We are pleased to be partnering with Analyst Perspectives and offering an excerpt of their high valued content. Click here to download the full report.
  
SaaS is one of the most talked-about topics since the early 2000s. The demand for SaaS applications has risen in all business categories, from large enterprises to SMBs. The key drivers for adopting SaaS are its low-cost and ease of deployment and use. There are various applications such as Service Oriented Architecture SOA and other web services which curtail the cost of enterprises because the usage of the software is metered and the enterprises pay accordingly.
  
The acceptance and uptake of SaaS applications have increased in almost all geographical regions. Currently, the US is the largest SaaS market in the world, followed by Europe, and Asia-Pacific. Apart from the regular SaaS applications such as CRM, HR, and web conferencing, there are certain other newer segments where the SaaS model is gradually gaining acceptance. For example, analysts opine that in Europe, the uptake of SaaS in the insurance market will increase in the coming years. The early adopters will obviously be the small rather than large insurers; however, banks are also likely to adopt SaaS. The European insurance market as a whole will adopt SaaS as a trusted model in coming years. Another segment that is also at a nascent stage is security technologies delivered via SaaS. However, the adopters of this segment are being given several offerings in order to make use of this upcoming technology for their IT systems defense infrastructure.
  
However, there are certain issues hampering the uptake of SaaS applications, the foremost of which is the problem of integrating SaaS applications with other on-premise applications, which, in turn, leads to interoperability issues. Security is also a major concern. As SaaS applications are widely available via the Internet, the chances of misuse are magnified compared to traditional software. This is one of the reasons that still cause some SMBs to avoid SaaS despite the many cost benefits it provides. Analysts observe that SMBs are sometimes skeptical of handing over their scarce data to third parties. Moreover, analysts caution that enterprises do not get lured by the much advertised low-cost SaaS applications because after the end of the subscription period, enterprises are most likely to face an increase in their budget. Analysts also point to the fact that using software from a hosted service provider does not in any way mean that the enterprises are relieved of their responsibilities completely because they have to take care that the quality of service is in place. Another reason why many a times SaaS is unable to meet the requirements of enterprises is because generally hype is created around SaaS due to which enterprises tend to expect a lot from SaaS applications and ultimately they get disillusioned.
  
We believe that despite the aforementioned pitfalls of SaaS, the uptake of SaaS applications is poised for a stable growth in the future. Cisco's ten million dollar investment in SaaS startup SoonR is an indication to go by. Also, the telecom sectors' recent interest in SaaS proves its future potential. For instance, TELUS Partner Solutions' believes that the time is right for the deployment of on-demand software due to the multitude of applications that the organizations require. Besides TELUS, a handful of other telecom companies, such as British Telecom and XO Communications, have moved into SaaS services. Although we agree that an impending recession/slowdown is expected to affect the SaaS market, in the long run, the model is likely to be considerably successful — especially for SMBs. The IT and telecom industries have recognized the potential in the SMB segment and are going out of their ways to sell to SMBs through customized products, prices, distribution channels, and marketing communication strategies. The fact that SaaS generally works very well for SMBs is yet another factor that will help its market grow.
  
Software as a Service (SaaS) has emerged as a viable mode of software usage for enterprises due to its ease of deployment, low cost, and low maintenance.
  
The areas of SaaS application are gradually increasing. Some of the areas where SaaS is widely used include Customer Relationship Management (CRM), human resources (HR), video conferencing, and payroll.
  
The adoption of SaaS application has witnessed three waves namely — 'Early', 'Mainstream' and 'Ubiquitous Adoption'. Analysts believe that currently, SaaS has gone mainstream and is well poised for ubiquitous adoption in the future.
  
The demand for SaaS is similar among large enterprises and small- and medium-sized businesses (SMBs). The SaaS market at present is led by the US followed by Europe, Asia-Pacific, and Australia. Although the SaaS adoption rate among SMBs is high, they are faced with problems such as integration of SaaS applications with other on-premise applications.
  
There are a number of SaaS vendors which are making their presence felt both globally and regionally. Some popular global vendors are Salesforce.com, WebEx, RightNow Technologies, Oracle, Netsuite, IBM, and CISCO.
  
Our partners at Analysts Perspectives present an overview of analyst observations, predictions, and opinions about the growing use of SaaS in the enterprise.
  
Some key findings include SMBs spent USD 3.2 billion on SaaS applications in 2007, compared to USD 5.3 billion on packaged software; by the end of 2008, more than 55 percent of businesses based in North America will have deployed at least one SaaS application, with Europe close behind at more than 40 percent; and the SaaS market in Asia will reach USD 1.6 billion by 2010, with a CAGR of 66 percent.