Global SaaS Revenue To Reach £7.6bn In 2011

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The SaaS market is expected to grow by 20.7 percent in 2011, driven largely by CRM applications

Global Software-as-a-Service (SaaS) revenue is set to grow 20.7 percent this year, reaching the $12.1 billion (£7.6bn) mark by the end of 2011, according to a report released by analyst firm Gartner on 7 July.

SaaS will continue to experience healthy growth between now and 2015, when worldwide revenue is projected to reach $21.3 billion, predicts Gartner. This will be driven largely by a thriving market for SaaS in the field of customer relationship management (CRM).

“After more than a decade of use, adoption of SaaS continues to grow and evolve within the enterprise application markets,” said Tom Eid, research vice president at Gartner. “This is occurring as tighter capital budgets demand leaner alternatives, popularity and familiarity with the model increases, and interest in platform as a service (PaaS) and cloud computing grows.”

SaaS and cloud converge

SaaS is only one variation of cloud computing, representing the application layer of the overall cloud architectural stack. However, according to Gartner, around 75 percent of current SaaS delivery could be regarded as cloud services, and this could exceed 90 percent by 2015, as the SaaS model matures and converges with cloud service models.

“Initial concerns about security, response time and service availability have diminished for many organisations as SaaS business and computing models have matured and adoption has become more widespread,” said Eid.

CRM continues to be the largest market for SaaS, with revenue expected to reach $3.8 billion in 2011, up from $3.2 billion in 2010. Gartner expects SaaS to represent nearly 32 percent of the CRM market’s total software revenue in 2011.

This will be followed by content, communications and collaboration (CCC) and enterprise resource planning (ERP), which are expected to account for $3.3 billion and 1.7 billion respectively by the end of 2011.

Nathan Marke, chief technology office at IT services provider 2e2, says SaaS is becoming an increasingly attractive way for organisations to receive the applications and services they need.

“Being able to pay for services such as CRM on a pay-for-use or subscription basis can provide organisations with the flexibility they require, but at the same time help them reduce their capital expenditure at a time when IT budgets remain tight,” said Marke. “The challenge for many organisations is how to effectively manage these services alongside the ones they currently receive on premise.”

SaaS ready for the enterprise?

The Gartner report paints a more positive picture than that given by Greg Schulz, author of “The Green and Virtual Data Center” who spoke to eWEEK back in February. Schults said that, although SaaS is ready for the enterprise, it isn’t being adopted at the rate that some people thought it would be.

“Companies are going to go with what works. If a client-server system installed seven years ago still works and gets the job done, they will stay with it but keep a close eye on it at the same time. If the budget opens up, a refresh is needed and the tech is there, then they may make a change. But the conditions all have to be right,” he said.

Meanwhile, an Ovum report in January warned that CIOs should only implement SaaS if they are clear about the business outcomes, to avoid ending up with an application that is more expensive, slower and worse than if a more traditional approach was taken.

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