Credit Suisse, Seeking Alpha and Saugatuck Reports Show SaaS in the Enterprise Gaining Steam

March 15, 2007 Appirio

Several important research reports in the past two weeks demonstrate the continuing momentum of Software as a Service (SaaS). These recent announcements reflect a broader market awareness of the disruption SaaS is causing for on-premise software in the enterprise.

  • Credit Suisse’s March 11 “On Demand Market Forecast” projects “On Demand software to grow at a CAGR of 36% to roughly $21 billion in 2011 from over $4 billion in 2006.”
  • The number of companies over $1 billion in revenue that said they were planning to deploy SaaS for mission critical applications more than quadrupled over the previous year, from 13% to 53%, according to Saugatuck’s March 7 “Research Alert Survey of over 250 Senior Business and IT Executives.”
  • On their March earnings call, salesforce.com reported a 81% growth rate in accounts with greater than 1000 users, and 88% in accounts with over 500 users. The growth rate of salesforce.com in the enterprise was nearly double their overall growth rate.
  • The March 11 edition of “Seeking Alpha” reported that “The message in SAP’s re-segmenting of its revenue streams on March 8 is that SAP is beginning its tortuously slow move to 21st-century Software as a Service (SaaS). But the announcement also shows that SAP has a long way to go to compete with the salesforce.coms of the world from a business model perspective.’

SaaS market momentum, coupled with the significant customer benefits it offers, will lead to a continued expansion in the number of new SaaS offerings and amount of repositioning from existing on-premise vendors.

CIOs should respond by developing a comprehensive plan to properly understand, manage and promote SaaS solutions. An important first step is to create a clear view of the current and future application portfolio in light of the capabilities SaaS solutions offer. Reviewing a company’s portfolio of IT-managed applications, along with the on-demand applications flying under IT’s radar, helps CIOs understand the complete IT and application landscape.

CIO’s must then incorporate an organization’s business priorities in order to arrive at the right portfolio of applications and corresponding priorities. Through portfolio analysis and planning, a CIO can channel the momentum and benefits of SaaS. CIOs will better serve the business by extending their own capabilities and avoiding the creation of SaaS silos across functional areas. CIOs that get ahead of SaaS, will be able to simultaneously empower the business, ensure information consistency, and institute proper governance and controls.

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