Johannesburg, 13 Aug 2007
Worldwide total software revenue for software as a service (SaaS) within the enterprise software markets is projected to surpass $5.1 billion in 2007, a 21% increase from 2006 revenue, according to Gartner.
The market is poised for strong growth through to 2011, when worldwide revenue will reach $11.5 billion.
Gartner analysts say adoption of SaaS varies widely across software markets, contributing as little as 1% of total software revenue in some markets and over 75% in others. For example, in enterprise content management 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," says Sharon Mertz, research director of 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.
Mertz says SaaS offerings are gaining market presence in emerging areas, such as compliance, risk management, office administration, sales and service automation, procurement optimisation, 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, she says.
According to Mertz, 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.
"Small and medium-sized enterprises that have insufficient resources to convert their applications will also find SaaS an attractive 21st century solution to their legacy systems," she concludes.
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