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Businesses that want easier customer support software are not the only ones choosing the cloud. So are leveraged buyout firms and activist investors. Buyout firms and private equity in general is finding that the software-as-a-service (SaaS (News - Alert)) model offers a lot of financial value.

One of the advantages of using the cloud is moving from a perpetual license to a subscription model. This enables businesses to buy software with operating expenses, and only pay for what is needed.

For private equity, this also is a good model because it delivers relatively stable income sources they then can lend against. The recurring revenue from the SaaS model also makes it an easy sell to bankers. For instance, Wells Fargo (News - Alert) Foothill has been more aggressive in lending to mature software companies because of the regular maintenance stream can be highly recurring, sticky, predictable and with high margins.

Just as SaaS in customer service and other software areas gives business transparency in terms of software use, so too does the SaaS model make revenue from these software firms relatively visible.

Gross margins can be high, too, for private equity, with SaaS delivering margins in the 80s or even 90 percent range. Businesses that use SaaS solutions pay for the ease of signing up and then immediately using the latest iteration of a software solution without the hassle of upgrades and maintenance. For the businesses that offer these SaaS solutions, they get the benefit of good margins once they have established their product as a cloud offering. It is a win-win.

Private equity sees the trend, and increasingly is buying out infrastructure firms with the intent of moving them to SaaS delivery models for a quick payout.

It also is noticing the shift in business in general, and the general rethinking that enterprise software must consist of huge licensing contracts with complex software and support options. With the consumerization of enterprise IT through SaaS, smaller firms also can find big success.

Accordingly, private equity such as Bain Capital and Vista Equity Partners are buying into smaller firms with compelling enterprise SaaS offerings.

So are businesses. It no longer takes an Oracle (News - Alert) or a SAP to deliver the goods; businesses are stitching together best-of-breed products from smaller firms, something that can be done with a SaaS model since connectivity is the name of the game. Both big and smaller providers play on the same level playing field.

It is never a bad sign for a trend when the money gets involved. The move toward SaaS continues.