Gartner questions cost benefits of SaaS

New research from IT analyst Gartner questions the assumption that software as a service (SaaS), whereby applications are delivered from third parties over the web, saves businesses money by allowing them to pay only for what they use.

For one thing, the company estimates only 10% of global SaaS applications are charged for on a pay-as-you-go basis, the rest resembling traditional software licensing engagements.

Related: Proprietary software ‘a waste of money’, says EU commissioner

Secondly, the company believes that the "bad habits" associated with proprietary application use, such as license over-subscription, are being repeated by SaaS users.

"This most commonly occurs in large organisations, but it could happen to any company," explains Gartner analyst David Cearley, "especially those that have downsized their workforce, or one that has oversubscribed to trigger a volume discount."

Gartner also questioned the impact that SaaS will have on the IT industry in the coming years, citing its own research which showed that cloud-based software represented only 3.4% of global enterprise spending last year, compared to 2.8% in 2008.

Despite this, Gartner says that the emergence of SaaS has "re-energised" and "added choice" to the software market, predicting that it will eventually be deployed in all enterprises at some level.

SaaS vendors have been one of the most prominent success stories during and in the immediate aftermath of the global economic downturn, with on-demand CRM business a noteworthy example of this. In the company’s most recent financial quarter, it reported a 24% year-on-year increase in sales to $377 million.

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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