Worldwide software as a service (SaaS) revenue within the enterprise application software market is forecast to surpass $8.5 billion in 2010, up 14.1 percent from 2009 revenue of $7.5 billion, according to Gartner, Inc. The rapid adoption of SaaS has contributed to growth in varying degrees across the enterprise software markets. There will be a shift in total SaaS revenue from just over 10 percent of the combined markets in 2009, to more than 16 percent of these combined markets in 2014.
Gartner defines SaaS as software that is owned, delivered and managed remotely by one or more providers. The provider delivers an application based on a single set of common code and data definitions, which is consumed in a one-to-many model by all contracted customers anytime on a pay-for-use basis or as a subscription based on use metrics.
"After a decade of use, adoption of SaaS continues to grow and evolve within the enterprise application markets. As tighter capital budgets demand leaner alternatives, familiarity with the model increases, and interest in platform as a service and cloud computing grows," said Sharon Mertz, research director at Gartner. "Adoption varies between and within markets, and although use is expanding to a wider range of applications and solutions, the most widespread use is still characterized by horizontal applications with common processes, among distributed virtual workforce teams and within Web 2.0 initiatives."
During 2009 and 2010, the significant industry buzz surrounding SaaS and other off-premises models has shifted to cloud computing - a broad concept, of which SaaS is only one variation, representing the application layer of the overall cloud architectural stack. Gartner estimates that 75 percent of the current SaaS delivery revenue could be considered as a cloud service, and that could exceed 90 percent by 2014 as the SaaS model matures and converges with cloud services models.
"The popularity of SaaS has increased significantly within the past five years and initial concerns about security, response time, and service availability have diminished for many organizations as SaaS business and computing models have matured and adoption has become more widespread," Ms. Mertz said.
"Usage and vendors' on-demand 'ecosystems' continue to evolve to provide additional business and technology services, more-vertical-specific functionality, and stronger communities of partners and buyers," Ms. Mertz said. "Although some attrition occurred in 2009 due to business workforce reduction, nearly all SaaS vendors grew revenue, even during the economic downturn, as buyers continued to confirm their acceptance of on-demand. We certainly expect adoption of SaaS to far outpace market growth through 2014."
Although use and adoption continues to grow, deployment of SaaS still varies between the enterprise application markets and within specific market segments because of buyer demand and applicability of the solution.
The project and portfolio management (PPM) SaaS market is rapidly growing in percentage of sales. SaaS alternatives may help to grow the overall PPM market again rather than cannibalizing on-premises sales; however, some SaaS revenue growth will be at the expense of on-premises license, as several new entrants to the market are able to provide solutions at less than the cost of maintenance on more mature solutions.
The content, communications and collaboration (CCC) market continues to show the widest disparity of SaaS revenue generation, with SaaS representing 4 percent of enterprise content management (ECM) and approximately 82 percent of Web conferencing in 2009.
SaaS continues to penetrate the customer relationship management (CRM) market, accounting for nearly 24 percent of total CRM market revenue in 2009. SaaS in CRM exhibits more-general market adoption, ranging between 11 percent and nearly 40 percent of total software revenue, depending on the CRM subsegment. SaaS is forecast to account for 26 percent of CRM market total revenue in 2010.
"The market landscape for on-demand CRM continues to evolve and mature as the availability and use of SaaS solutions becomes more pervasive," Ms. Mertz said. "Greater market competition and increased focus by the megavendors reinforces the legitimacy of on-demand, mitigating initial objections about security and availability for many, as acceptance of SaaS as a viable model for enterprise computing services grows."
Additional details are available in the Gartner report "Forecast Analysis: Software as a Service, Worldwide, 2009-2014". The report is available on Gartner's website at http://www.gartner.com/resId=1393813.
Gartner has published a Cloud Computing Special Report that examines SaaS and the Cloud. The Special Report is available on Gartner's website at http://www.gartner.com/technology/research/cloud-computing/saas-cloud.jsp.
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