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Will IT Management Go SaaS?

Forrester Research forecasts SaaS will take a modest bite out of the IT management market. The big surprise is the high level of interest from medium-sized and large enterprises.
Forrester Research forecasts SaaS will take a modest bite out of the IT management market. The big surprise is the high level of interest from medium-sized and large enterprises.One of the busiest areas of startup activity we see at InformationWeek is in IT management. Companies such as Spiceworks, PacketTrap, and Zenoss are making waves with low cost products that provide a respectable set of functions without a lot of deployment pain. Check out our lab review of these products here.

A subset of IT management startups are taking the SaaS or hybrid-SaaS route, which promises simpler deployment than traditional premises software. Companies such as Paglo, which is aimed at small businesses, and Service-now.com, which targets Global 2000 customers, use the SaaS model to provide a variety of IT management services.

A new report from Forrester forecasts the future of this market. (You can read a summary here.) At present, it says SaaS-based IT management accounts for a measly 1% of IT management software. But by 2013, the report anticipates SaaS vendors will have a modest 10% of the market.

While those numbers probably don't have the Big Four (BMC, IBM Tivoli, HP, and CA) trembling, another figure might: Forrester predicts that enterprises with 1,000 or more employees will account for 50% of SaaS installations in 2009.

It's easy to dismiss SaaS as a small-business play. But Forrester's figure places SaaS squarely in the midsize range, with room to go upward. And there's great appeal to the SaaS model. Traditional premises IT management software deployments are time-consuming and expensive, with significant capital costs. SaaS deployments are cheaper and faster. SaaS products also can get a toehold into the enterprise through departmental deployments.

Forrester notes that the Big Four are making their own moves into the cloud. However, complex applications can't quickly be retooled for SaaS, giving upstarts time to secure enough customers to flourish.

Of course, there are casualties in this market. In August 2007, a company called Klir Technologies closed its doors. It offered SaaS-based network management tools and had more than 100 large customers, but couldn't successfully transition from startup to established vendor.