Gartner: SaaS Growth Shows No Signs of Slowing

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The enterprise software market saw some ups and lots of downs during the recession and slow recovery. One category that experienced surprisingly strong growth was software-as-a-service, with SaaS vendors in 2010 adding large enterprises to their client rosters and taking away business from on-premise software companies. Earlier this summer Gartner predicted SaaS will account for some 15 percent of enterprise application purchases by 2015, up from 10 percent today.


SaaS growth shows no signs of slowing. According to Gartner (again), global SaaS revenue should hit $12.1 billion this year, a 20.7 percent jump from revenue of $10 billion in 2010. Gartner cites growing familiarity with SaaS, interest in cloud computing, growth in platform-as-a-service developer communities and still-tight budgets as among the drivers for SaaS adoption.


North America is the biggest SaaS buyer. Gartner expects North American SaaS revenue to reach $7.7 billion in 2011, an 18.7 percent increase from last year's revenue of $6.5 billion. Looking ahead, Gartner predicts that number will grow to $12.9 billion in 2015.


While North American companies no doubt like to save money, ease and speed of deployment are their top two reasons for SaaS adoption, followed by lower total cost of ownership, according to the Gartner research. North American companies also value SaaS' ability to lower capital expense more highly than their global counterparts do, says Gartner Research Director Sharon Mertz.


CRM is the top SaaS application across all regions, almost surely due to the dominant position of Salesforce.com. North Americans are more likely than other regions to use SaaS Web conferencing, e-learning and travel booking.


Other regions are far behind North America in SaaS adoption. SaaS revenue should reach $2.7 billion this year in Western Europe, up 23.3 percent from 2010 revenue of $2.2 billion. Gartner expects that number to hit $4.8 billion in 2015. The market is growing more quickly in Eastern Europe, Gartner believes SaaS revenue will grow to $131.4 million in 2011, up 29.8 percent from 2010 revenue of $101.2 million. Gartner predicts that number will grow to $270.1 million in 2015.


For Asia-Pacific, Gartner projects SaaS revenue of $768.3 million this year, up 27.7 percent from 2010 revenue of $601.8 million. It believes SaaS revenue will reach $1.7 billion in 2015. Australia, New Zealand, Hong Kong, Singapore and South Korea are the leading adopters in Asia-Pacific.


While Gartner categorizes the Latin American SaaS market as "embryonic," it says revenue is on pace to total $328.4 million in 2011, a 23.5 percent increase from 2010 revenue of $266 million. It expects that number to rise to $694.2 million in 2015.


It's worth noting that this kind of growth is what lands enterprise software in Gartner's famous (or infamous) "Trough of Disillusionment." If SaaS follows Gartner's usual Hype Cycle technology adoption trajectory, it will spend some time in the trough before emerging into the Slope of Enlightenment and Plateau of Productivity.


Last summer Gartner fretted that many companies were transferring their on-premise software bad practices to SaaS. It also issued some smart SaaS guidance:

  • Determine the value of a SaaS implementation.
  • Create a SaaS policy and governance document. Don't let a "we'll throw the switch and everything will be great" mentality lead you to neglect the always-important issues of people and processes when implementing SaaS.
  • Evaluate SaaS vendors within the context of specific needs.
  • Create an integration road map that shows how SaaS applications will integrate with on-premises solutions. IT Business Edge contributor Loraine Lawson earlier this week wrote a nice post on Gartner's prediction that what it calls integration-platform-as-a-service will ease SaaS integration issues.