Down Economy Drives SaaS Usage

Ann All

It's been just about a year since I wrote about the down economy's positive impact on the software-as-a-service market. I cited a Forrester Research analyst's opinion that SaaS "has an element of being recession-proof" and noted that SaaS was attracting fans among CFOs, who said SaaS could help their companies attain a faster ROI with software implementations.


An InfoWorld article makes much the same point, that many companies turned to SaaS to help trim their technology costs over the past year. IDC increased its worldwide growth projections for SaaS from 36 percent to 40.5 percent after the economy took a sharp downward turn. Gartner predicts SaaS revenue will total $7.5 billion in 2009, nearly 18 percent more than in 2008, when all of the sales numbers are in. It expects SaaS spending to hit $14 billion by 2013.


The article also cites a Computerworld survey of 127 IT professionals that found 42 percent of them were using SaaS in their organizations. While CRM is still the most popular SaaS application, used by 40 percent of respondents, rapidly gaining are HR (38 percent), e-mail (36 percent) and payroll (32 percent).


Drivers other than the economy may have boosted use of SaaS, but it's a safe bet that cost consciousness played a big part. InfoWorld quotes Ginnie Stouffer, VP of consulting at Pennsylvania-based IDC Partners, who said SaaS' flexible licensing costs are a big plus in a still-uncertain economy. The company uses SaaS for almost all its applications, including disaster recovery and VoIP communications. With its VoIP service, a simple notification to the provider is all that's needed to scale up or down. Said Stouffer:

With other software, if we bought 50 licenses then laid off 25 people, we'd still have 50 licenses.

Beyond the financial savings, several SaaS users in the article mentioned getting frequent updates from vendors, also touted as a benefit by Doug Harr, CIO of database software provider Ingres, when I interviewed him last January. He told me:

Every dollar that Salesforce puts into R&D shows up at my doorstep without me doing anything to gain access to it.

I'm a contrarian by nature, so I've wondered if the automatic software updates promoted in the SaaS model are always a good thing.


The InfoWorld article mentions several other benefits commonly used as SaaS selling points, such as speed of deployment and fewer maintenance issues. While difficulty in customizing applications is often presented as a knock against SaaS rather than a benefit, at least one SaaS customer sees it differently. It's a way to force users to move to more standardized business processes, said Chris Proudfoot, head of procurement, process and system strategy at British insurer Aviva PLC.


Proudfoot has used both on-premises applications and SaaS for procurement. The company now uses Ariba's Spend Management SaaS application. He said users often ask for individualized processes when using on-premise software. But with SaaS:

You've basically got to adapt to the [SaaS] process. It's a way to standardize, although there still tends to be a certain amount of debate about the processes we use.

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Add Comment      Leave a comment on this blog post
Nov 22, 2010 3:08 PM Matt at Intelestream Matt at Intelestream  says:

Great statistics and review of trends during our turbulent economic times. I think it's very telling that businesses are projected to turn towards SaaS more and more over the next several years. It makes sense, given that traditional marketing and sales approaches may no longer work as well as they once did. Significant benefits can be achieved by working closely with a specialized SaaS consultant to learn how you can achieve a competitive advantage in today's marketplace: take advantage of their expertise and free consultation.

Well-seasoned consultants should provide not only a solid overview of the marketplace, competitors and opportunities; but also how you can leverage and improve upon your current business model. There is an endless sea of vendors and consultant services in the market today, therefore take your time, do your shopping and take advantage of several free trials.


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