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| Wednesday, 15 August 2007 | |
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Enterprise software as a service revenues to hit US$11.5bn by end of 2011 say analysts…
Worldwide total software revenue for software as a service (SaaS) within the enterprise software markets is projected to surpass US$5.1bn in 2007, a 21% increase from 2006 revenue, according to ‘SaaS Demand Set to Outpace Enterprise Application Software Market Growth’, a new report from Gartner, Inc. The research company reckons market is poised for strong growth through 2011, when worldwide revenue will reach US$11.5bn. Gartner analysts say adoption of SaaS varies widely across software markets, contributing as little as 1% of total software revenue in some markets and more than 75% in others. For example, in enterprise content management (ECM) and search, SaaS adoption is in the range of 1% to 2% of total software spending. Within e-learning and Web conferencing, SaaS accounts for more than 60% and 70% of total market revenue. “SaaS adoption is highest in applications that support simplified, common business processes or large, distributed virtual workforce teams,” suggests Sharon Mertz, research director at Gartner. “Ease of use, rapid deployment, limited upfront investment in capital and staffing, plus a reduction in software management responsibility all make SaaS a desirable alternative to many on-premises solutions, and they will continue to act as drivers of growth.” Gartner defines SaaS as software that is owned, delivered and managed remotely by one or more providers. Gartner’s forecast is focused on enterprise application software and does not include the infrastructure software markets, such as: application development and project and portfolio management (PPM); data management and integration; and IT operations software. Gartner adds that SaaS offerings are gaining market presence in emerging areas, such as compliance, risk management, office administration, sales and service automation, procurement optimization, and small integrated business systems, in which their multi-tenant networked architecture offers advantages such as speed of deployment, ease of use and embedded service management. Although SaaS as a percentage of total software revenue is expected to grow in most markets, other major forces will also impact market development during the forecast period, acting as either proponents or deterrents to growth. “Major on-premises software vendors are re-architecting their application stacks to service-oriented architectures. Their customers will invest in migration for those processes that are complex or proprietary, but they also have an opportunity at this juncture to evaluate whether SaaS is an appropriate alternative for other aspects of their business,” adds Mertz. “Small and midsize businesses that have insufficient resources to convert their applications will also find SaaS an attractive 21st-century solution to their legacy systems.” Also running the rule (on a regular basis) over SaaS is Saugatuck Technology. This company finds that the SaaS arena is experiencing growth in two dimensions: rapid expansion of offerings, and growing adoption by users. However it cautions that a recent public filing by a major SaaS provider has highlighted that customers may not be aware of key attributes of the IT infrastructure which underlies the SaaS application. The takeaway from the Saugatuck perspective ‘What You Don’t Know Can Hurt You’ is that, just as learning that your brake pads are badly worn while driving down the side of a mountain can ruin your day, learning that a SaaS provider has weak or non-existent recovery capabilities during recovery from a disaster can ruin careers. Not all Saas c’est bon, then. John Williamson |
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