How Real Is the Software as a Service Phenomenon?

February 2, 2007 from IT Business Edge – “Info-Tech surveyed more than 1,900 IT professionals, including more than 200 recruited by ITBE. In one area of the survey, respondents were asked to quantify the impact of SaaS as a proportion of new software spending over three time periods: two years ago, today, and two years from now.

The results show that SaaS, while still accounting for a modest portion of new software purchases, is a growing force in the industry. This year, on-demand software is expected to account for 20 percent more of your software acquisition budget than it did two years ago. If our respondents’ forecasts are correct, it will grow by a further 30 percent over the next two years. In the near term, the uptake has occurred primarily in small organizations (1-100 employees); these were already about 20 percent ahead of the industry-wide use of SaaS two years ago, and have increased by roughly 25 percent since then.

However, looking forward, it is large accounts that see the greatest proportional future growth. IT professionals in enterprises with more than 1,000 employees believe that although their organizations have been slower to respond to SaaS than smaller firms, they will experience strong growth – perhaps as high as 40 percent – in the proportion of new software acquisition budgets allocated to on-demand products.

180 View – The name has changed from Application Service Provider, but SaaS has now become mainstream. We now typically include SaaS vendors in our RFP’s. They don’t always win the day, but it’s not because the SaaS model doesn’t make sense. It’s more often that the products are not as mature as their on-premise/license-based counterparts.