Gartner forecasts double-digit strong growth in revenue for the enterprise SAAS applications market in 2010 and 2011.
Software-as-a-service worldwide revenues for enterprise
applications will reach $10.7 billion in 2011, said Gartner on Dec. 14.
The market generated worldwide revenues of $7.9 billion
in 2009, and is forecast to reach $9.2 billion for 2010, according to the
analyst firm. While growth was strong for 2010, with a 15.7 percent jump over
2009 revenues, "the market is projected for stronger growth in 2011," with a
16.2 percent increase over 2010, Gartner said.
The "significant industry buzz" surrounding SAAS and
other off-premises models has "shifted" to cloud computing, according to the
report. Gartner analysts estimated that 75 percent of the "current" SAAS
delivery revenue could be considered cloud services. As the "SAAS model matures
and converges with cloud services models," the breakdown could exceed 90
percent by 2014, the analysts said.
The challenge is to be able to clearly identify SAAS from
all other off-premise products. Since SAAS and cloud are "hot concepts," many
suppliers are rebranding their hosting, application management, or application
outsourcing capabilities as SAAS or are claiming their solutions are "in the
cloud," said Sharon Mertz, a research director at Gartner.
"Suppliers run the risk of confusing and antagonizing buyers
if they persist in this approach," said Mertz. Enterprises run the risk of
"getting nasty shocks" when they realize what they bought is not SAAS, she
Mertz defined SAAS as software owned, delivered and
managed remotely by one or more providers. The application is delivered as a
single set of common code and data definitions and contracted customers
"consume" the application at anytime in a "one-to-many model," according to the
There have been changes in how SAAS is sold, consumed and
perceived by vendors and buyers, Gartner said. Executives and IT are getting
involved in purchasing decisions as the deal sizes and deployments get bigger,
covering "thousands to tens of thousands of users," said Mertz.
Even so, IT is left out of most deals as an increasing
number of companies are procuring and deploying SAAS
applications from multiple
vendors without involving IT, said Gartner. The variety of SAAS applications
from multiple vendors within the enterprise creates management issues and challenges,
In fact, that is often a part of the SAAS-providers sales
pitch, according to Brian Cleary, vice president of marketing at Aveksa, a
producer of change management, compliance and application access governance for
IT organizations. There is an "IT is bad" mentality and the providers would
rather sell directly to the lines of business and not talk to IT, he said. As a
result, IT has no visibility as to who is buying external applications, what
data is being stored there, and who has access to the application, Cleary said.
Content, communications and collaboration SAAS offerings
continue to dominate the enterprise application market, with customer
relationship management products close behind. Worldwide 2010 revenues are
expected to hit $2.9 billion, and $2.6 billion respectively, said Mertz.
"Initial concerns about security, response time and
service availability have diminished for many organizations," said Mertz.
However, SAAS usage and adoption varies widely across
market segments, according to Gartner. SAAS is "barely used" for enterprise
content management and search, but is the "predominant form" for Web
conferencing, according to the report. While SAAS is an "attractive
alternative" to on-premises solutions for sales force automation, buyers are
concerned about e-commerce because of integration challenges with on-premises
applications and uncertainty over who owns the data, according to the report.
There is a "higher requirement for downstream integration" as SAAS offerings become integrated with other applications and business processes
within the enterprise, Mertz said.