Demand for software-as-a-service still growing

Demand for software-as-a-service (SaaS) will hit $9.6 billion in 2009, a 21.9% increase from 2008 revenue of $6.6 billion, according to analyst company Gartner.
The market will show consistent growth through 2013 when worldwide SaaS revenue will total $16 billion for the enterprise application markets, it says.

The adoption of SaaS within enterprise resource planning (ERP) and supply chain management (SCM) depends on the degree of process complexity. SaaS is expected to represent only about 1% of the ERP manufacturing and operations revenue, but more than 18% of human capital management and 30% of the procurement segment by 2013, says Gartner.

The CRM market exhibits more general market adoption, ranging between 9% and more than 33% of total software revenues, depending on the CRM segment. Overall, SaaS accounted for more than 18% the CRM market total revenue in 2008.

Office suites and digital content creation (DCC) remain the fastest-growing markets for SaaS, while the content, communications and collaboration (CCC) market continues to show the widest disparity of SaaS revenue across market segments.

In a seprate report, Gartner said that software-as-a-service (SaaS) email solutions will account for 20% of the commercial email market by 2012 compared to a mere 1% in 2007.

That twentyfold increase will have “direct and material consequences for traditional third-party product vendors, effectively cutting the addressable market for traditional third-party applications by one-fifth,” says the research firm.

Applications likely to be particularly affected include those core to running premises-based email, such as disaster recovery, reporting, backup, spam and virus filtering, as well as mobility, encryption, fax and archiving solutions.

Gartner also predicts an impact on the email-related hardware market, with fewer sales opportunities for server vendors. Conversely, there will be opportunities for such third parties to be acquired by SaaS vendors keen to fill in platform gaps, as has already been the case with Google and Postini, Cisco and Ironport, and Microsoft and Frontbridge.

“In many ways, email is the ‘litmus test’ for the SaaS model, disrupting a pre-existing set of on-premises-related businesses,” observes Gartner analyst Matt Cain. “We can expect similar third-party dynamics to occur in adjacent collaboration spaces, such as instant messaging and virtual workspaces.”

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