to be a Cloud-based software company in order to assure a long-term future for its business (and extrapolation – for any business).

Coming after last month’s purchase of RightNow Technologies by Oracle for an equally attractive multiple – it is clear that SaaS and Cloud-based software is truly coming into its own.

We agree!

Let’s just hope these companies integrate and invigorate their purchases not squelch them. The news the Lars Dalgaard, SuccessFactor’s founder and CEO is going to manage the company as a separate SAP subsidiary, be on SAP’s executives board AND be in charge of all their Cloud-based initiatives bodes well for this.

Forbes analyzes the deal.

“New research shows that over the past year, SaaS company valuations grew twice as much as valuations of legacy software companies rooted in the client-server world.”

An article from GigaOM highlights, with astonishing clarity, how SaaS companies have continued to show incredible resilience and pronounced strength in terms of valuation, in relation to the rest of the technology and broader market.  According to the article, “SaaS valuations tower head-and-shoulders over…other…categories”. Those who follow the SaaS market know that this is not a passing fad, but a sustained strength that has been maintained for many years in a row.

Looking at the graphs in this article – we are happy with this massive public market validation for the decision that Irad and I made when we founded TOA and considered which technological and business path TOA should take. TOA is now the only provider of enterprise-SaaS solutions for mobile workforce management, serving tier one customers worldwide and processing over 65 million appointment annually, setting us apart from the field of legacy software providers with whom we compete.

We know that delivering Software as a Service is not easy or simple, and those companies who have exhibited the ability to do so and continue to grow aggressively over the years deserve the valuations that they are getting.  We also know that there is no way to masquerade as a SaaS provider –  you either are, and know how to do it and have all your DNA wrapped around it…or you’re not. There is no hybrid.  Delivering value in this context is very black and white.

We are gratified that the long-term value that we know our solution delivers to our customers, translates directly into long-term value for shareholders.

Consumerization of IT is a mega-trend and is fast becoming a tidal wave.

The notion that employees don’t want devices, software and a user experience in the workplace that are in any way degraded from those they experience as consumers has now hit the main stream media.

Two separate articles, one in the Economist and the other in the NY Times – describe this trend that we have long identified at TOA as we track mobile usage of our application.

Employees are no longer willing to compromise on what, in today’s world, are basic, cheap and available tools. They no longer agree to relinquish the fantastic user experience that they have at home for a deteriorated one in the workplace – and that is shifting the balance of power of decision making on devices and softwares away from IT departments and CIOs.

Employees are voting with their fingers and forcing IT departments to think mobile, to think web and Cloud, to think advanced, state-of the-art software, ease of use and accessibility and to let go of some age old patterns and beliefs and their closed mentality. A new generation of IT people is embracing this rather than rejecting it. And I believe that with the launch of Apple’s iCloud, this trend will only grow, as employees become familiar, and comfortable, with the idea of the ‘Cloud’, they will expect and push more Cloud-based services on their IT departments too. Just as we see employees now bringing their iPhones, Androids and iPads to work, regardless of what IT says, we will see employees using Dropbox and iCloud and Google Docs and a whole plethora of web-based software services – regardless of what IT says. The power of consumerization is huge and it is all for the good – good for the employees, good for companies, good for technology and innovation and, mostly, good for customers.

As has been the case from the first time I read Fred Wilson – close to 8 years ago –  he has a distinct knack to capture the moment and put it into very clear straightforward words. This time about The Cloud.

I especially like this quote to which,  of course, I can relate to deeply and agree with the ‘obvious’ conclusion 1000%:

“It’s pretty clear from reading the comments (on his blog entry – yb) that moving to the cloud is something many have done, many more are doing, and a few are resisting. It’s also clear to me that it is the future.”