SaaS spending to rocket in next five years

But growth will be "far less impressive" after that

Cloud computing set to experience strong growth in the next five yearsPhoto: Shutterstock

While many businesses are yet to use software as a service (Saas), the market for cloud-based software will be nearing saturation point in just five years' time because adoption will be so rapid, according to an analyst's report.

A report Sizing the Cloud, by analyst house Forrester Research, says that the rate at which organisations increase their spend on SaaS will peak by 2016.

Revenues from SaaS will increase from $21.2bn today to $92.8bn in 2016, by which point SaaS will account for roughly 26 per cent of the packaged software market, the report said.

"After 2016, however, the market will come closer to saturation, and SaaS growth will be far less impressive between 2016 and 2020," according to the report.

Revenues from SaaS will help the global market for all types of cloud services increase from $40.7bn in 2011 to $241bn in 2020, the report says.

However Forrester analysts predict that not all cloud-based services will see uninterrupted revenue growth to 2020.

The infrastructure as a service (IaaS) market is expected to grow from $2.9bn to $5.9bn between 2011 and 2014, before shrinking to $4.8bn in 2020.

The report forecasts that while the success of cloud-based infrastructure services like Amazon EC2, which provides computing power on-demand, is encouraging new IaaS providers to enter the market today, its overall value will soon hit a ceiling.

"Our analysis shows that IaaS will reach a peak of $5.9bn in global revenues in 2014 and will then enter a period of significant commoditisation, price deterioration, and margin pressure," the report says.