Large organizations embrace on-demand - and not just CRM

A new study published today by Nucleus Research answers five key questions about on-demand adoption, including the news that almost two-thirds of organizations with 1000 or more employees have already gone on-demand.
Written by Phil Wainewright, Contributor

Almost two-thirds of organizations with 1000 or more employees have already adopted on-demand solutions, according to a new study published today by Nucleus Research. And although the adoption rate in smaller organizations is lower at 46%, that's set to rise next year, with 64% of all organizations expecting to have gone on-demand. A total of 198 organizations took part in the survey of KnowledgeStorm readers, and it provides interesting answers to five key questions:

How strong is on-demand adoption?
The study echoes research last year by consulting group McKinsey which found that the proportion of CIOs considering adopting SaaS applications in the coming year had gone from 38% in 2005 to 61% by late 2006. So this is not a one-off rogue survey. There's mounting evidence that organizations across the board are dipping their toes into the SaaS and on-demand waters — not as a wholesale replacement for conventional on-premises software, but as a viable alternative in many cases.

Which on-demand applications are most popular?
CRM solutions had been adopted by a surprisingly low number of organizations in the survey — less than a third had implemented on-demand CRM, despite the high media profile of on-demand poster child Salesforce.com. Project management was the next most popular on-demand choice, adopted by almost a quarter — and interestingly, it overtakes CRM in future buying intentions, which is good news for the many vendors with offerings in that field. Other applications frequently mentioned included collaboration, ecommerce and content management. Surprisingly, HR solutions weren't cited by a significant number, but otherwise the spread of application types corresponds to the headings I identified last year in my posting about Billion dollar SaaS sectors.

Why are organizations turning to on-demand?
Rapid implementation and ease of use were the two factors most often cited, with lower cost mentioned by only 9%. Reasons for rejecting on-demand were more diffuse, with the most prevalent being a churlish "doesn't fit with our culture" — perhaps indicative that a substantial minority of IT shops remain afraid of SaaS.

What industries are leading adoption?
The report finds that technology companies, finance organizations and insurance companies are the broadest users of on-demand solutions, with more than half in those industries adopting on-demand offerings. Laggards include healthcare and education.

How are the leading vendors perceived?
Interestingly, the research finds users utterly confused by vendor marketing tactics, citing some well-known companies without any on-demand offerings as leaders in the field, while largely unable to name any of the real leaders. In light of that information, one has to wonder how reliable the headline figures about on-demand adoption really are, if respondents didn't have a clear understanding of what they were being asked about. This is a problem I've often noticed when people look to market research to provide definitive answers about an emerging technology. The fact is that there are no definitive answers until after the technology has finished emerging.

In an effort to help close the gap, Nucleus notes that organizations risk missing out on the benefits of on-demand unless they can do a better job of recognising what it is — and offers some advice on how to tell the difference.

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