Hosted-applications usage on the rise

A Forrester Research report suggests that adoption of software as a service is increasing in large enterprise, but significant barriers remain
Written by David Meyer, Contributor

Large enterprise adoption of software as a service has increased by a third over the last year, according to analysts at Forrester Research.

The analyst firm published a report last week, Competing in the Fast-Growing SaaS Market, in which it said adoption of software as a service (SaaS), or hosted applications, in large enterprises now stands at 16 percent, up a third on the previous year's 12 percent. The survey was based on research conducted among 1,017 "technology decision makers".

Of those surveyed, 46 percent said they were interested in or planning to deploy SaaS applications, while 37 said they were not at all interested.

The SaaS model involves users accessing hosted online applications rather than installing applications on their desktops. Aside from the collaborative possibilities opened up by such an approach, it also involves a completely different financial model to installed applications, as it tends to be based on software rental rather than upfront payment.

The survey, led by analyst Liz Herbert, suggested that the most popular uses for the SaaS model were in human resources, collaboration and customer-relationship management. Overall, 45 percent of the SaaS users surveyed said they were using "human capital management" applications, while just 22 percent of respondents claimed to be using SaaS for Web 2.0 technologies like RSS, wikis and blogs. Enterprise resource planning and supply chain also show relatively low adoption rates.

North American companies are the keenest adopters of SaaS, according to the survey, which claimed the continent has around double the adoption rate of that shown in Europe.

The biggest barrier to the adoption of SaaS appears to be integration, with 65 percent of respondents refusing to consider deploying SaaS because of it. According to Herbert: "Concerns around customisation and integration have long plagued the SaaS space and, while vendors have made strides in both areas, they still have not caught up to on-premise capabilities where firms can modify the underlying code and data models and where more developer tools and prebuilt connectors are typically available."

Other notable adoption barriers that came up in the survey were total cost of ownership and security concerns.

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