Hunger for software as a service sharpens

Hunger for software as a service sharpens

Summary: Separate surveys from Gartner and AMI-Partners point to growing interest in SaaS-delivered applications, especially customer relationship management capabilities.


Perhaps it is the predictable cost structure. Or the speed with which users can be provisioned for applications when they need them, not when someone tells them they can have them. Or the ability to add new seats that more closely match business needs and not some guess-timate based on widely erratic economic data.

Perhaps all of these reasons and more are what is driving the overwhelming number of businesses that intend to increase their use of software as a service (aka SaaS) over the next year, according two separate research reports out in the past week. The data is derived from the declared habits of both enterprise accounts and, more interesting for readers of this blog, of small and midsize businesses.

The first report, from Gartner, suggests that 95 percent of companies expect to increase their use of SaaS as a wave of enabling their workforce with specific software applications. There are certain industries that are more excited than others about SaaS. That would be the government, banking and securities companies, and wholesale trade. Manufacturers are another vertical group where SaaS is especially compelling, according to Gartner.

The Gartner data is culled from the research firm's surveys of 525 companies in nine countries during June and July 2011.  Mind you, many of those survey respondents were large companies, but historically speaking, data has pointed to the trend that SMBs are even more likely to use SaaS than big companies because it enables them to use features and functions that weren't previously available to them.

The biggest challenge related to SaaS deployments (according to the Gartner research) is the fact that many companies still don't have policies for evaluating and procuring SaaS contracts. This is still done on a somewhat ad hoc basis, which can create problems across an organization when it comes to how services are assimilated. Most of the time, the decision to procure SaaS is a joint decision of a business executive and an IT team, which is a distinct different from applications that are bought and deployed "on premise," according to the Gartner survey.

A separate study from research firm AMI-Partners suggests that customer relationship management applications and software services will continue to be a primary focus for SMBs. During the next five years, spending on SaaS versions of CRM will outpace spending for on-premise versions by a ratio of almost four to one, according to the AMI-Partners data ("U.S. SMB Cloud Services Study").

Said Jacqueline Atkinson, research manager at AMI-Partners, discussing the research:

"Customer engagement on social networking sites is driving SMBs to pay closer attention to their social communities. But it is the influence of the cloud that affects their decision to adopt more advanced customers solutions. Such market trends are creating the right conditions for the integration of social media with CRM applications for enhanced interactions with customers. In fact, U.S. SMB CRM users are a third more likely to engage in social media activities for business than firms who do not use CRM."

It makes total sense that smaller companies would seek to exploit their customers relationships as much as possible in the current weird economic climate, and SaaS-delivered CRM really enables them to do just that.

Of course, one great feature of SaaS is that a company can more easily stop using an application that isn't appropriate for its business. This becomes more complicated, the more deeply a particular application is integrated into the company's core business processes.

Topics: Emerging Tech, Apps, Cloud, Data Centers, Software Development

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  • RE: Hunger for software as a service sharpens

    Of all the reasons that SMB companies are adopting SaaS offerings, the most important reason is "because they can." Think about it. SaaS is the great equalizer. An SMB can now afford the same enterprise software as the big guys. The acquisition model -- pay as you go, pay for what you consume -- is the reason SMB is moving to SaaS and will continue moving to SaaS in droves.
  • Data Privacy

    I see the optimism about SaaS, and then I look at what happens when *any* kind of external agency collects too much information about individuals or businesses for their own comfort. Take Facebook for example.

    When businesses start using SaaS for managing their customer relationships, they're in a way partnering up with the SaaS company and trusting them with very confidential (and holding immense competitive value) pieces of information. However, unlike a formal partnership, the trust is based upon just the "Privacy Policy" pages of the SaaS providers (the pages and their contents can change anytime).

    Is this going to be a problem in the foreseeable future? I have discussed on other forums as well - the SaaS providers themselves are backed by investors who might be investing in various competing spaces as well - can companies entrust their data with the SaaS providers in the way the current responsibility and ownership mechanisms lie?
  • Open Source

    I see more and more software being offered as open source. Is open source software a threat to SaaS business model ?
  • Integrating SaaS into the Retail Environment

    Great article on SaaS and CRM, Heather. We at iQmetrix do believe that integrating SaaS into the retail environment helps to develop customer relationships. That's why our touchscreen display solution, XQ Interactive Retail, engages customers and provides a great shopping experience. When fully integrated with RQ4, our flagship product, wireless retailers can manage their businesses seamlessly from CRM to inventory management to HR and accounting. There is a direct connection between customer loyalty, a decrease in walk-outs and an increase in consumer interest and sales efficiency.
    - Christopher Krywulak, President and CEO iQmetrix
    Christopher K.