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Publication Date: 1 July 2010 ID Number: G00201597
Forecast Analysis: Software as a Service, Worldwide, 2009-2014
Sharon A. Mertz, Chad Eschinger, Tom Eid, Hai Hong Swinehart, Chris Pang, Laurie F. Wurster, Yanna Dharmasthira, Ben Pring
After a decade of use, adoption of software as a service (SaaS) continues to grow and evolve within the enterprise application markets, as tighter capital budgets demand leaner alternatives, popularity and familiarity with the model increases, and interest for platform as a service and cloud computing grows. Adoption varies between and within markets. 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. Key Findings
Project and portfolio management (PPM) emerged in 2009 as a fast-growing market for SaaS with a compound annual growth rate (CAGR) of more than 41% projected for the next five years. Tight budgets and frustrated users have forced mature vendors to provide SaaS alternatives to counter new entrants to the market with SaaS-only low-cost offerings. Office suites and digital content creation (DCC) also continue to show rapid growth for SaaS although starting from a smaller base, with a 31.8% CAGR and a 35.7% CAGR, respectively. Adoption is driven by new entrants in office suites but gated by Internet broadband availability for DCC. The content, communications, and collaboration (CCC) market continues to show the widest disparity of SaaS revenue generation, with SaaS representing 4% of enterprise content management (ECM) and approximately 82% of Web conferencing. Adoption of SaaS within ERP and supply chain management (SCM) varies based on process complexity. SaaS within ERP remains a relatively small proportion of the overall market (in comparison with other software segments featured in this report) at approximately 6% in 2009. SaaS continues to penetrate the CRM market, accounting for nearly 24% of total CRM market revenue in 2009. SaaS in CRM exhibits more-general market adoption, ranging between 11% and nearly 40% of total software revenue, depending on the CRM subsegment. SaaS may exceed 26% of CRM market total revenue in 2010.
© 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Gartner's research may discuss legal issues related to the information technology business, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed herein are subject to change without notice.
TABLE OF CONTENTS
Assumptions ................................................................................................................................ 4 Analysis ....................................................................................................................................... 4 Changes in Market Conditions ......................................................................................... 4 Forecast Overview ........................................................................................................... 5 Market Landscape ......................................................................................................... 11 CCC Markets .................................................................................................... 12 SaaS Drives CRM Market Growth Despite Leaner Budgets, While Competition Heightens.......................................................................................................... 13 SaaS Within ERP — Penetration Varies by Submarket but Still Most Notable in HCM ................................................................................................................. 15 Development of SaaS in the DCC Software Market Depends on Internet Capacity16 SaaS Offerings Complement and Coexist With Traditional Office Suite Products 17 PPM SaaS Alternatives Gain Favor in Difficult Times ......................................... 17 SaaS SCM Solutions Experience Double the Growth of the Traditional SCM Market ............................................................................................................... 18 Other Markets ................................................................................................... 19 Regional Context and Outlook ....................................................................................... 19 SaaS in Asia/Pacific .......................................................................................... 19 SaaS in Europe ................................................................................................. 21 Current SaaS Adoption ......................................................................... 21 SaaS Application Use ........................................................................... 22 Future SaaS Investment ....................................................................... 24 SaaS in North America ...................................................................................... 24 Current SaaS Adoption ......................................................................... 24 SaaS Application Usage ....................................................................... 24 Future SaaS Investment ....................................................................... 25 Business and Market Drivers and Inhibitors.................................................................... 25 Factors Promoting Adoption .............................................................................. 25 Factors Limiting Adoption .................................................................................. 26 Market Model ............................................................................................................................. 26 Recommended Reading ............................................................................................................. 27
LIST OF TABLES
Table 1. Evolving Role of SaaS as Segments Mature ................................................................... 7 Table 2. Total Software Revenue Forecast for SaaS Delivery Within the Enterprise Application Software Markets, 2007-2014 (Millions of Dollars) ........................................................................ 9 Table 3. SaaS by Enterprise Software Market, Representative Vendors ..................................... 11
LIST OF FIGURES
Figure 1. Total Software Revenue Forecast for SaaS Delivery Within the Enterprise Application Software Markets, 2007-2014 Millions of Dollars........................................................................... 9 Figure 2. Percentage of SaaS by Enterprise Application Software Markets, 2009-2014............... 10
Publication Date: 1 July 2010/ID Number: G00201597 © 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Page 2 of 28
............................. 22 Figure 4...... All Rights Reserved................................................... 23 Publication Date: 1 July 2010/ID Number: G00201597 © 2010 Gartner................. SaaS Adoption by Application ............. Inc........Figure 3.... Reasons for SaaS Adoption ................... Page 3 of 28 ...... and/or its Affiliates.............................
Update" published in November 2009. and factors that are germane to each of the enterprise application markets included in this forecast. 20082013. and the appearance of larger deals and expanding deployments within enterprises legitimizes the model and broadens adoption. ANALYSIS This report discusses trends. Primary assumptions include the following: Continual cost pressures on businesses drive the search for less-capital-intensive alternatives and opportunities to operationalize costs." such as SAP and Oracle. but its popularity has increased significantly within the past five years. 1Q10 Update." Changes in Market Conditions Adoption of the on-demand deployment model has grown for nearly a decade. including detailed regional and country-specific forecasts.ASSUMPTIONS Assumptions that impact the growth of SaaS include broader industry trends. Worldwide. Inc. changing user preferences and consumption patterns. Usage and Publication Date: 1 July 2010/ID Number: G00201597 © 2010 Gartner. and service availability have diminished for many organizations as SaaS business and computing models have matured and adoption has become more widespread. Page 4 of 28 . can be found in "Forecast: Enterprise Software Markets. updating "Market Trends: Software as a Service. Financial markets favor investments in vendors with subscription-based revenue models due to the potential for greater margins and incremental market opportunity. and within underserved niches. More widespread use of SaaS in companies of all sizes. Rising maintenance fees from the "megavendors. Increasing functional sophistication of some SaaS vendors and growing solution portfolios offers a more extensive range of options to address business requirements. in specific vertical industries. and forecast estimates for SaaS in the enterprise application markets. can constrain budgets and encourage buyers to entertain other options and choice of vendors. Worldwide. The extension of SaaS to the platform creates new opportunities for developers and independent software vendors (ISVs) and more solution choices for buyers. New expectations for time to market and more-rapid return on investment (ROI) demand ease and speed of deployment for enterprise solutions. Market-level forecasts for the enterprise application markets featured in this report. All Rights Reserved. Increased availability of broadband extends the viability of Web-based service solutions globally. Growth opportunities for vendors exist across various submarket segments. and within the small or midsize business (SMB) market. and/or its Affiliates. market forces. Initial concerns about security. response time. though network instability remains an issue in certain countries. 2009-2014. Gartner's forecast represents our most recent data for SaaS in the enterprise application software markets. Growing interest and slowly developing familiarity with cloud computing contributes to the acceptance of SaaS as the application layer in the broader cloud stack.
SaaS has been a "lead indicator" of the cloud concept for some time. Gartner has observed the following shifts in how SaaS is sold. and are entertaining SaaS alternatives for specific functionality. where services are tracked with usage metrics Publication Date: 1 July 2010/ID Number: G00201597 © 2010 Gartner. increase penetration within existing accounts and "greenfield" opportunities. rather than a pay-up-front subscription model. and stronger communities of partners and buyers. Growing communities of professional service providers are emerging for SaaS. Deal structures are slowly changing to more often accommodate an actual pay-for-use model. and marketing initiatives. An increasing number of enterprises are using a variety of SaaS applications from multiple vendors that were procured and deployed without participation from IT. more-vertical-specific functionality. the expanding footprint of SaaS in the enterprise. Although some attrition occurred during 2009 due to business workforce reduction. to reach a wider audience and respond to customer demand. nearly all SaaS vendors grew revenue during the economic downturn. All Rights Reserved. ranging from small-to midsize deployments to large implementation efforts in the complex deals. Firms of all sizes are growing practices focused on SaaS. and higher requirement for downstream integration as SaaS becomes incorporated in the enterprise business process. sales. SaaS deployments are becoming larger. Expect adoption of SaaS to far outpace market growth through 2014. not only to fulfill technical integration and deployment requirements. as social platforms such as Facebook and Twitter are leveraging customer service. Immediate financial advantages may be outweighed by downstream costs as users demand richer functionality and as customization or integration requirements with onpremises applications increase. Many buyers are facing application migrations to service-oriented architectures as vendors rearchitect their stacks. particularly when the solution is not available from the incumbent vendor. as buyers continued to confirm their acceptance of on-demand. representing the application layer of the overall cloud architectural stack. and/or its Affiliates. consumed and perceived by vendors and buyers: There is increasing involvement from executives in purchasing decisions. the significant industry buzz surrounding SaaS and other off-premises models shifted to cloud computing. The composition of the worldwide SaaS landscape is evolving as vendors continue to extend regionally. Page 5 of 28 . especially in emerging markets. either organically or through acquisition. During the past 12 months to 18 months.vendors' on-demand "ecosystems" continue to evolve to provide additional business and technology services. Inc. as well as greater participation from IT in the purchase process due to larger deals. creating management issues and challenges. of which SaaS is only one variation. Social media and social software is becoming increasingly integrated with SaaS solutions. Forecast Overview During 2009 and 2010. Cloud computing is a broad concept. and expand their solution offerings. but also to assist buyers with process re-engineering and change management initiatives. with deals more frequently appearing in the range of thousands to tens-of-thousands of subscriptions within large enterprises. Gartner defines cloud computing as a style of computing in which massively scalable IT-enabled capabilities are delivered as a service to external customers using Internet technologies.
Worldwide and Regions. and service availability have diminished. Hosting and application management are not synonymous with SaaS. The provider delivers an application based on a single set of common code and data definitions. Page 6 of 28 . During the market share analysis. These applications are no longer strictly one-to-many. Although use and adoption continues to grow. Where a custom application is developed on PaaS it is no longer. and adoption has become more widespread. Based on our guidance calls with hundreds of vendors. One IT-related function can be a software application. nor do they necessarily comply with the definition of cloud computing. refer to "Forecast: Public Cloud Services. 2010"). Another complication in the difficulty of distinguishing between SaaS and hosting is that leading SaaS vendors increasingly offer customization capabilities that allow customers (either end users or ISV partners) to develop entirely customized versions of the core SaaS application. which is consumed in a one-to-many model by all contracted customers anytime on a pay-for-use basis. response time. available to other customers and. Enterprise Application Markets. All Rights Reserved. Because that revenue attributable to PaaS is still extremely small. Industry Sectors. delivered and managed remotely by one or more providers. If the software application is written in such a way that it meets the characteristics of this definition. are more akin to being called a hosted application. or as a subscription based on use metrics. Worldwide. Gartner develops estimates that recognize the difference between revenue that is attributable to SaaS and that which represents PaaS for vendors that offer solution and platform capabilities to their customer base. and therefore. by definition.to enable multiple deployment models." It is important to also differentiate SaaS from hosting or application management or application outsourcing. For further discussion of the broader cloud service environment. early in the evolution of a market for wiki technology. partner offerings. But Gartner will watch and comment on it during the next few years Adoption of the on-demand deployment model has grown for the past decade. and that could exceed 90% by 2014 as the SaaS model matures and converges with cloud services models. The value proposition of SaaS varies. or replacing existing on-premises applications (see "User Survey Analysis: Software as a Service. and with enterprises that are shifting development resources to create custom applications for the organization. Suppliers run the risk of confusing and antagonizing buyers if they persist in this approach. thus. building net new SaaS solutions." Much relabeling of moretraditional application outsourcing approaches is occurring. deployment of SaaS still varies between the enterprise application markets and within specific market segments because of buyer demand and applicability of the solution. On-demand vendors have extended their services through alliances. Users are demanding more functionality and better contractual terms as they expand their use of SaaS in the enterprise by extending existing on-premises applications. depending in part on the stage of maturity of the SaaS offering (see Table 1). by definition. The development of custom PaaS applications is gaining momentum with ISVs that are developing multitenant SaaS applications. Because SaaS and cloud are hot concepts in the market. and more recently by offering and promoting user application development through platform as a service (PaaS) capabilities. Enterprises run the risk of getting nasty shocks when the thing they thought they were buying turns out to be something altogether different. then SaaS is considered a form of cloud computing. Gartner estimates that 75% of the current SaaS delivery revenue could be considered as a cloud service. SaaS enables enterprises to enable user and IT experimentation with Publication Date: 1 July 2010/ID Number: G00201597 © 2010 Gartner. initial concerns about security. and/or its Affiliates. or also pure custom applications. many suppliers are rebranding their hosting or application management or application outsourcing capabilities as SaaS or are claiming their solutions are available "in the cloud. For example. Inc. and as organizations reach increasing levels of maturity and gain familiarity with the model. 2009-2014. Gartner defines SaaS as software that is owned. this issue is more a theoretical debate than a pressing practical one. is not a SaaS application but simply an application developed by the client and hosted by the provider.
are: CCC CRM DCC ERP Office suites PPM Publication Date: 1 July 2010/ID Number: G00201597 © 2010 Gartner. and make it easier to move away from the product. and IT operations software. There are many other factors to consider (such as degree of dependence on. and integration with. PPM Not apparent Low Declining Moderate Moderate Source: Gartner (June 2010) When considering market size or growth. Page 7 of 28 . all maturity levels are not equal. The table explores the value proposition and value magnitude variations by maturity level. CRM. such as application development. Inc. SaaS business volume in emerging market segments will be far lower. The major enterprise application software markets that Gartner tracks. but. early experimentation leads to earlier exploitation for business benefit Lessen the effect of skill shortages. managing peak loading Exploit SaaS providers' economies of scale to drive down cost. it should be somewhat easier to move to a SaaS e-mail offering than a SaaS CRM offering. and that are included in this forecast. this is a representative view of market potential and can be used as a proxy for adoption. Not all market segments at any particular maturity level are equally appropriate for SaaS.that technology at minimum risk. Table 1. Lessen the effect of skill shortages. data management. A comparison of compound annual growth rates and estimated SaaS revenue between markets illustrates this point. Table 1 profiles the evolving role of SaaS as application market segments mature. for many enterprises. and with potentially far higher growth rates. security software. than SaaS business volume in a mature market segment. and/or its Affiliates. All Rights Reserved. SaaS may enable enterprises to benefit from the dramatic economies of scale that a very large service provider may be able to achieve. Evolving Role of SaaS as Segments Mature SaaS Value Proposition Emerging Easy for users (and IT) to experiment because of low barrier to entry. For example. This forecast is focused on enterprise application software and does not include the infrastructure software markets. and make it easier to move away from the product. Potential Value Magnitude High Examples Social software (such as communities and wikis) Web conferencing Vendor Risk High High Growth Modest (a lot of switching costs will remain) High Moderate Mature E-mail. Although Gartner sees other markets where SaaS is developing. Much later in the evolution of a market for e-mail technology. CRM and e-mail are mature markets. internally developed or highly tailored systems).
7% in the November. and/or its Affiliates. risk. The rapid adoption of SaaS has contributed to growth in varying degrees across the enterprise software markets." Other application software represents a group of applications (such as financial governance.SCM The forecast also includes an estimate for a category of software referred to as "others. Page 8 of 28 . The forecast is based on results from hundreds of vendors across the markets. e-learning and enterprise instant messaging have moved to the "Other Application Software" category and enterprise e-discovery has been added.3% overall CAGR from 2009 through 2014. down from 17. Publication Date: 1 July 2010/ID Number: G00201597 © 2010 Gartner. to more than 16% of these combined markets in 2014. and compliance management. PPM estimates have been added to the market forecasts and have been moved from the "Other Application Software" category. The updated forecast represents a shift in total SaaS revenue from just over 10% of the combined markets in 2009. Inc. The forecast in Figure 1. Table 2 and Figure 2 cover SaaS for enterprise application software markets. or more than $15 billion attributed to SaaS at the end of the forecast period. aligned to estimated revenue. This represents a lower CAGR. Changes to this forecast are as follows: For the CCC segment. and payment services) that include SaaS offerings. Gartner's forecast for estimated SaaS total software revenue within the enterprise application software markets is a 15. All Rights Reserved. 2009 forecast. Declines are more reflective of lower overall IT spending than waning interest in the SaaS deployment model.
862 100 92 2.872 1. Page 9 of 28 . 2007-2014 Millions of Dollars Source: Gartner (June 2010) Table 2.782 51 18 1.015 2.805 1.502 1.652 271 298 4.488 68 65 2.378 2014 5.0 10.9 Publication Date: 1 July 2010/ID Number: G00201597 © 2010 Gartner. Total Software Revenue Forecast for SaaS Delivery Within the Enterprise Application Software Markets.8 31.157 56 44 1.935 248 277 3.465 1.177 1.8 35.177 690 2009 2.279 1.612 1.346 922 2011 3.598 1.044 582 2008 2.248 807 2010 2.831 1. Inc. Total Software Revenue Forecast for SaaS Delivery Within the Enterprise Application Software Markets.056 2012 4.089 199 207 3.0 13.Figure 1. 2007-2014 (Millions of Dollars) 2007 CCC Office Suites DCC CRM ERP SCM 1.382 150 143 2. and/or its Affiliates.7 12.231 1.200 2013 4. All Rights Reserved.013 1.547 CAGR (%) 2009-2014 17.
543 2011 216 718 9. 2009-2014 Source: Gartner (June 2010) Gartner defines total software revenue as revenue from new licenses.410 2009 70 462 7. Page 10 of 28 . and software maintenance and technical support services that include new version license sales to update/upgrade an existing license to a new version.961 2012 280 855 11. and on-site remedial support.2007 PPM Other Application Software Total Enterprise Software Source: Gartner (June 2010) 2008 30 385 6. and/or its Affiliates.486 2010 138 580 8. a valid approach is to total vendors' Publication Date: 1 July 2010/ID Number: G00201597 © 2010 Gartner.3 22 304 5. such as CRM or ERP. All Rights Reserved. However.275 CAGR (%) 2009-2014 41 18. subscriptions. Inc.599 2014 394 1.084 15.019 13. Percentage of SaaS by Enterprise Application Software Markets. telephone support. SaaS is primarily a software delivery and management approach that exists in established markets.6 15.035 Figure 2.620 2013 339 1.
com. Hyland. Sonar 6.com. eGain. NetSuite. Team and Concepts. CyberShift. Lyris. Iron Mountain. SAP. Xerox E-discovery: AccessData. SAP. SaaS by Enterprise Software Market. HardMetrics. Microsoft Dynamics CRM. ExpressO. Sage. Avid. Smartsheet. Demandware. L-Soft. Unica Customer service and support — AIM Technology. therefore. Epiq Systems. InStranet. Softscape. NetSuite. Anacomp. Huddle/Ninian Solutions. Parature. Open Source Software Institute. Clickability. RightNow Technologies. Microsoft. Additional vendors may also have functionality in a software product category. Microsoft Search — Atomz. AdventNet. Citrix. Silverpop. Enkata. Elateral. For the CCC segment. SpringCM. Ultimate Software. NetReach. Genalytics. InVision. HP. Kenexa. Content Management AG. is a composite market that consists of data sourced from other markets. Marketingisland. Yahoo. FTI. Google. LexisNexis.Venda. Paint. ATG. IBM. Saba.com. Vyew CRM DCC ERP Office Suites Publication Date: 1 July 2010/ID Number: G00201597 © 2010 Gartner. Aprimo. Imano. SugarCRM. Page 11 of 28 . Oracle CRM On Demand. Grove Technologies. ThinkFree. KCura. NetViewer Sales — Access Commerce.com. EpiServer. Google. vendors are listed in alphabetical order. IBM. Coremetrics. PaperHost. Merced Systems. Xactly. of each category. Simple Groupware Solutions. EMC. Approver. Inc. Cisco. Case Central. Twinfield. e-learning and enterprise instant messaging have moved to the "Others" category and enterprise e-discovery has been added. SuccessFactors. Open Text. salesforce. SAP (Business ByDesign). NetSuite. Ajax13. Microsoft Dynamics CRM. Treeno Software. Eprise (SilkRoad Technology). Responsys. SAS Institute. The forecast is based on two base years of actual vendor revenue estimates plus a five-year forward projection. SilkRoad. Auersoft. Intaact. and/or its Affiliates. Summation E-mail — Cisco. TeamSpace Web conferencing — Adobe. CDC Software.NET. Firepond. Teleopti. Representative Vendors Representative Vendors CCC ECM — Alterian. Sheetster. SAP. Table 3. CrownPeak. Peepel Technology. but not inclusive. Serif Human capital management — CornerStpne on Demand. but are not identified in Table 3. SLI Systems Team collaboration — DesignLinks International. SAP (Business ByDesign) Adobe. Knowledge Solutions. Corel. Exact Online. All Rights Reserved. Software Garden. NetSuite. an approach that is consistent with Gartner's market-level forecasts for the enterprise application markets. Workday Manufacturing & Operations — Plex Systems. Oracle.com. Microsoft. Huron Consulting. TOA Technologies Adobe. Commvault. Assetlink. iNetOffice. Corel. Workday. TrimPath. ExactTarget. Jive Software. IBM. PaperThin. Taleo. Google. Confirmit. salesforce. BigMachines. Zoho Marketing — Alterian. IntraLinks. Microsoft. RightNow Technologies. Workscape Financial management systems — FinancialForce. VirtualEdge. Renew Data. Autonomy. Neolane. InterCall (Genesys Conferencing). This SaaS data. Callidus. AT&T.revenue from SaaS-based delivery in these established markets to create a market size and forecast for SaaS. Market Landscape The vendor listing in Table 3 is representative. Kadient. Infor (Workbrain). Involve Technology.
Augeo. Emptoris. Kinaxis Warehouse management — Accellos. SumTotal Instant messaging — FaceTime Communications. Jabber. All Rights Reserved. Innotas. SmartTurn (RedPrairie) Transportation management — BridgePoint. GT Nexus. E-mail — Much more focused on the consumer segment rather than the enterprise segment. EPM. Log-Net. Learn. but SaaS represented about 5% of the total enterprise market spending in 2009. Daptive. Ketera. while for e-learning and Web conferencing. Inc. BI International. Tenrox and VCS Online. The projected five-year CAGR for revenue attributed to SaaS in this market is nearly 18%. Element Software. Genis Inside. SaaS is barely used at all. and digital asset management. ProjectPlace. CA. Google. Atlantic Global. Project Inverision. records management. Cisco's entry in November 2009.net. SaaS use varies across the market segments. such as ECM and search. NIIT. Savvion Storage — Amazon. approximately 4% of total software spending. Descartes. such as e-mail management. Project. BetweenMarkets. Severa. early adoption for Web content management and in related markets.com. Clarizen. Hubspace Business process management — Appian. Plateau Systems. Google. Quadrem Supply and demand chain planning — E2open. Mzinga. Google's entry in February 2007 and Microsoft's SaaS-based Exchange and Business Productivity Online Suite delivery may drive accelerated adoption starting in 2011. Planview. Paisley (Thomson Reuters) E-learning — ACS Learning Services. Servigistics Others Expense management — Cerylion. and/or its Affiliates.Representative Vendors PPM @Task. Skire. Page 12 of 28 . MessageLabs (Symantec) Disaster management — Send Word Now Data cleansing — HyperQuality Business intelligence — LucidEra Data integration — Informatica. versus more than 11% CAGR for total software revenue for all delivery models. Qtask. GeoLearning. OutStart. Instantis. Saba. PowerSteering. Sourcing/procurement — Ariba. Invoice Insight Compliance management — Axentis (Wolters Kluwer). OpenAir. TradeBeam SPP — MCA Solutions. Compuware. Publication Date: 1 July 2010/ID Number: G00201597 © 2010 Gartner. Agentrics.com. For certain markets. Recent market analysis for SaaS adoption in 2009 indicates the following: ECM — Very small adoption. it is the predominant form of software access. Symantec Retail management — DigiPoS Store Solutions Healthcare management — TriZetto Physical security management — CrimeReports SPP = service parts planning Source: Gartner (June 2010) SCM CCC Markets For CCC technologies. Elemica. HyperOffice. Procuri. Global Scholar. Management Dynamics/BridgePoint.
or by providing interfaces to popular social forums such as Twitter and Facebook. and/or its Affiliates.2% for the CRM market overall.000 custom-built applications on the platform.com continues to actively promote its growing PaaS solution. repeatable application solutions to an enterprise-specific development platform on demand. and Callidus developed their own solutions. Gartner expects growth to continue. Web conferencing — SaaS accounts for approximately 82% of total market revenue in 2009. and the Collaboration Cloud (Chatter). Service Cloud 2. but with varying Publication Date: 1 July 2010/ID Number: G00201597 © 2010 Gartner. which accounted for approximately 44% of vendor revenue in 2009. with SaaS representing 26% to 27% of the CRM market total software revenue in 2010. More than half the historical SaaS revenue for CRM has come from salesforce.com in each year.E-discovery — Multiple actions and technologies are used as part of the e-discovery process. RightNow's acquisition of HiveLive in 2009. review. Team collaboration — A growing segment gaining in popularity from influences from social software and distributed virtual teams. Salesforce. with strong double-digit growth annually. SaaS in 2009 represented nearly 24% of the total CRM software market revenue. The rapidly growing PaaS community is evolving the nature of on-demand from its early days of simplified. which will act as a value-added wholesaler throughout all of Latin America except Colombia. SaaS has continued to represent a key driver of growth in the CRM market. and Unica's acquisition of MakeMeTop. compared with slightly positive growth of 1. All Rights Reserved. While Competition Heightens For the past five years. as vendors across the CRM market acquire smaller on-demand firms to complement their product portfolios. SaaS represents approximately 45% of total market revenue in 2009. or more than $2. NetSuite's acquisition of QuickArrow.com have compelled vendors without an on-demand solution to acquire smaller niche SaaS providers or develop the solution internally in response to increasing buyer demand.com officially opened its first international data center in Singapore and signed its first wholesaler agreement with software distributor Tallard Technologies. with total market spending of about 4% to 5%. SaaS Drives CRM Market Growth Despite Leaner Budgets. mitigating initial objections about security and availability for many. Microsoft. SAP. Search and information access — Limited market impact at this time. The rapid adoption of SaaS and the marketplace success of salesforce.com continues to enhance its portfolio functionality with Sales Cloud 2. SaaS vendors are responding to increasing demand to incorporate access to social software and social technologies into solutions. and claims 150. Acquisition activity continues. SaaS revenue grew at 19% within the CRM market during 2009. Regional business expansion continued in 2009 as salesforce. such as salesforce.2 billion in January 2010.2 billion. Greater market competition and increased focus by the megavendors reinforces the legitimacy of on-demand. The market landscape for on-demand CRM continues to evolve and mature as the availability and use of SaaS solutions becomes more pervasive.com's acquisition of Jigsaw in 2010. Salesforce. as acceptance of SaaS as a viable model for enterprise computing services grows. analysis and production functions. introduced during Dreamforce in November 2009. and total company revenue exceeding $1. The most popular use of SaaS delivery is for the processing. on-premises offerings are increasingly taking hold and so are hybrid offerings that combine hosted and on-premises access. force. such as CDC's acquisition of Truition.com. nearly double the 2007 estimates. Inc. Page 13 of 28 .
e-mail marketing. We expect that growth will continue through 2010. 2010. SaaS in marketing Publication Date: 1 July 2010/ID Number: G00201597 © 2010 Gartner. Most deployments are still operationally or tactically focused. and the competitive environment is intensifying. representing less than 75% of SaaS revenue within the CRM market.com continues to maintain its leadership position for SaaS CRM. representing more than 32% of the overall CRM market. Many vendors are offering free trial periods for their solutions. Worldwide. Vertical-specific SaaS solutions are also growing for major vertical and microvertical sectors. In 2014. such as those within the Microsoft partner channel. Page 14 of 28 . less IT involvement. Microsoft. Interest has been growing for ecommerce SaaS solutions in business-to-consumer environments. and development organizations. and/or its Affiliates. subscription-based cost structures. enabled by development efforts of enterprise service providers. where benefits of rapid time to deployment and ease of configuration for sales administrators make it an attractive alternative to on-premises solutions. Web analytics. RightNow Technologies officially announced their Cloud Services Agreement in March. Gartner believes that market competition within CRM for SaaS will continue to be fierce.degrees of success and market adoption. for example. The broad categories of campaign and lead management and marketing resource management represent the most significant use of SaaS within marketing automation. particularly among SMBs with basic or moderate levels of complexity in their compensation structures and functional requirements. which offers more-flexible terms and the ability to rebalance usage. For example. Worldwide survey results in 2010 indicate 95% of respondents expect to maintain or increase SaaS investments (see "User Survey Analysis: Software as a Service. and extremely competitive pricing. This was followed by another offer in April 2010.com and Oracle ondemand users that provided the option to switch to CRM Online at no cost for the first six months. benefiting pure-play SaaS providers and other traditional on-premises vendors that now offer this deployment option. SaaS solutions for incentive compensation management have been gaining popularity. Inc. and most traditional on-premises vendors offering SaaS enjoy higher growth rates for their on-demand offerings than for traditional software licenses. salesforce. SaaS within the CRM industry is expected to exceed $4 billion in total software revenue. All Rights Reserved. integration challenges with on-premises applications. Vendors that offer both on-premises and on-demand solutions are shifting their customer bases and revenue models to a greater proportion of SaaS in response to market demand and more highly scrutinized budgets. impact on the total IT portfolio. The majority of SaaS total software revenue within the sales subsegment is represented by sales force automation. small niche players. as vendors seek to differentiate and show value in solution offerings and contractual arrangements to a more-astute customer base in an increasingly commoditized environment. More specifically. and uncertainty over data ownership (client data versus aggregated data). with terms which a included a pay-as-you-go basis. The sales subsegment will remain the largest contributor to CRM SaaS during 2010. Although they are still relatively new. Many pure-plays continue to perform well. Despite a widening field of competitors. although some buyers express concerns about a potential lack of differentiation. Vendors are experiencing increasing pressure to negotiate on price and provide more-flexible contractual terms. Enterprise Application Markets. Recent survey data reinforces the intention to deploy more applications to an on-demand environment. Although the sales subsegment still represents the largest contributor to SaaS revenue. 2010"). designed to entice existing Microsoft Dynamics GP customers to adopt CRM Online at a rate of $19 per user per month. introduced an offer in late 2009 targeting salesforce. demand is increasing for marketing automation and customer service and support solutions. and community marketing solutions have been accepted as a SaaS model and support overall campaign management functionality. Adoption of SaaS in the CRM market also varies within each subsegment. Currently SaaS accounts for more than 40% of overall sales subsegment revenue. and predictable. emphasizing the usual benefits of ease of deployment and use.
By year end 2010.35 billion in total software revenue. quality management. Another major inhibitor is that many industries that typically invest in EAM. Gartner expects SaaS in customer service and support to account for more than 12% of customer service and support subsegment total software revenue during 2010. SaaS Within ERP — Penetration Varies by Submarket but Still Most Notable in HCM The proportion of revenue attributed to SaaS within the ERP market remains consistent to previous estimates at a little more than 6% of the total market with slow annual growth. Within FMSs." From a physical and information security perspective. the outlook for SaaS applications remains extremely conservative. Inc. However.com and RightNow. This is because of the complexities involved with EAM implementations. a number of increasingly strong vendors provide solutions only via SaaS. such as utilities. As SAP moves away from ramp-up mode and closer to general availability for its ByDesign product. but the cultural aversion to SaaS in some of these industries remains strong.com (from Unit4) Publication Date: 1 July 2010/ID Number: G00201597 © 2010 Gartner. this will bring further attention (and to some extent validation) to the existing SaaS-based ERP suites solutions in the marketplace ERP consists of four major subsegments related to SaaS: Within EAM. we are projecting this to increase a further 8% to $1. with HCM being the most penetrated (in terms of adoption and revenue growth) and EAM and manufacturing being relatively unaffected by SaaS. and/or its Affiliates. Page 15 of 28 . and oil and gas. The popularity of SaaS within customer service and support is increasing with the success of vendors such as salesforce. Greater demand for SaaS in areas such as knowledge management. On-demand solutions in the call center can offer a cost-effective alternative to costly on-premises maintenance renewals. and allow buyers to take advantage of newer technologies and functionality. in which a high amount of industry and specific process knowledge is required (such as in the manufacturing and transportation sector). and many systems in use today are related to core accounting solutions for the small business sector. although it still represents a relatively small percentage of subsegment revenue. this is rapidly changing with the development muscle and pedigree of some well known vendors in the FMS space. Observations from client inquires and industry trends suggest that SaaS as a delivery method for ERP is more readily considered than in previous years. have strict data and network security policies that preclude the holding of business data outside of the business or systems that are "shared with others. SaaS applications are often more secure than "hosted at home" systems in corporate data centers. but it will remain the smallest subsegment within CRM throughout the forecast period. For 2009 total SaaS revenue for the ERP market was estimated at $1. workforce management. All Rights Reserved. but we have not seen a mass switch in preference from on premise to SaaS based ERP solutions." but within individual ERP domains. The penetration of SaaS within ERP varies greatly between subsegment. such as FinancialForce. SaaS total software revenue represents just over 11% of the marketing automation subsegment. However. Only a small handful of vendors have delivered anything close to "full suite ERP functionality. and e-mail response management is expected as use evolves and buyers evaluate alternatives as replacements for legacy applications. such as B2B customer service centers. these vendors are still small compared with the "megavendors" and so they struggle for brand recognition outside their home regions. Call centers with lower call volume and limited workflow requirements. SaaS applications are still a minor part of the overall market. are generally better candidates for SaaS.automation is expected to exhibit the highest CAGR.25 billion.
the progress that vendors such as Plex have achieved suggests that we will continue more innovation and entrants in the manufacturing and operations domain. as well as by market leaders. such as Plex Systems. extending its reach beyond HR functionality to financial management as well. SaaS solutions are expected to experience strong growth because of an increase in low-cost or no-charge options for graphics tools provided through SaaS initiatives.7%. In addition. Page 16 of 28 . Within digital imaging (desktop painting. Development of SaaS in the DCC Software Market Depends on Internet Capacity We expect SaaS to represent 9% of total DCC software revenue and reach total revenue of $298 million by 2014.and Workday. Consumer adoption of these tools. to access and share real-time images and video — making inside-the-firewall models less attractive. As these tools evolve further. hybrid systems — browser-based tools and online storage and publishing platforms — will enable new business opportunities beyond software sales. Inc. The projected CAGR for revenue attributed to SaaS in this market is 35. This dovetails with the general need for partner enterprises. sales partners and other constituents. This is mainly because of the current limitation of broadband. and/or its Affiliates. Overall. have managed to achieve notable momentum through their focus on a select number of industries. various advertising forms and promotional services for content creators. such as premium subscriptions. recognizing that collections of images and video that vary in size and serve collaborative purposes will prove cumbersome to manage internally. SaaS-delivered applications have been available as a high-growth area for a number of years. especially among "digital natives. as well as growth of a mass Publication Date: 1 July 2010/ID Number: G00201597 © 2010 Gartner. Within manufacturing and operations software. recruitment and performance management). and expense management). the outlook for SaaS is more positive than in other segments because of the new and exciting products within consumer markets. some vendors. Within strategic HCM applications (such as recruitment. Microvertical specialization can be achieved. SAP's ByDesign ERP suite will also feature FMS functionality at its core. performance and talent management. the economics of doing this in-house (versus via an external partner) can be prohibitive. Storage costs can still be significant. Although not a major threat to the more established on premise vendors. However. versus an estimated 9% CAGR for total software revenue in the overall DCC market. there will not be a big wave of full-feature DCC products using the SaaS model through 2014. photo editing. and illustration). but for many SaaS providers. much application-based functionality is migrating toward browser-based capabilities." is significant. which can be consumed out of the box across many industries and do not require major configuration or customization efforts. such as advertising agencies and their customers. All Rights Reserved. which makes it difficult to transfer rich digital content. drawing. HCM SaaS applications will continue to see elevated growth through the next few years. In the digital video segment. companies are evaluating any kind of storage in the cloud. Although interest in premium subscriptions continues to grow and evolve within the enterprise application markets. One reason for this is the horizontal applicability of strategic HCM applications (for example. The double-digit growth of SaaS HCM providers has been a distinguishing feature of the HCM software segment in recent times. SaaS is a minority component to the market. which generic industry templates cannot fully satisfy. Manufacturing organizations often require a high degree of additional customization for their applications because they often operate in a microvertical.
however. open source and Web-based). All Rights Reserved. In addition to smaller IT departments (fewer than 100 employees) requiring PPM systems. Adobe Buzzworld and ThinkFree Office because they prove to be most-viable from the usage point of view. because those companies are unlikely to have restrictions on adopting Webbased office. Publication Date: 1 July 2010/ID Number: G00201597 © 2010 Gartner. Page 17 of 28 . as several new entrants to the market are able to provide solutions at less than the cost of maintenance on more mature solutions.4% share of the office suites market based on total software revenue. larger enterprise IT departments are also considering the SaaS option. Once Microsoft's offerings are available. potential of rapid deployment and functionality that meet immediate needs (without requiring extensive process and behavioral changes) continue to drive the interest and adoption of SaaS-based PPM systems. technical support and maintenance. Based on these changes. by 2014. Most small businesses are expected to behave similarly to consumers in Webbased adoption. Also. In most cases. fat-client suites and Webbased versions. Each of these websites provides a suite of best-of-breed online video editing tools. and they tend to have multiple products in use. because there is a significant functionality and performance gap between full-function. some business users will still find them appropriate for real-time collaboration or as secondary online tools for editing docs or taking notes. SaaS Offerings Complement and Coexist With Traditional Office Suite Products In the best-case forecast scenario. In a previous office SaaS forecast. we define total Web-based office software revenue as those generated from subscriptions. businesses worry less about the homogeneity of office suites within their organizations. However. Office 2010 will offer collaboration tools and a free Web version office. Small budgets. no major cannibalization of office productivity markets by Web-based office suites will occur through 2014. Inc. Web-based office suites could significantly boost business revenue if their performance increases substantially and they prove attractive to general-business users. In this update. it will push Web-based office adoption to a higher level. with the limitations in today's Web-based office offerings. business users are looking at Google docs. some SaaS revenue growth will be at the expense of on-premises license.market for individual users and media professionals. Google and similar Web-based freeware and SaaS offerings are anticipated to have combined revenue of $406 million and 2. enabling users to have greater control over media access and manipulation. Consumer demand is accelerating as the popularity of social networking sites grows unabated. SaaS alternatives may help to grow the overall PPM market again rather than cannibalizing on-premises sales. there may not be continuity with published historic reports for this market. Web-based office suites are not a replacement for standard office suites and should be viewed differently. However. PPM SaaS Alternatives Gain Favor in Difficult Times The PPM SaaS market is rapidly growing in percentage of sales and is projected to do so at a significant pace of more than 41% during the forecast period. and/or its Affiliates. Consumers and small businesses will continue be the major forces for Web-based office suites through 2010. Zoho. hosting. However. we measured the Web-based office software's impact on total office suites market (include proprietary.
North America. Expect demand for SaaS solutions offered by other traditional suite vendors to increase significantly throughout the forecast period. in an effort to capture lost opportunities. We estimate that. SaaS PPM vendors are quickly advancing solution capabilities and pushing improvements out to their customers faster than their onpremises counterparts. but which makes it difficult for vendors to differentiate themselves in a meaningful way. the market segment has low penetration (3%) but growth of (15. less-complex shippers (with less than $25 million in annual freight). from 2009 revenue estimates of $807 million. the more-complex and more-customized applications within planning. several vendors offering on-premises and hosted deployment options are now transforming their businesses to be "deployment agnostic" or "SaaS first. which will fuel growth in this segment.SaaS-based solutions allow prospects to minimize the risk of a PPM implementation with a 12month financial commitment with a SaaS offering. the PPM SaaS model continues to mature. SaaS trends in SCM market segments are as follows: Supply chain planning (SCP) — The technology is pervasive as an on-premises solution. and this will continue to hinder adoption of SCP as a service. remaining more resilient than the overall SCM market through 2013. potential customers new to PPM disciplines or low in PPM maturity can use SaaS as a way to test organizational commitment. and growing competition increase the opportunity for supply chain solutions and are positive influences on the SaaS forecast. Growth takes into account businesses postponing enterprisewide upgrades of core applications while continuing to seek more-rapid results from application purchases that are often deployed around an enterprise application core. and evaluate the organization's adaptability to PPM in terms of people. Page 18 of 28 . However.9% five-year CAGR for growth. As demand increases. consulting services and three-year maintenance contracts usually associated with on-premises solution. or the deep execution within the four walls of a warehouse management system. assess the potential impact of adopting PPM en masse. In a recent report ("User Survey Analysis: Understanding Supply Chain Management Software Buyers. and/or its Affiliates. Greater traction from existing vendors.6%) though 2014. are unlikely to migrate wholly toward a SaaS delivery model. while growth did come from emerging vendors. In response to the emergence of SaaS PPM as a competitive threat. All Rights Reserved. Inc. as opposed to the exponentially higher costs driven by licensing fees. This finding. process and technology. With an estimate of 12% of 2009 total software Publication Date: 1 July 2010/ID Number: G00201597 © 2010 Gartner. coupled with the performance of many specialized vendors offering their solutions via SaaS." SaaS SCM Solutions Experience Double the Growth of the Traditional SCM Market Our estimated revenue growth for SaaS within SCM markets is in line with that published in September 2009. which are beneficial to customers without significant or complex planning requirements. Through agile development methods and transparent seasonal feature releases. Supply chain execution (SCE) — Most traction is driven by transportation management systems (TMSs). Value is gained from digital connectivity with carriers. The mature installed base has endured considerable customization because of complexity in the business process and integration with other important business processes. supply chain practitioners indicated that twice as many supply chain solutions would be sourced through a SaaS model than had been the sentiment in the three years prior. SaaS has the potential to open the TMS market to smaller. provides confidences in a 13. 2010"). In addition. more new vendors incorporating SaaS. Higher-growth markets are within organizations with less than $2.5 billion in annual revenue and within e-sourcing (strategic sourcing) and global trade and transportation management. which is a primary reason for the adoption of TMS SaaS.
Indonesia. then we could see not only more bumps in associated revenue. applications such as contract management are often desired to be behind the firewall. Our 2009 total software estimate for SPP is $147 million. if not all. with 6% of 2009 total software revenue generated through SaaS delivery. of these are still small market spaces. If this trend continues. marketing and support services structures. It's a newer and smaller market within SCM. In 2009. Vietnam and the Philippines. the increasing prevalence of SaaS demonstrates that SaaS is far from being simply a phenomenon of CRM and associated application markets. Current SaaS adoption: SaaS adoption is more prominent in the more mature countries/markets in Asia/Pacific such as Australia. The dynamics influencing the SPP market have shifted little. but also by vertical industries. Page 19 of 28 . Singapore. In Publication Date: 1 July 2010/ID Number: G00201597 © 2010 Gartner. we estimate that SaaS accounted for 26% of the segment's total software revenue and will generate 33% of the market's revenue by 2014. Other Markets SaaS is also fast-penetrating a host of other markets and subsegments (as shown previously in Table 4). Although most. Singapore. and it is one of the survivors from that era. Despite most vendors moving toward SaaS delivery. Inc. which began to emerge in 2008. We continue to maintain that about 10% of the addressable market has sourced SPP applications. not only by countries. increasing our forecast estimates to 18% of the market in 2014. although in reality this is still more a theory than a driver of significant revenue to leading SaaS vendors that have been touting this idea. and South Korea because of established infrastructure (such as more-stable network). New Zealand. New Zealand. we feel optimistic about continued opportunities for SaaS in the execution market. Hong Kong. and/or its Affiliates. Procurement — Strategic sourcing (e-sourcing) emerged during the late 1990s. Malaysia. but also a required shift for vendors to adjust their business to accommodate this user need. Asia/Pacific (excluding Japan) is a combination of mature markets (such as Australia. Thailand.revenue in SCE generated as a service. South Korea. as well as the availability of vendor sales. SPP — Specialized versions of SCP applications focus on the unique characteristics of service parts management. but perhaps have been heightened lately because manufacturers are selling fewer new products and they need to enhance their service capabilities as consumers and businesses increase the life cycle of existing goods. reaching 7% of the market by 2014. Taiwan) and emerging markets. Its survival results from the value that e-sourcing delivers to enterprises and because many vendors have worked to offer products through the SaaS model. The following are SaaS dynamics in the region. Hong Kong. All Rights Reserved. India. with several specialized providers often partnering with larger ERP suite providers. at the beginning of the B2B e-business bubble. has continued to gain traction through 2009 and 2010. Regional Context and Outlook SaaS in Asia/Pacific Overall SaaS adoption in Asia/Pacific has been fragmented. SPP may well emerge as one of several new post-SCP and innovation partner solutions targeted at specific industry requirements. including China. The idea of PaaS.
specifically in emerging countries.1% CRM market share in Asia/Pacific in 2009. Although adoption is relatively low. and to a lesser extent will use SaaS as extension of their on-premises solutions. There is an increasing trend that SaaS contract renegotiation may occur. Nevertheless. Gartner research indicates that more SaaS contracts in the emerging markets are on a pay-as-you-go basis. As the market is back in the growth mode in 2010. India and Malaysia have higher intentions to increase their SaaS investment significantly in the next 12 months. Mature countries in the region have more apparent adoptions for wider range of applications in addition to financials and e-mail. Our user surveys indicate that core/basic applications such as financials (accounting).com in key mature countries — such as Australia and Singapore. amidst significant economy improvement. SaaS adoption in emerging countries is significantly more fragmented. All Rights Reserved.com occupied 12. specifically with revenue growth contribution from salesfore. which offers a more-attractive option for SMBs that may not have an IT budget. salesforce. specifically in emerging countries. as they are being used to satisfy the needs of local financial reporting requirement. there are pockets of mature SaaS users that have been using SaaS for long periods of time. 2010-2011"). Page 20 of 28 . Publication Date: 1 July 2010/ID Number: G00201597 © 2010 Gartner.many cases. With its continuous yearly double-digit growth.com still has sporadic presence in this diverse region. where users are fine tuning their scope of SaaS deployments. as end users are demanding for greater functionality. Other reasons for contract renegotiation are to look for better financial terms due to the rising competition. Gartner research indicates these are the top reasons for SaaS adoption in both emerging and mature countries in Asia/Pacific. Our user survey indicates that China. The popularity of financials (accounting) in emerging countries are not surprising. the use of English as a common language in these countries (exception South Korea) make them as attractive destinations for foreign providers investing in the region. and with high adoption among enduser organizations. and growing their user base. the mature countries are also not conservative with notable intention to increase their SaaS investment "slightly" during the next year. Inc. comparable to those in mature countries/regions (see "Emerging Market Analysis: Plans for SaaS Application Software Use in China and Malaysia. This is not surprising. SaaS Use SaaS in CRM has been significant. and/or its Affiliates. Yet. however. The emerging countries are specifically interested for SaaS investment on net new solutions. salesforce. e-mail have been the most-popular SaaS applications used among respondents in Asia/Pacific. end users attitude is not expected to change and the key reasons mentioned will remain critical in the increasing competitive environment. compared with the mature countries. Future SaaS investment End-user investment mood has been much improved to accommodate the growth mode attitude after the economic slowdown in 2009. Reasons to adopt SaaS in the region has been cost-effectiveness from total cost of ownership (TCO) perspective. limited capital expense and fast/easy deployment compared to on-premises solutions. or the third-largest CRM vendor after SAP and Oracle.
and/or its Affiliates. The highestranking reason for choosing and using SaaS were TCO. please contact Gartner. Inc. For the purpose of this report. from client interactions we believe these reasons also figure very highly across the rest of Europe when shortlisting SaaS solutions. And although SaaS is easier to deploy. the focus of the following text is on Northern and Continental Europe because of their current and near-term potential for SaaS adoption. culture and specific localization issues. Although we lack survey data to support this. which is composed of the U. the reality of SaaS ownership may not be quite so clear — especially when it comes to TCO. as shown in Figure 3. Continental and Southern Europe seeing slower adoption compared with Northern Europe due to business acceptance. followed by ease of deployment and limited capital expense. they do provide insight into why SaaS is being considered or currently in production in the three largest European country markets (collectively the three countries represent 54% of the European software spending — see "Market Share: All Software Markets Worldwide. Hungary and Poland are showing greater potential in the near term. Eastern Europe is relatively low in adoption. sales and support services/resource in local language.. Germany and the U. such as language translation within the product. Ireland.K. specific data security rules in certain countries (such as Germany) and a generally slower adoption of new technology. All Rights Reserved. 2009").SaaS in Europe SaaS adoption in Europe runs along three major trends: Northern Europe showing adoption and acceptance levels similar to North America. Gartner recently conducted a user wants and needs study for SaaS software in France. Netherlands and the Nordics.K. For areas not discussed. to gauge adoption trends and while the results are a not a proxy for Europe overall. SaaS adoption in Continental Europe is generally lower than in Northern Europe due to reasons of high localization requirements. there will be tradeoffs regarding areas such as integration to other systems and customization. This makes it much easier for North American vendors to branch out into the region and for local vendors in one country to adapt and sell their applications in other Northern European countries with less localization effort. but the Czech Republic. well-established and generally good Internet infrastructure within these countries and English being the primary business language. However. Page 21 of 28 . Current SaaS Adoption SaaS penetration and adoption is showing most in Northern Europe. This is due to a culturally open outlook toward technology adoption.These subjects were commented on by our respondents when asked what their issues were after having used SaaS in their businesses. Publication Date: 1 July 2010/ID Number: G00201597 © 2010 Gartner.
However. Germany and the U. Inc. Publication Date: 1 July 2010/ID Number: G00201597 © 2010 Gartner. categories such as employee performance management. Reasons for SaaS Adoption Source: Gartner (June 2010) SaaS Application Use Similar to the trend seen in other parts of the world. use in other parts of Continental and Southern Europe is likely to be more muted than the results below suggest.Figure 3. such as supply chain execution systems and manufacturing/operations software. SaaS usually sees lower adoption in areas where complex customization/configuration is needed. the findings again closely mirror the pattern above. SaaS adoption and use varies greatly from application to application. In Gartner's recent user wants and needs survey for SaaS software in France.K. Page 22 of 28 . with SaaS CRM being the most-popular business application. All Rights Reserved. although small business accounting solutions also featured fairly highly in the statistics. and/or its Affiliates.. as shown in Figure 4. simply because the major vendors behind these applications have yet to fully localize and focus on other European markets. but others such as e-mail and employee self-service for HR management also see high acceptance.
Page 23 of 28 .Figure 4. Inc. SaaS Adoption by Application Source: Gartner (June 2010) Publication Date: 1 July 2010/ID Number: G00201597 © 2010 Gartner. and/or its Affiliates. All Rights Reserved.
Publication Date: 1 July 2010/ID Number: G00201597 © 2010 Gartner. travel and expense management. and is the most mature of the regional markets. with half of all U. North America represents a reasonably homogeneous user population.S. Widespread availability of high-speed and generally stable Internet connectivity also reduces some of the infrastructure issues we observed in other regions from our 2010 survey results. such as talent management. However. Gartner expects established SaaS solutions. Survey respondents ranked ease and speed of deployment highest among reasons for deploying SaaS in North America. Usage is nearly three times higher in Canada than in the U.. the full impact of this is unlikely to occur overnight. as well as access to less risk-averse venture capital firms and resources.. and fluency with Internet use became more widespread. CRM shows the highest use of SaaS among the enterprise applications. during the late 1990s. and/or its Affiliates. e-learning. and culture inherent in the other regions.Future SaaS Investment In terms of the applications that European buyers will consider and shortlist in the near and medium term. companies indicating that replacement was the primary intention. All Rights Reserved. according to survey results. will continue to be in high demand. Use of Web conferencing. SaaS Application Usage Consistent with the other regions. as SAP begins to ramp up selling efforts around its SaaS ERP application this may help drive further acceptance and awareness of SaaS solutions generally within Europe. was considered more important in North America than the other regions based on percentage of respondents. will see greater penetration in the region. procurement and/or deployment of SaaS than in the other regions. and with it. Furthermore. Current SaaS Adoption With only two countries. and have been able to benefit from a more technologically mature commercial user population. But as broadband availability became more pervasive.S. in part. and travel booking was higher in North America than in other regions. in which Canada had a higher percentage of companies under 1. as North American vendors further develop their applications for the European market. given the relative maturity of SaaS among the three regions. language. rapidly growing adoption in North America. the accessibility and viability of SaaS evolved.S.S. Inc. A higher percentage of companies in North America responded that they were using SaaS to replace an existing on-premises solution than in the other regions. The majority of large SaaS vendors are also headquartered in the U. the third-highest category indicated. employee self-service and e-mail. eliminating much of the diversity in regulations.000 employees. This is not surprising. such as CRM. Although adoption of financials (accounting) is lower in North America. followed by lower TCO. Internet technologies became more robust. Page 24 of 28 . SaaS in North America North America. to the survey demographic. many of which subsequently fell victim to the dot-com bust. and specifically the U. In contrast. We believe this is attributable. Vendors initially tested the market appetite for servicesbased application solutions with an application service provider (ASP) model in the U. and SaaS CRM/e-mail are likely remain tops in overall popularity and usage for many years. other areas. However. More companies in North America have established policies governing the evaluation. Limited capital expense.S. represents the largest opportunity for SaaS.
Seventy-five percent expected increases in use. Rising maintenance fees and the imperative to update to Web 2. Buyers facing costly upgrades or platform decisions are more likely to consider on-demand solutions as an alternative. quicker alternatives. including the following: Business The benefits of rapid deployment and rapid ROI. a higher level of executive decision-making is expected for SaaS in North America than at the worldwide level. and/or its Affiliates. Inc. Business and Market Drivers and Inhibitors Factors Promoting Adoption Many factors are driving adoption of SaaS. Market Greater market competition and increased focus by the megavendors reinforces the legitimacy of on-demand solutions.half of the Canadian respondents were using SaaS as extensions to existing onpremises solutions. responsibility for continuous operation. updates and infrastructure maintenance shifts risk and resource requirements from internal IT to vendors or service providers. Page 25 of 28 . larger deals. Future SaaS Investment No organizations surveyed in North America expect use of SaaS to decrease significantly this year. contributes to adoption. A shortage of skilled professional resources.0 technologies contribute to legacy replacement decisions. within internal IT departments and system integrator organizations. Painful reminders of lengthy. as SaaS becomes more pervasive throughout the enterprise. and less than 2% expected a slight decrease. In addition. A heightened awareness of and growing intolerance for misspent investments on shelfware motivate buyers to purchase on-demand solutions. backups. unsuccessful deployment cycles spur buyers to investigate simpler. mitigating initial objections about security and availability for many and driving market growth. and a decreased reliance on limited implementation resources encourage SaaS deployments. We attribute this to greater executive participation based on higher levels of budget approval. Publication Date: 1 July 2010/ID Number: G00201597 © 2010 Gartner. less upfront capital investment. With SaaS. and only about one-third were planning to replace them. Sixty percent of North American organizations expect purchasing decisions to be made jointly by the business and IT. and the recognition that widespread use of SaaS has become a more strategic. An increase in the number of executives as buyers or influencers also drives growth. rather than tactical. decision. which is higher than the worldwide projection of 52% and representative of a more-mature market. All Rights Reserved.
improvements in security. Increasing concerns about scalability and downstream integration requirements as the number of users per company grows may limit additional installed-base purchases. repeatable business services. such as SaaS user adoption patterns. and the relationship of SaaS to other developing trends in the IT industry such as cloud computing. standardized solutions. Complex process requirements constrain adoption of simplified. Existing investments in applications. The latest available market data is carefully reviewed and compared with the most recently completed forecast. and organizational expertise limit SaaS growth. Increasing familiarity with the Internet. MARKET MODEL The SaaS forecast for each of the enterprise application markets included in this document are developed according to Gartner's multistep forecasting methodology (see "Dataquest Guide: Software Market Research Methodology"). An inability for vendors to shift to a service-based model for architectural or cultural reasons restricts SaaS availability. All Rights Reserved. Page 26 of 28 . including the following: Business Concerns about data security and critical customer information continue to encourage on-premises applications for many. Limited broadband availability in specific countries restricts growth. with consideration given to factors that could cause the forecast to stray in one direction or the other and to potential market discontinuities. Market Regulations governing data privacy and protection vary by country and may restrict adoption of some vendors' solutions in certain areas.Strong market growth within the SMB sector and increasing adoption of SaaS solutions by large enterprises exists within line-of-business applications and in regional locations. macroeconomic and regional conditions. growth and competitive impact of key market players. and/or its Affiliates. capital. Buyers perceive a lack of competitive differentiation through use of common. Factors Limiting Adoption Certain factors can work to impede the adoption of SaaS. and broader acceptance of a service alternative reduce earlier barriers to adoption. Inc. The methodology then directs the formulation of assumptions about the future. Publication Date: 1 July 2010/ID Number: G00201597 © 2010 Gartner. These include a range of influences. Questions about vendor longevity and viability arise as buyers begin considering larger deployments. Vendors adding local-language capabilities to their solution portfolios fuel SaaS growth globally.
the methodology dictates an iterative approach to a final forecast in which successive preliminary forecasts are reviewed. North America. 2009" "Essential SaaS Overview and 2010 Guide to SaaS Research" "Forecast: Public Cloud Services. and collaboration digital content creation enterprise asset management enterprise content management human capital management platform as a service project and portfolio management return on investment software as a service supply chain execution supply chain management supply chain planning small or midsize business Publication Date: 1 July 2010/ID Number: G00201597 © 2010 Gartner. 2010-2011" "User Survey Analysis: Software as a Service. Industry Sectors. 2009-2014. All Rights Reserved. RECOMMENDED READING "Emerging Market Analysis: Plans for SaaS Application Software Use in China and Malaysia. 2010" "Market Share: All Software Markets. For further discussion please contact Gartner. Enterprise Application Markets. Worldwide and Regions. and/or its Affiliates. 1Q10 Update" Acronym Key and Glossary Terms CAGR CCC DCC EAM ECM HCM PaaS PPM ROI SaaS SCE SCM SCP SMB compound annual growth rate content. 1Q10 Update" "Q&A: Top 10 Things You Need to Know About SaaS in Asia/Pacific" "User Survey Analysis: Understanding Supply Chain Management Software Buyers. Worldwide. 2009-2014" "Dataquest Guide: Software Market Research Methodology" "Dataquest Guide: Software Market Research Definitions" "Forecast Analysis: Enterprise Application Software. critiqued and revised by all those involved in the forecast process in Gartner's analyst community. 2009-2014.Finally. 2009" "Forecast: Enterprise Software Markets. Worldwide. Inc. Worldwide. Page 27 of 28 . Worldwide. communications.
6F 7-7. +1 203 964 0096 European Headquarters Tamesis The Glanty Egham Surrey. Inc. Ltd. Aobadai Hills.A. All Rights Reserved. Tokyo 153-0042 JAPAN +81 3 3481 3670 Latin America Headquarters Gartner do Brazil Av. Aobadai. and/or its Affiliates. 4-chome Meguro-ku. 141 Walker Street North Sydney New South Wales 2060 AUSTRALIA +61 2 9459 4600 Japan Headquarters Gartner Japan Ltd. Page 28 of 28 . das Nações Unidas. TW20 9AW UNITED KINGDOM +44 1784 431611 Asia/Pacific Headquarters Gartner Australasia Pty. CT 06902-7700 U.SPP TMS service parts planning transportation management system This document is published in the following Market Insights: Software Applications Worldwide REGIONAL HEADQUARTERS Corporate Headquarters 56 Top Gallant Road Stamford. Level 9.S. 12551 9° andar—World Trade Center 04578-903—São Paulo SP BRAZIL +55 11 3443 1509 Publication Date: 1 July 2010/ID Number: G00201597 © 2010 Gartner.
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