In the space of a year, Software-as-a-Service (SaaS) has grown from a point-solution curiosity to a platform for the deployment of mission-critical application workloads for many user enterprises. Research by Saugatuck Technology also shows that the depth and breadth of enterprise SaaS impact is not well understood, leaving both user and vendor executives unsure of how to manage SaaS both tactically and strategically. Both parties need a framework and plan for focusing SaaS investment and management.
"We're seeing breakthrough levels of SaaS acceptance across all categories of business software - from SMBs to the largest enterprises worldwide. Gone are the early days where SaaS was primarily a business-unit driven phenomenon. Today, IT is now actively engaged in building hybrid architectures that leverage the best of web-based applications, with on-premise enterprise software - especially as SaaS increasingly addresses mission-critical workload requirements. At the same time, much of this growth is coming without any sort of plan or management structure," states Saugatuck VP Mark Koenig, head of the SaaS research programme and co-lead author of the new report.
There's a lot of confusion among vendors - and therefore among customers - about how this current wave of SaaS fits into the business portfolio. Never mind there's a third wave coming that's just around the corner.
"Our research shows not only explosive growth in SaaS but increasingly sophisticated offerings that may combine SaaS applications with business services - and the business models and frameworks are all over the map," adds Saugatuck VP Mike West, co-lead author of the report. "There's a lot of confusion among vendors - and therefore among customers - about how this current wave of SaaS fits into the business portfolio. Never mind there's a third wave coming that's just around the corner."
Along with an in-depth examination of the current reality of SaaS development, adoption and usage, Saugatuck's newest report, entitled Three Waves Change: SaaS Beyond the Tipping-Point, presents a framework for users and vendors that positions successive waves of SaaS. The three-wave model presents a "roadmap" of SaaS evolution, usage, management, and effects, highlighting strategic and tactical requirements for vendors and users.
Other key highlights and insights from the report regarding SaaS evolution, user adoption, and vendor impacts include the following:
- Twenty-six per cent of companies now have at least one SaaS application installed, up from 11 per cent at the beginning of 2006. By year-end 2007, Saugatuck forecasts that SaaS adoption will grow to forty-seven per cent, and by 2010, to over 65 per cent.
- Meanwhile, SaaS usage within mid-size and large enterprises will more than double by 2010 - averaging more than 7 SaaS solutions in production.
- While a few technology 'master brands' with established distribution channels will thrive in SaaS markets (e.g., Salesforce.com, IBM, Microsoft), the real long-term winners will be dominant business brands (e.g., telcos, banks, or master brands such as FedEx) that partner with leading SaaS Integration Platform (SIP) providers
- Reducing and managing software costs remain important attractions for SaaS, but users are focusing much more on Service Levels, Integration with Data and Workflow, and intra- and inter-company collaboration
- Hybrid application architectures are emerging - SaaS is increasingly linked to on-premise data, applications and processes through Web Services-based Integration APIs
- SOA, Open Source, Collaboration, Mobility, Mash-ups and Web 2.0 are converging on SaaS platforms, providing rich, configurable applications and business value
- The next two years will see exploding growth for ad-supported SaaS initiatives targeting consumers (i.e., business services and productivity tools) and vertical-market small business niches (e.g., health care patient records)
- SaaS is already expanding its reach into a variety of business services as traditional BPO providers struggle to rationalise their one-to-one outsourcing models, reduce costs and bring greater process efficiency to their clients
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