The U.S. currently represents the largest opportunity for SaaS, and it is the most mature of the regional markets.
Worldwide software as a
service revenue is forecast to reach $14.5 billion in 2012, a 17.9 percent
increase from 2011 revenue of $12.3 billion, according to a new report from IT
analytics firm Gartner. The report projected SaaS-based delivery would experience
healthy growth through 2015, when worldwide revenue is projected to reach $22.1
Researchers noted although growing interest has been observed in
vertical-specific software, the most widespread use is still characterized by
horizontal applications with common processes, among distributed virtual
workforces and within Web 2.0 activities.
North America, specifically
the United States, currently represents the largest opportunity for SaaS, and
it is the most mature of the regional markets. SaaS software revenue is
forecast to total $9.1 billion in 2012, up from $7.8 billion in 2011.
Consistent with other regions, North America shows the highest SaaS deployments
in expense management, financials, email and office suites. Use of Web
conferencing is higher in North America than in other regions, in part because
of a highly distributed workforce, said Gartner research director Sharon Mertz.
"After more than a
decade of use, adoption of SaaS continues to grow and evolve regionally within
the enterprise application markets," Mertz said. "Increasing
familiarity with the SaaS model, continued oversight on IT budgets, the growth
of platform as a service [PaaS] developer communities and interest in cloud
computing are now driving adoption forward."
Gartner analysts said SaaS
adoption in Eurupe, the Middle East and Africa (EMEA) is currently running at
two speeds. In Western Europe, SaaS revenue is forecast to surpass $3.2 billion
in 2012, up from $2.7 billion in 2011, while SaaS revenue is Eastern Europe is
projected to reach $169.4 million, up from $135.5 million last year.
In Western Europe, the most
developed sub-region, SaaS offerings and adoption rates are rapidly increasing
as North America-based SaaS vendors further penetrate the region and the number
of local European SaaS vendors increases.
In Eastern Europe and the
Middle East and Africa, which are small and emerging markets overall, the
potential opportunity for SaaS is more in the medium to long term due to
ongoing infrastructure challenges that vendors need to overcome if they are to
be successful in these regions, the report said.
"The top issues
encountered when deploying SaaS vary by region," Mertz said. "Limited
flexibility of customization and limited integration to existing systems are
the primary reasons in North America. In EMEA, network instability is the issue
most frequently encountered, whereas longer-than-expected deployments are the
top issue in Asia-Pacific. Vendors are more aggressively pursuing SaaS buyers
outside traditional markets by offering local-language availability, forming
alliances and constructing data centers to accommodate local
SaaS revenue in the Asia-Pacific
region is on pace to reach $934.1 million in 2012, up from $730.9 million in
2011. Overall, SaaS adoption in the Asia-Pacific has been fragmented. The Asia-Pacific
(excluding Japan) is a combination of mature markets, such as Australia, New
Zealand, Hong Kong, Singapore, South Korea and Taiwan, and emerging markets,
including China, India, Malaysia, Thailand, Indonesia, Vietnam and the
SaaS financial (accounting)
applications are most popular, particularly in China and India. The
next-highest SaaS usage is for ERP functionssuch as expense management and
employee performance managementfollowed by office suites, email and the CRM
While the Japanese economy
is still struggling due to last years earthquake and resulting tsunami, thus
limiting IT budgets, demand for SaaS solutions is increasing due to their lower
implementation costs and faster deployment times. SaaS revenue in Japan is
forecast to reach $495.2 million in 2012, up from $427 million in 2011. Gartner
forecasts that the growth of the SaaS market in Japan through 2015 will be led
by CRM and email/groupware, which are already seeing actual demand.
Gartner said users have
found that SaaS reduces the burden of application management, increases the
ease and agility of deployment, and reduces initial costs of implementation. In
addition, since the 2011 earthquake and tsunami in Japan, users have looked to
SaaS adoption as a defense against future power outages and disasters. However,
many companies are still concerned about SaaS-related issues, such as data
security risk, true cost effectiveness and the difficulty of linking with other