Japan's lucrative US$1 billion SaaS (software-as-a-service) market last year dwarfed the rest of Asia's markets combined, according to Springboard Research.
In a report Thursday, the research house said the adoption of SaaS in Japan spread across all major industries in the country and is set to continue growing at a compound annual growth rate (CAGR) of 24 percent between 2009 and 2013.
This also makes SaaS one of the fastest-growing segments of the Japanese IT industry, according to the report.
Masami Kashiwagi, Springboard's Japan research manager, attributed the growth to adoption from large enterprises, with products from Salesforce.com and Google being among the most popular.
"The remarkable market evolution and growth is reflected in the strong demand among organizations in traditionally conservative industries, such as the government and financial sectors, that have started to deploy CRM (customer relationship management) systems via the SaaS model," Kashiwagi said in the report.
Huge deals such as the Japan Post adopting SaaS also helped raise awareness and trust, she added.
Interest in SaaS was primarily driven by the promise of cost savings on upfront spending, the analyst noted. Speed of deployment was another driver for organizations with tight project timelines, making SaaS the only viable option, Kashiwagi said.
Lower exit costs were also found to be a common justification for SaaS-related spending, she dded.
However, she advised companies not to assume SaaS would automatically represent lower TCO (total cost of ownership), noting that customization requirements and higher service level agreements may put the TCO back on par with on-premise offerings.
Springboard said in December last year that while the majority of companies in the Asia-Pacific region found cloud offerings "not relevant", they were more familiar with the SaaS mode of deployment.
A separate Springboard study pegged the Chinese SaaS market at US$171 million by end-2010.
According to another research firm IDC, the SaaS market in the Asia-Pacific region, excluding Japan, was worth US$298 million in 2009.