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Ready Or Not, Here Comes SaaS

Saugatuck Technology says SaaS is spreading throughout the enterprise, "whether the vendors -- or their offerings -- are ready to support and deliver what users want."
Like a runaway train, software-as-a-service is spreading throughout large corporations whether the enterprises or their vendors are ready for the challenges associated with SaaS, a market research firm says.

The rapid adoption, boosted by exceptional market hype, is breeding high expectations among executives who are expecting SaaS versions of everything from e-mail to enterprise resource planning systems, Saugatuck Technology said in a recent report. These high expectations, unfortunately often come with a misunderstanding of the technological and organizational resource requirements to make enterprise-wide SaaS effective and efficient.

"Users want SaaS throughout the enterprise, whether their enterprises are ready for it, or not," Saugatuck said. "SaaS is spreading throughout the enterprise, whether the vendors -- or their offerings -- are ready to support and deliver what users want."

Among the key findings in the report is that users are implementing SaaS as part of mainstream IT, particularly in North America and Europe. As SaaS becomes more mainstream, user expectations of its capabilities and functionality are expected to rise, particularly in the area of linking and interoperating with on-premise systems.

"Providers are therefore expanding and improving SaaS offerings to meet and exceed user desire and demand, as well as to establish and extend their competitive advantages," Saugatuck said.

SaaS vendors this year are starting to offer "SaaS platforms" that enable enterprise-ready application services, the researcher said. Six different types of platforms are emerging: transaction services, collaboration services, corporate-consumer business services, aggregation-distribution services, SaaS enablement and infrastructure services, and IT infrastructure services.

Saugatuck found among SaaS users the belief that a "changing of the guard" is occurring between pure-play SaaS vendors and large traditional software makers. Fully, 22% of respondents to a Saugatuck survey cited new pure-play SaaS providers by name when asked to identify who the new "SaaS master brands" would be. Of the remainder, 29% said it was too early to tell, and 49% named traditional enterprise software or infrastructure providers.

"The vendors most challenged by SaaS will be the thousands of smaller, independent software vendors that see opportunity in SaaS, but are uncertain of what needs to be done to take advantage of it," Saugatuck said.

By 2010, at least 65% of businesses worldwide with more than 100 users will have at least one SaaS solution in place, with the U.S. adoption rate exceeding 75%, the researcher predicts.

By next year, 40% of traditional independent software vendors will have brought a SaaS product to market, either by acquisition, development or virtualization, Saugatuck said. By 2012, 80% of software providers globally will either have a significant SaaS component within their portfolios, or will be "fully SaaS-focused with a dwindling legacy customer base.

Also by 2012, about half of the companies considered "SaaS master brands" will be pure-play providers. The remaining will be traditional software makers who have repurposed their businesses.

The full summary of Saugatuck's report is available through the researcher's Web site.