Growing Usage of SaaS Increases Importance of Governance Mechanisms
Nearly 90 percent of organizations surveyed expect to maintain or grow their usage of software as a service (SaaS), citing cost-effectiveness and ease/speed of deployment as primary reasons for adoption, according to a recent survey by Gartner Inc.
Replacement of on-premises solutions and net-new implementations were cited as major drivers of future deployments. More than one-third of respondents indicated plans to transition from on-premises to SaaS. The key drivers cited included total cost of ownership (TCO), and unmet performance expectations with on-premises solutions, in addition to changes in sourcing strategy.
The survey was conducted across eight major countries worldwide in June and July 2008 with 258 qualified respondents completing the survey. Qualified respondents were those individuals within the organizations personally involved in the implementation support, implementation, planning and/or budget decisions related to the purchase of enterprise application software. Organizations participating in the survey were either currently using SaaS, or planned to use it within the next 12 months.
“Use of SaaS has been evolving during the past decade and the SaaS model has become increasingly popular over the past three or four years,” said Sharon Mertz, research director at Gartner. “Our survey indicates that more than 40 percent of organizations have used SaaS for more than three years, implying a growing fluency with the model within the end-user base. Users are demanding higher levels of functionality, sometimes prompting organizations to renegotiate their contracts early to opt for more feature-rich solutions, or to add more users as the organizational footprint expands.”
North American respondents showed a greater confidence that their organizations will increase investments in products offered as SaaS or through a subscription model through year-end 2010, compared with those in Europe and Asia/Pacific. Sixty two percent of North American respondents said that they expected new investments to increase slightly and 15 percent said that they expected new investments to increase significantly compared with 49 percent and 15 percent, respectively, in Europe and 55 percent and 5 percent, respectively, in Asia/Pacific. North America was an early adopter of solutions delivered through the SaaS model, with more than 20 percent of respondents indicating use for five years or longer and 60 percent having adopted it in the last three years.
Gartner’s survey found that 37 percent of respondents were transitioning from a current on-premises solution to a SaaS solution. This drive is particularly significant in Asia/Pacific where 50 percent of respondents indicated that they were shifting away from on-premises and India indicated a 70 percent conversion. When asked why their organizations were transitioning from a current on-premises solution to a SaaS solution, respondents' consistent message was that the TCO was becoming too financially onerous. Given the likelihood of reduced discretionary spending in 2009 and perhaps 2010, Gartner expects that these driving forces will foster greater demand for SaaS solutions rather than budgets directed at enhancing — or furthering investment for — on-premises solutions.
Despite the increase in usage of SaaS, most respondents to Gartner’s survey indicated that no policies had been instituted to govern the evaluation and use of SaaS. Only 38 percent of total respondents that are currently using SaaS have a process or policy that guides the evaluation, procurement and deployment of SaaS. The majority of these organizations are based in Europe and North America. While another 30 percent indicated plans to develop these policies and or processes, another 26 percent have no plans at all to address this issue. Ms. Mertz said that the importance of governance mechanisms will increase as SaaS becomes a larger element of a company’s overall sourcing strategy.
Additional information is available in the Gartner report “User Survey Analysis: Software as a Service, Enterprise Application Markets, Worldwide, 2008.” The report is available on Gartner’s Web site at http://www.gartner.com/DisplayDocument?ref=g_search&id=802221&subref=simplesearch.
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