Global SaaS market to hit US$9B in 2010

Growing demand for software-as-a-service IT deployments come as initial concerns revolving security, service availability and response time among enterprise users diminish, new Gartner report notes.
Written by Tyler Thia, Contributor

Worldwide software-as-a-service (SaaS) revenue within the enterprise application software market is expected to hit US$9.2 billion this year as more enterprise customers get comfortable with the technology and delivery model, according to Gartner's latest report.

The research firm, which released its report on Wednesday, stated that 2010's projected SaaS revenue for enterprise application software is a 15.7 percent improvement on 2009's US$7.9 billion intake. Additionally, as the market is growing from strength to strength, Gartner is expecting to see the industry rake in US$10.7 billion for next year--a hike of 16.2 percent from the current year.

Explaining the firm's positive outlook for the enterprise software industry, Gartner's research director, Sharon Mertz, said: "Initial concerns about security, response time and service availability have diminished for many organizations as SaaS business and computing models have matured and adoption has become more widespread."

She added that as usage patterns and vendors' on-demand ecosystems continue to evolve, additional business and technology services, vertical-specific functionality and stronger partner and buyer communities will be developed.

IT vendors, for instance, are on an expansionary track as they increase penetration within existing customer accounts as well as venturing into greenfield opportunities, Gartner pointed out. This, in turn, has led to a global SaaS landscape that is "evolving", the report added.

Zooming in on the firm's findings, content, communications and collaboration-based software continues to lead the enterprise SaaS market, with worldwide revenue for this segment on pace to reach US$2.9 billion in 2010, the report noted. This is followed closely by CRM (customer relationship management) programs, which will likely garner US$2.6 billion, Gartner stated.

Cloud computing supersedes SaaS
However, while overall SaaS revenue has and will continue to grow, its time in the IT spotlight has been replaced by a broader concept known as cloud computing during 2010. SaaS is now just one variation, representing the application layer, of the overall cloud architectural stack, the report stated.

That said, it is important to differentiate SaaS from hosting and application management or outsourcing, Mertz urged.

She pointed out that as cloud computing and SaaS are hot concepts in the market currently, many vendors are rebranding their hosting and application management or outsourcing capabilities as SaaS or cloud-based. This might result in customers experiencing "nasty shocks" when the software they have purchased turns out to be something else altogether, she added. 

"[IT vendors] run the risk of confusing and antagonizing buyers if they persist in this approach," Mertz cautioned. "Hosting and application management are not synonymous with SaaS, nor do they necessarily comply with the definition of cloud computing."

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