Research indicates that one quarter of all new business software will be delivered as SaaS by 2011; loyalty to the on-demand model is reaching enterprises as well as SMBs.
Posted Sep 28, 2006
Software as a service (SaaS) will be servicing more businesses in the future, according to a recent Gartner report. Applications using the on-demand delivery model represented 5 percent of business software revenue in 2005, but Gartner projects 25 percent will be SaaS by 2011.
The CRM industry has performed well in terms of SaaS, with 8 percent of CRM total software revenue in 2005 and an expected 12 percent in 2006. Integration as a service (IaaS) is emerging as a hot topic, with 10 percent adoption in its market, according to Gartner. ERP and supply chain management trail the field, each with less than 4 percent new software revenue coming from SaaS.
"As SaaS became a viable delivery model from 2000 to 2003, most providers supplied good enough functionality with core integration capabilities. SaaS and solving business complexity were two phrases not associated with each other," says Robert DeSisto, research vice president. Since those beginnings, he says, the trend has shifted toward enhanced functionality and greater ease of customization and configuration.
This has led to loyalty to the SaaS model itself, DeSisto says. "Early on, companies approached the problem saying, 'we'll start by using SaaS and make the move to on-premise software later when we can afford it.'" These implementations tended to be contained to departmental silos, except among SMBs where vendors are able to provide end-to-end functionality.
DeSisto says that as SaaS has matured it has grown beyond SMBs and is being embraced by larger enterprises. Where line-of-business leaders were the main adopters in the past, IT departments are now becoming more involved in the decision making, resulting in implementations that cross departments. "Having both parties represented leads to better initial decisions being made and to more efficient, effective ongoing management."
On-demand applications delivery has come a long way and is here to stay, but needs to keep moving forward as well. "We need to see more cross-departmental implementations on a larger scale with BPM and workflow to link applications," DeSisto says. "Salesforce.com had already made the jump to large enterprise in departmental settings such as sales organizations. Netsuite has broad functionality but not deep enough for a large enterprise to use cross-departments."
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