This action might not be possible to undo. Are you sure you want to continue?
The Global SaaS Market
SMBs spent USD 3.2 billion on SaaS applications in 2007, compared to USD 5.3 billion on packaged software. By the end of 2008, more than 55 percent of businesses based in North America will have deployed at least one SaaS application, with Europe close behind at more than 40 percent. The SaaS market in Asia will reach USD 1.6 billion by 2010, with a CAGR of 66 percent. In Australia, the SaaS model is growing at a CAGR of 65 percent and is set to top USD 506 million by 2010. Worldwide SaaS revenue is expected to exceed USD 20 billion by 2012 (up from approximately USD 6.5 billion in 2007), which translates into 35 percent Compounded Annual Growth Rate (CAGR) over this time period. By 2012, at least 30 percent of all new business software will be deployed and delivered as SaaS.
oftware as a Service (SaaS) has emerged as a viable mode of software usage for enterprises due to its ease of deployment, low cost, and low maintenance.
The areas of SaaS application are gradually increasing. Some of the areas where SaaS is widely used include Customer Relationship Management (CRM), human resources (HR), video conferencing, and payroll. The adoption of SaaS application has witnessed three waves namely – ‘Early’, ‘Mainstream’ and ‘Ubiquitous Adoption’. Analysts believe that currently, SaaS has gone mainstream and is well poised for ubiquitous adoption in the future. The demand for SaaS is similar among large enterprises and small- and medium-sized businesses (SMBs). The SaaS market at present is led by the US followed by Europe, Asia-Pacific, and Australia. Although the SaaS adoption rate among SMBs is high, they are faced with problems such as integration of SaaS applications with other onpremise applications. There are a number of SaaS vendors which are making their presence felt both globally and regionally. Some popular global vendors are Salesforce.com, WebEx, RightNow Technologies, Oracle, Netsuite, IBM, and CISCO. This report presents an overview of analyst observations, predictions, and opinions about the growing use of SaaS in the enterprise.
Copyright 2007 Books24x7®. All rights reserved. Reproduction in whole or part is prohibited without the prior written permission of the publisher. This AnalystPerspectivesSM/TM document was published as part of a subscription based service. AnalystPerspectivesSM/TM, a Referenceware® collection from Books24x7, provides concise, easy to absorb, practical information to help organizations address pressing strategic issues. For more information about AnalystPerspectivesSM/TM, please visit www.AnalystPerspectives.com.
Frost & Sullivan) Areas of Application The following are some of the application areas of SaaS: • • • • • • • • Customer Relationship Management (CRM) Human Resources (HR) Web Conferencing Accounting/Payroll Collaboration Manufacturing Supply Chain Management Business Intelligence © Books24x7 2007 AnalystPerspectives 2 . January 18. Moreover. Reduced risk – The overall commitment and the risk faced by the customer is much lower. an analyst with Frost & Sullivan. software delivered through the SaaS model scores over the conventional on-premises software model on the following parameters: • • • • • • Cost – Software delivered as a service is inexpensive and the pricing mechanism is flexible enough to allow for the application to be scaled up and down quickly. This is a major driving force behind the adoption of SaaS by enterprises. No client installations – There is no need for software to be installed in each user’s machine. and only a browser and an Internet connection is required to access the software. SaaS is categorized as hosted applications. the maintenance cost of SaaS is also negligible. but for using it. enterprises are not required to make heavy IT investments and also avoid complexities associated with owning on-premise appliances. Satish Annamalai. In using SaaS. The customers are not required to pay for owning the software. and the organization is free to schedule the application rollout at their own pace. and the running costs are predictable and stable.Is it the Right Delivery Model for Business Intelligence?”. and there is a drastically reduced need for internal IT support.and medium-sized businesses (SMBs). Less in-house staff – The complexity is moved from the client side to the vendors. According to Satish Annamalai. (Source: “Asia Pacific Market Insights: Software as a Service . 2007. especially small. generally on a monthly basis.The Global SaaS Market – Perspectives Introduction Software as a Service (SaaS) refers to a software application delivery model where a software vendor develops a Web-based software application and hosts and operates it either independently or through a third-party for use by its customers over the Internet. allowing organizations to make a business case for quick return of investment (ROI). Quick setup – The implementation time is reduced in comparison with the on-premises model. also referred to as ‘on-demand’ applications. Stable costs – Variability is taken out of the system because of the reduced need for IT support or external system integrators.
HR. Gartner 2007 Press Release). contributing as little as 1 percent of total software revenue in some markets and more than 75 percent in others. distributed virtual workforce teams. January 2. October 15. The firm believes that the reason behind this growth is the increasing acceptance of the SaaS delivery model (Source: “SaaS Gives CRM a Big Boost”.6 billion over the following five years. 2007. rapid deployment. common business processes. IT Business Edge). August 9. Research and Markets/“SaaS CRM market in Asia to grow 68 percent. The following figure depicts the comparison in the approximate growth of the global and Asian SaaS CRM markets in 2006 and 2010: The Global and Asian SaaS CRM Market (2006 and 2010) (Sources: “SaaS CRM Market Analysis”. 2008. CRM. 2008. limited upfront investment in capital and staffing. or large. as companies become more comfortable with SaaS in other areas. AMIPartners). “Ease of use. 2007. plus a reduction in software management responsibility all make SaaS a desirable alternative to many on-premises solutions. August 9. the growth of SaaS accounting and ERP solutions is likely to accelerate (Source: “SAP’s Leap to SaaS: Beyond ByDesign”. Sau Lam. as back office software replacement cycles kick-in. 2008. and as younger decision-makers take control. in enterprise content management (ECM) and search.” mentioned Sharon Mertz. respectively (Source: “Gartner Says Worldwide Software as a Service Revenue in the Enterprise Application Software Markets to Grow 21 Percent in 2007”. Ovum.The Global SaaS Market – Perspectives • • Transportation/Logistics Messaging/Email Analysts from research firm Gartner believe that adoption of SaaS varies widely across software markets. Companies have been less willing to host financials and Enterprise Resource Planning (ERP) solutions outside their firewalls. January 3. and they will continue to act as drivers of growth. However.6 billion to USD 6. For example. Within e-learning and web conferencing. SaaS accounts for more than 60 percent and 70 percent of total market revenue. says Springboard Research”. 2007. Datamonitor. SaaS adoption is in the range of 1 to 2 percent of total software spending. Springboard Research. and collaboration applications are leading SaaS adoption. July 2007. Tekrati) According to a report dated January 3. © Books24x7 2007 AnalystPerspectives 3 . “SaaS adoption is highest in applications that support simplified. Gartner 2007 Press Release). analyst firm Datamonitor asserts that they expect the CRM market to double from USD 3. Sharon Mertz.” she added (Source: “Gartner Says Worldwide Software as a Service Revenue in the Enterprise Application Software Markets to Grow 21 Percent in 2007”. research director at Gartner.
so that issue [security] is a valid question and it’s important to ask. Saugatuck Technology). Kaplan also pointed out that.2010) characterized by the growth of integrated business solution increasingly integrated with on-premise appliances.” he continues (Source: “Three Waves of Change: SaaS Beyond the Tipping-Point”. Jeff Kaplan. adds. but it’s no longer the primary question” (Source: “SaaS adoption rate by SMBs underrated”. THINKstrategies. “SaaS is beyond the tipping point and accelerating into mainstream adoption. Mark A Koenig/Michael G West/William S McNee/Bruce T Guptill. Kaplan continued. SaaS is not a curiosity – it’s mission-critical. Marketwire). 2007.” notes Mark A Koenig. 2007. SearchCIO Mindmarket). “We’re seeing breakthrough levels of SaaS acceptance for mission-critical computing. 2007. Mark A Koenig/Michael G West/William S McNee/Bruce T Guptill. Saugatuck research breaks SaaS adoption and usage into three distinct yet overlapping waves: • • • Wave I: Early Adoption (2001-2006) characterized by cost-effective software delivery involving stand-alone appliances. May 3. Saugatuck Technology) © Books24x7 2007 AnalystPerspectives 4 . December 20. THINKstrategies.The Global SaaS Market – Perspectives Adoption Trends SaaS is now becoming an international phenomenon. Vice President at research firm Saugatuck Technology. “…adoption is far more advanced than is being readily reported”. managing director. Wave III: Ubiquitous Adoption (early 2008-2014) characterized by the growth of workflow-enabled business transformation. “There are so many people that are adopting SaaS and learning that security is better than in the past -. real-world insights and advice from their peers and industry experts so they can capitalize on the powerful features and economic benefits of today's SaaS solutions” (Source: “The World's Premier Software-as-a-Service Conference to Showcase Mature Enterprise Adoption”. THINKstrategies. Saugatuck Technology). (Source: “Three Waves of Change: SaaS Beyond the Tipping-Point”. from SMBs [small and medium sized businesses] to the largest enterprises worldwide.driven by both local demands and large multinationals that are adopting SaaS business solutions on a global scale (Source: “Key Trends in SaaS: 2008 and Beyond”. December 17. 2007. “With the software-as-a-service industry evolving rapidly. IT/business decision-makers are seeking honest. Jeff Kaplan. 2007. Jeff Kaplan. May 3. Wave II: Mainstream Adoption (latter half of 2006. March 14.
the following factors impact a company’s decision to implement SaaS solutions: • • • • • • • Expanding global business environment Growing mobile sales force and mobile work force Data security concerns Vendor longevity Increasing total cost of ownership of integrating front-end and back-end solutions Need to customize to align with business model. Michael G West. 2007. and we’re starting to see a proliferation of SaaS ecosystems that offer portfolios of synergistic and integrated SaaS applications with business services” (Source: “Three Waves of Change: SaaS Beyond the Tipping-Point”. Saugatuck Vice President Michael G West commented. 2007. May 3. Saugatuck Technology). “The second wave of SaaS as a nextgeneration business platform is already here. and customer experience Constrained IT resources (Source: “CRM Software as a Service Update 2008”. December 2007. Five Planning Positions”. On-Demand News) In mid-2007. and already delivering powerful business advantages for user enterprises. “Users are already utilizing SaaS for transaction and collaboration marketplaces. Aberdeen Group) © Books24x7 2007 AnalystPerspectives 5 . June 25. According to research firm Aberdeen Group. niche market.” He also added.The Global SaaS Market – Perspectives The following figure by Saugatuck Technology depicts the evolution of SaaS: Waves of SaaS Evolution (Source: “SaaS Beyond the Tipping Point: Three Waves. Four Key Challenges. Saugatuck Technology.
Computerweekly. 2007.3 billion on packaged software. spending on SaaS applications is expected to outpace spending on packaged software by as much as three times over the next five years (2008-2012) (Source: “SAP’s Leap to SaaS: Beyond ByDesign”.The Global SaaS Market – Perspectives SMBs – A Promising Segment for SaaS Analyst firm AMI-Partners estimates that SMBs spent USD 3. compared to USD 5. 2007. The following figure shows the growth in SaaS adoption percentages among SMBs in 2006-2007: SaaS Adoption Percentages among SMBs (2006 – 2007) (Source: “SMB SaaS Sales Robust. Sau Lam.com) © Books24x7 2007 AnalystPerspectives 6 . May 16.2 billion on SaaS applications in 2007. Saugatuck Technology. but Holdouts Remain”. AMI-Partners). October 15. While the packaged software market is bigger in terms of dollar size.
In an article published on ComputerWeekly in mid-2007. might prove beneficial for the SaaS market as a whole.” affirmed Liz Herbert.” he continued (Source: “SMBs sample SaaS via telecoms”. Now we’re seeing SaaS used more broadly” (Source: “Integration tricky for SMBs using multiple SaaS apps”. Jeff Kaplan. said. SearchCIO Mindmarket). “People just weren’t focused on the challenge of integration. Forrester Research. Almost two-fifths of these medium businesses indicated that they would increase their spending on SaaS applications in the next 12 months: Spending on SaaS Applications by US Medium Businesses (Source: “SAP’s Leap to SaaS: Beyond ByDesign”. October 15. Analysts are of the opinion that this trend. June 19.. Sau Lam. They were focused on customization. AMI-Partners) Integration of SaaS with other business applications is increasingly becoming a crucial factor in SMBs. “In the early days of SaaS. managing director of consultancy THINKstrategies Inc. a lot of applications were standalone and running in silos. Jeff Kaplan. 2007. 2007. a senior analyst at Forrester Research. She also commented. “I think we’re going to see more of this. THINKstrategies. if it develops sufficiently. Liz Herbert. Another emerging trend which may facilitate the SMB adoption of SaaS is that telecom providers are taking more interest in SaaS as a delivery mode.The Global SaaS Market – Perspectives The following figure from AMI-Partners’ 2007survey data shows that US medium businesses (firms with 100-500 employees) are bullish on their spending on SaaS applications. 2007. Gartner was quoted as mentioning that 45 percent of 307 US SMBs do not trust their data to © Books24x7 2007 AnalystPerspectives 7 . Mindmarket CIO News). SaaS adoption in SMBs is not without challenges.” Internet service providers and other telecoms are seeking ways to differentiate themselves by offering a “fuller suite of services that can enhance their position and better serve their customers. However. June 5.
In some cases. 2006. “They don’t like giving up control more so than large enterprises. and Sweden would become the largest adopters of hosted/SaaS CRM and ERP/SCM. “SMBs are control freaks. May 16. Japan. High demand outside the US comes from the insurance. William McNee. with a compound annual growth rate (CAGR) of 15 percent over the following five years. and Germany. or going beyond a preset storage limit. but holdouts remain”. but holdouts remain”. Meanwhile. and only 17 percent said that they would consider SaaS when its adoption became more widespread. they are hit with hikes in subscription fees if they decide to stay with their vendor or with hidden charges if they decide to leave (Source: “The Components of SaaS Pricing and Negotiations”.com). but believes that security concerns will fade. some level of market saturation will stabilize CAGR at 12-13 percent for Britain. Herbert believes that firms often view SaaS as offering simpler pricing than traditional on-premise software because infrastructure. Says AMI-Partners”. In terms of value. and upgrade costs are all included in a pay-as-you-go subscription fee. Tekrati). 2007. Spencer Richardson. Britain and France round out the top five with a combined investment of USD 318 million in 2006” (Source: “SMB Spending on Hosted/SaaS CRM and ERP/SCM Services to Jump 17 percent in 2007. They have fewer applications and less data. or about 9 percent of the global hosted spend. Spencer Richardson. 2007. Geographic Uptake In December 2006. configuration services. A lot of it is just awareness and overcoming some rather rudimentary business and technology objections. Tekrati).Partners. AMI. That’s their lifeline. At the end of the day. 2007. © Books24x7 2007 AnalystPerspectives 8 . Saugatuck Technology. “SMBs in the US spent more than USD 1 billion on their hosted/SaaS CRM and ERP/SCM in 2006. Additional charges often apply for support. Gartner Vice President and Research Director James Browning was quoted by ComputerWeekly as stating. an analyst with AMI-Partners. real estate. William McNee. acknowledges that security has been a concern for SMBs with SaaS. the US is likely to maintain its dominant market share of global hosted/SaaS CRM and ERP/SCM investment. France. Herbert reminds us that firms also often forget to consider what happens at the end of their contract term.com). Liz Herbert. “We anticipate that to change. accounting for 52 percent of the overall USD 2 billion global investment in hosted software. 2006. Says AMI-Partners”. December 14. “Germany was second with USD 179 million.The Global SaaS Market – Perspectives third parties such as SaaS vendors. AMI-Partners estimated that Canada. Computerweekly. Only 7 percent of SMBs strongly believed that SaaS was suitable for their organizations. founder and CEO of Saugatuck Research.” he stated (Source: “SMB SaaS sales robust. May 16. But firms must be careful not to take too simplistic an approach when evaluating costs and negotiating contracts. December 14.” He added. additional functionality. and they don’t want someone else messing up their data” (Source: “SMB SaaS sales robust. October 4. SaaS is as secure if not more secure than on-premise solutions.” says Mr. maintenance. the US. Forrester Research). Computerweekly. AMIPartners. and financial services sectors (Source: “SMB Spending on Hosted/SaaS CRM and ERP/SCM Services to Jump 17 percent in 2007. It’s just the culture.
analysts believe that interest in the SaaS delivery model will increase further as enterprises struggle to cut costs. ComputerWorld). September 10. This growth in the Australian market has been attributed to various causes. The Vendor Landscape Some analysts believe that the acceptability of SaaS has risen considerably among software vendors over the past one year. 2007. ComputerWorld). Thirty one percent of respondents to a 2007 study by Springboard Research believe that ease of use and management are the most important reasons for deploying SaaS. May 25. Springboard Research. Springboard Research projects strong SaaS growth in Asia through 2010 (Source: “Key Trends in SaaS and Beyond”. which serves as another major reason for its growth among the SMBs (Source: “SaaS adoption escalating without IT department support”. December 20. September 10. Saugatuck Technology). as business users find it easy to subscribe to and deploy SaaS” (Source: “SaaS adoption escalating without IT department support”. Saugatuck Technology asserts that approximately 15-20 percent of application ISVs [independent software vendors] have already either begun new skunk works initiatives or gained access to SaaS assets and development experience through M&A activity (Source: “Key Trends in SaaS: 2008 and Beyond”. One of the foremost reasons is the growing awareness of the SaaS model and to substantiate this. 2007. December 20. Saugatuck Technology.The Global SaaS Market – Perspectives The following figure shows the increase in SaaS adoption in Western Europe and North America in 200607: SaaS Adoption in Western Europe and North America (2006-07) (Source: “Spotlight shines on SaaS in Europe”. ZD Net) Analyst firm Springboard Research observes that while US Saas adoption is clearly going ‘mainstream’ (with deeper penetration by both SMBs and large enterprise accounts – and shifting from a fringe phenomenon to focusing increasingly on core business process and systems of record) – Europe and Asia are only now beginning to experience the steep adoption ramp that the US witnessed over 2005-07. September 10. 2007. With an economic slowdown looming large on the US horizons. SaaS applications are being used without the involvement or knowledge of the IT department. Saugatuck Technology). ComputerWorld). Springboard Research. Springboard Research shows that the awareness level jumped 31 percentage points in 2007 from what it was in 2006 (Source: “SaaS adoption escalating without IT department support”. SaaS applications involve zero maintenance. © Books24x7 2007 AnalystPerspectives 9 . B Mcnee/Michael G Wes/Bruce T Guptill/Mark A Koenig. Phil Hassey. Springboard Research. Springboard Research ANZ country manager Phil Hassey adds. Springboard Research’s findings reflect that the providers of hosted services continue to launch new offerings in the Australian market and that the SaaS model in Australia is growing at a CAGR of 65 percent and is set to top USD 506 million by 2010. 2007. 2007. Springboard Research. 2007. “In many instances. Moreover. Balaka Aggarwal.
they can choose their technologies. resulting in a product evolution that is very agile and much more in touch with “real-life” IT requirements. Julie Craig. Saugatuck Technology).g. Multi-tenancy: While ASP vendors had to add hardware or virtual servers to add customers. These innovations include: • One version. RightNow Technologies.” rather than “horizontal. WebEx. Balaka Aggarwal. especially when compared to the average 60 percent to 80 percent of budget that goes toward IT administration and support in the average enterprise. 2007. Oracle. one platform: While legacy vendors still focus the majority of their resources on supporting multiple versions and platforms. A good example of a fast growing regional European player is Stepstone. and with minimal disruption to service.com supports only one version running on one platform. Oracle. both Salesforce and Workday are engineered for “vertical.The Global SaaS Market – Perspectives Beyond the emergence of pure play SaaS market brands such as Salesforce and Cisco/WebEx. established master brands including IBM. This enables them to deliver service to consumers at a very reasonable cost. believes that today’s SaaS vendors have capitalized on the lessons learned by their predecessors and are addressing them with innovations that yield big advantages.com. little or no risk. Salesforce.. 2007. Open source: When SaaS vendors write and host their own applications. Customers always have the most recent version of the software and they never have to worry about upgrading or migrating data. © Books24x7 2007 AnalystPerspectives 10 . and instead relies heavily on open source in its product delivery. B Mcnee/Michael G Wes/Bruce T Guptill/Mark A.” scaling. are beginning to make their presence felt in the region. has stated their hosting costs are only 6 percent of their overall service delivery expenditure. Aggarwal believes that the local players such as WebCentral and Saasu are competing with the big players by establishing niche markets in Australia (Source: “SaaS adoption escalating without IT department support”. a SaaS vendor whose offerings include a hosting platform and a CRM product. Microsoft. Springboard Research found that the competitive landscape in Asia-Pacific is beginning to change. RightNow Technologies. RightNow uses no Microsoft or Oracle products. This means that multiple customers can be stacked across a single delivery platform.com) The analysts at Saugatuck Technology anticipate very strong growth in Europe for both US-based SaaS giants aggressively expanding into this region (e. a senior analyst of analyst firm Enterprise Management Associates. ComputerWorld). This is another area of savings that helps keep costs down. Even though the regional SaaS market is still dominated by the top five vendors – Salesforce. both of which are high-risk activities. 2007. • • • (Source: “The SaaS Steamroller”. with each customer protected from other tenants by the inherent product design Cost-effectiveness: Multi-tenancy enables SaaS vendors to deliver services very cost effectively. Saugatuck Technology). Salesforce and Ofsource) as well as regional and national players. Springboard Research). 2007. December 20. August 14. Chinese 800 CRM (CRM On-Demand). Koenig. Singaporean JustLogin (collaboration). September 10. with no added cost. Vendors such as Australian SaaSu (accounting applications) and Aussieplay (payroll application). and Netsuite – several other vendors. December 20. Enterprise Management Associates. ASPNews. B Mcnee/Michael G West/Bruce T Guptill/Mark A Koenig. Julie Craig. and Indian Adrenalin eSystem (payroll/employee management) are gaining popularity in their respective local markets (Source: “Software as a Service Continues its High Growth Rate Trajectory in Asia”. Springboard Research. a UK-based talent management solution (Source: “Key Trends in SaaS: 2008 and Beyond”. 2007. One hundred percent of Salesforce’s resources can be devoted to innovation. The vendor does this automatically. especially local players. and SAP are now clearly deepening their SaaS commitments – as are upstart master brands such as Amazon and Google who are getting into the game with serious commitments of their own (Source: “Key Trends in SaaS: 2008 and Beyond”. July 23.
2007. 2007. 2005 to 2008: Executive Overview”. B Mcnee/Michael G West/Bruce T Guptill/Mark A Koenig. Saugatuck Technology) © Books24x7 2007 AnalystPerspectives 11 . December 20. Balaka Baruah Aggarwal. as well as a variety of on-demand infrastructure and IT management services (Source: “Key Trends in SaaS: 2008 and Beyond”. 2007. Saugatuck Technology).The Global SaaS Market – Perspectives The following figure depicts the revenue market share earned from the SaaS market in Asia-Pacific in early 2006: Market Share of Revenue Earned by Major Players in the Asia-Pacific SaaS Market (early 2006) (Source: “The Software as a Service Market in Asia Pacific. December 20. Springboard Research) Future Predictions Saugatuck Technology anticipates continued strong growth in customer demand across all application and solution segments. B Mcnee/Michael G West/Bruce T Guptill/Mark A Koenig. The following figure depicts the approximate increase in the worldwide SaaS revenue from 2007-12: The Approximate Increase in the Global SaaS Revenue (2007-2012) (Source: “Key Trends in SaaS: 2008 and Beyond”.
December 18. The key drivers for adopting SaaS are its low-cost and ease of deployment and use. In a declining economy. SaaStream.The Global SaaS Market – Perspectives Saugatuck Technology also predicts that by 2012. B Mcnee/Michael G West/Bruce T Guptill/Mark A Koenig. and their management teams will have a steep learning curve when it comes to adjusting their business model to deal effectively with an economic downturn” (Source: “SaaS -. By the end of 2008. The few of these early SaaS adopters that are still run by the original management team are likely to do well if the economy takes a dip. MGI Research. Wall Street loves the predictability of subscription services and now that it has a solid set of market competencies to measure business success in the services market. however. 2007. and then there is a possibility that users will aim to reduce the number of subscribed seats (Source: “Are SaaS (Software-as-a-Service) companies vulnerable in a recession?”. bMighty. On the other hand. December 4. At least 75 percent of the revenue generated by SaaS marketplaces will be driven by five or fewer SaaS platform providers (Source: “SaaS predictions for 2008 and beyond”. The acceptance and uptake of SaaS applications have increased in almost all geographical regions. December 11. The demand for SaaS applications has risen in all business categories. Jeff Kaplan observes that some of the most successful initial public offerings (IPOs) of 2007 were in the SaaS market. 2007. 2007. SaaS companies may take a triple hit as they will see their initial transaction sizes trimmed. Jeff Kaplan. with Western Europe close behind at over 40 percent by the end of 2008 (Source: “Key Trends in SaaS: 2008 and Beyond”. December 20. More than 55 percent of North America-based businesses will have deployed at least one SaaS application. Some of the early SaaS companies were ‘christened by fire’ in the technology meltdown of 2000-2002. the bulk of the pure-play SaaS vendors were funded between 2004 and 2007. SaaS companies are able to grow within their installed base and capture revenues as their clients expand with the economy. 2007.Smaller Businesses Should Proceed With Caution”. the number of user enterprises taking advantage of SaaS-based software development platforms. the results will stem from management experience and economic efficiency of the business model. December 27. Tech Industry Analysis) MGI's research analysts note that “When it comes to software company performance in a recession.com). from large enterprises to SMBs. Currently. At the same time. followed by Europe. investment bankers will be pushing a wide array of mergers and acquisitions (M&A) activity. 15 percent will be accessed through SaaS marketplaces. THINKstrategies. Apart © Books24x7 2007 AnalystPerspectives 12 . up sell opportunities reduced or eliminated. Of SaaS solution revenue. Analyst firm MGI Research. private equity funds will be encouraging publicly traded software companies to go private to enable them to shift to a SaaS model without the public market pressures. so in an expanding economy with growth in hiring. has a different perspective. Moreover. 30 percent or more of all new business software will be deployed and delivered as SaaS. Saugatuck Technology). services and offerings will number in the tens of millions worldwide. Saugatuck Technology. SaaS on-demand companies’ revenue models are typically based on a number of user seats.com). Consensus Opinion SaaS is one of the most talked-about topics since the early 2000s. and Asia-Pacific. Kaplan expects the offshore IT/business process outsourcers (IT/BPO) and business services companies to buy SaaS vendors and for there to be more consolidation in the managed services market (Source: “Top Ten Reasons Why On-Demand Services Will Soar in 2008”. ThinkIT Services). it will be encouraging more privately-held companies to go through the IPO door. There are various applications such as Service Oriented Architecture SOA and other web services which curtail the cost of enterprises because the usage of the software is metered and the enterprises pay accordingly. 2007. the US is the largest SaaS market in the world. MGI Research.
banks are also likely to adopt SaaS. However. Moreover. however. Another reason why many a times SaaS is unable to meet the requirements of enterprises is because generally hype is created around SaaS due to which enterprises tend to expect a lot from SaaS applications and ultimately they get disillusioned. Another segment that is also at a nascent stage is security technologies delivered via SaaS. Also. enterprises are most likely to face an increase in their budget. distribution channels. the uptake of SaaS in the insurance market will increase in the coming years. The IT and telecom industries have recognized the potential in the SMB segment and are going out of their ways to sell to SMBs through customized products. 2007. Gartner 2007 Press Release “Gartner Says Worldwide Software as a Service Revenue in the Enterprise Application Software Markets to Grow 21 August 9. such as British Telecom and XO Communications. analysts caution that enterprises do not get lured by the much advertised low-cost SaaS applications because after the end of the subscription period. 2007. © Books24x7 2007 AnalystPerspectives 13 . This is one of the reasons that still cause some SMBs to avoid SaaS despite the many cost benefits it provides. and web conferencing. For instance. in the long run. We believe that despite the aforementioned pitfalls of SaaS. which. Tech Industry Analysis “Asia Pacific Market Insights: Software as a Service . 2007. As SaaS applications are widely available via the Internet. December 2007. Analysts observe that SMBs are sometimes skeptical of handing over their scarce data to third parties. have moved into SaaS services. “Gartner Says Worldwide Software as a Service Revenue in the Enterprise Application Software Markets to Grow 21 August 9. prices. Gartner 2007 Press Release Percent in 2007”. Satish Annamalai. leads to interoperability issues.Is it the Right Delivery Model for Business Intelligence?”. Aberdeen Group Percent in 2007”. The European insurance market as a whole will adopt SaaS as a trusted model in coming years. Besides TELUS. The fact that SaaS generally works very well for SMBs is yet another factor that will help its market grow. there are certain other newer segments where the SaaS model is gradually gaining acceptance. a handful of other telecom companies. December 4. HR. Frost & Sullivan “CRM Software as a Service Update 2008”. the model is likely to be considerably successful – especially for SMBs. Cisco’s ten million dollar investment in SaaS startup SoonR is an indication to go by. and marketing communication strategies. January 18. Sharon Mertz. TELUS Partner Solutions’ believes that the time is right for the deployment of on-demand software due to the multitude of applications that the organizations require. the foremost of which is the problem of integrating SaaS applications with other on-premise applications. However. Security is also a major concern. For example. References “Are SaaS (Software-as-a-Service) companies vulnerable in a recession?”. the uptake of SaaS applications is poised for a stable growth in the future. analysts opine that in Europe. the adopters of this segment are being given several offerings in order to make use of this upcoming technology for their IT systems defense infrastructure. there are certain issues hampering the uptake of SaaS applications. Although we agree that an impending recession/slowdown is expected to affect the SaaS market. the chances of misuse are magnified compared to traditional software. in turn. the telecom sectors’ recent interest in SaaS proves its future potential. 2007. MGI Research. The early adopters will obviously be the small rather than large insurers.The Global SaaS Market – Perspectives from the regular SaaS applications such as CRM. Analysts also point to the fact that using software from a hosted service provider does not in any way mean that the enterprises are relieved of their responsibilities completely because they have to take care that the quality of service is in place.
June 19. Research and Markets/“SaaS CRM market in Asia to grow 68 percent. but holdouts remain”. Springboard Research. Saugatuck Technology “Key Trends in SaaS: 2008 and Beyond”. Gartner. B Mcnee/Michael G Wes/Bruce T Guptill/Mark A Koenig. Saugatuck Technology. 2007. says Springboard Research”. October 4. 2007. Liz Herbert. AMI-Partners “SMB SaaS sales robust. 2007. 2006. June 25. IT Business Edge “SaaS predictions for 2008 and beyond”. 2008. but holdouts remain”. Saugatuck Technology. AMI-Partners. Says AMI-Partners”. Springboard Research. July 2007. ZD Net “The Components of SaaS Pricing and Negotiations”.The Global SaaS Market – Perspectives “Integration tricky for SMBs using multiple SaaS apps”. June 5. MGI Research. 2007. Saugatuck Technology. May 16. May 25. Computerweekly. ComputerWorld “SaaS adoption escalating without IT department support”. Mindmarket CIO News “Key Trends in SaaS and Beyond”. 2007. May 16.Smaller Businesses Should Proceed With Caution”. October 15. December 27. SaaStream. Computerweekly. September 10.com “SMB Spending on Hosted/SaaS CRM and ERP/SCM Services to Jump 17 percent in 2007. Phil Hassey. 2007.com “SaaS adoption escalating without IT department support”. December 14. 2007. September 10. SearchCIO Mindmarket “Software as a Service Continues its High Growth Rate Trajectory in Asia”. Springboard Research “Spotlight shines on SaaS in Europe”. December 20. Springboard Research. Forrester Research. January 3. 2007. 2007. Balaka Aggarwal. On-Demand News “SaaS CRM Market Analysis”. 2007. SearchCIO Mindmarket “SaaS Beyond the Tipping Point: Three Waves. 2007. May 16. 2007. 2007. Spencer Richardson. ComputerWorld “SaaS adoption escalating without IT department support”. 2007. Sau Lam. Springboard Research. Tekrati “SMB Spending on Hosted/SaaS CRM and ERP/SCM Services to Jump 17 percent in 2007. Tekrati “SMBs sample SaaS via telecoms”. 2007. Five Planning Positions”. January 2. THINKstrategies. July 23. Liz Herbert. 2006. Jeff Kaplan. THINKstrategies. bMighty. September 10. AMI-Partners.com “SMB SaaS Sales Robust. Springboard Research. March 14. Computerweekly. Ovum. William McNee. September 10. Four Key Challenges. 2007. Saugatuck Technology. 2008.com “SAP’s Leap to SaaS: Beyond ByDesign”. Tekrati “SaaS Gives CRM a Big Boost”. 2007. 2007. Says AMI-Partners”. December 14. ComputerWorld “SaaS adoption escalating without IT department support”. Datamonitor. Forrester Research © Books24x7 2007 AnalystPerspectives 14 . Springboard Research. Balaka Aggarwal. Saugatuck Technology “Key Trends in SaaS: 2008 and Beyond”. ComputerWorld “SaaS adoption rate by SMBs underrated”. Saugatuck Technology “SaaS -.com “SMB SaaS sales robust. December 20. Jeff Kaplan. Saugatuck Technology. 2007. 2007. December 11. December 20. but Holdouts Remain”.
Saugatuck Technology “Top Ten Reasons Why On-Demand Services Will Soar in 2008”. August 14. Marketwire “Three Waves of Change: SaaS Beyond the Tipping-Point”. 2007. For more information on subscribing. visit www. 2007. December 18. Jeff Kaplan. 2007. Balaka Baruah Aggarwal. May 3.The Global SaaS Market – Perspectives “The SaaS Steamroller”. ThinkIT Services AnalystPerspectivesSM/TM is a subscription-based offering from Books24x7. THINKstrategies. 2007. December 17. THINKstrategies. 2007.com © Books24x7 2007 AnalystPerspectives 15 . Jeff Kaplan. a SkillSoft Company. Springboard Research “The World's Premier Software-as-a-Service Conference to Showcase Mature Enterprise Adoption”. Julie Craig. Mark A Koenig/Michael G West/William S McNee/Bruce T Guptill.books24x7. Enterprise Management Associates.com “The Software as a Service Market in Asia Pacific. 2005 to 2008: Executive Overview”. ASPNews.