APAC to lead SaaS revenue growth in 2012

Asia-Pacific software-as-a-service revenues to grow 27.8 percent and hit US$934.1 million next year, despite fragmented market, report says.

With adoption of software-as-a-service (SaaS) for enterprise applications on the rise worldwide including Asia-Pacific, SaaS revenue in the region is expected to jump to US$934.1 million this year from US$730.9 million in 2011, according to Gartner.

The market research firm said in a report Wednesday that global SaaS revenue will grow 17.9 percent to reach US$14.5 billion this year, up from US$12.3 billion the year before.

SaaS adoption is continuing to evolve within enterprise application markets after more than a decade of use, it said. The increasing familiarity with the SaaS model, continued oversight of IT budgets, the growth of platform-as-a-service (PaaS) developer communities and interest in cloud computing are now driving adoption forward, it explained.

Although vertical-specific SaaS software saw growing interest, the most widespread use of SaaS remained in horizontal applications with common purposes among distributed virtual workforces, the report added.

In the Asia-Pacific region, SaaS financial applications such as accounting are the most popular, particularly in China and India, followed by expense management and employment performance management, the report revealed.

It also noted SaaS adoption in Asia has been fragmented due to the heterogeneous mix of mature and emerging markets within the region.

Mature markets lead SaaS adoption
Yanna Dharmasthira, Gartner research director based in Indonesia, said SaaS adoption was highest in mature markets such as Australia, New Zealand, Hong Kong, Singapore and South Korea. This was due to the established infrastructure and networks as well as presence of vendors to provide sales, marketing and support services to end-users.

That said, she pointed out that while SaaS adoption was relatively low among emerging countries, there were "pockets of mature SaaS users" that have been using SaaS for long periods of time, comparable to those in more mature countries. Vendors should therefore target both mature and emerging markets within Asia, she added.

Dharmasthira said going forward, she was optimistic over adoption of SaaS throughout Asia-Pacific, citing Gartner's own findings that 80 percent of Asia-Pacific respondents said they will increase their SaaS investment by end 2012. While this was a positive outlook, once again, adoption patterns will likely vary by country, she acknowledged.

Gartner said North America, as the most mature of all the regional markets, currently represented the largest opportunity for SaaS. The market will total US$9.1 billion in 2012, up 16.7 percent from US$7.8 billion in 2011, the report stated.

It had the most SaaS deployments in expense management, financials, e-mail and office suites, and use of Web conferencing is also higher in there than in other regions, thanks to a highly-distributed workforce, it explained.

For Japan, a separate market from Asia-Pacific, SaaS revenue was forecast to grow 16 percent to reach US$495.2 million in 2012, Gartner said. Noting that the Japanese economy was currently struggling as it recovers from the 2011 earthquake and tsunami, SaaS adoption in the country have increased due to lower implementation costs and faster deployments. Users also looked to SaaS as a defense against future power outages and disasters, it added.

Challenges in adoption
Gartner research director Sharon Mertz said in the report that the challenges in SaaS deployment varied by region.

In Asia, for instance, the top issue was longer-than-expected deployments. In the EMEA (Europe, Middle East and Africa) region, the most frequently-encountered problem is network instability, while limited flexibility of customization and limited integration with existing systems are the main concern in North America.

Gartner's SaaS revenue forecast corroborates with a study it released last October which found that more than 95 percent of 525 companies across nine countries would maintain or increase their SaaS investments.