“In 2009, within enterprise applications, SaaS represented 3.4% of total enterprise spending, slightly up from 2008 at 2.8%,” said David Cearley, vice president and fellow at Gartner. Gartner predicts that the global enterprise applications software market will reach $8.8 billion in 2010.
From a market perspective, most of the spending for SaaS is occurring in content, collaboration and communication and the customer relationship management markets. Collectively, they represented 65% of the global enterprise applications software market in 2009.
Many of the bad practices that occurred in the on-premises world are now moving their way into SaaS. The biggest example is shelfware. “Shelfware as a service is the concept of paying for a software subscription that is not being accessed by an end user,” said Mr. Cearley. “This most commonly occurs in large organizations, but it could happen to any company, especially those that have downsized their workforce, or one that has oversubscribed to trigger a volume discount.”
SaaS may not have delivered on its early grand promises - of the current SaaS deployments we estimate that a total of 90% of SaaS deployments are not pay-per-use -, but it has re-energized the software market and added choice. SaaS does not solve all the challenges of software delivery, but can provide advantages based on the specific circumstances of a deployment as it is quicker to implement and configure for less-complex problems. “SaaS changes the role of IT from implementing its own operations to inspecting a vendor’s operations,” Mr. Cearley added.
Gartner said that SaaS will likely penetrate every company at one level or another and recommends that organizations consider four steps when evaluating SaaS:
- Determine Value SaaS is not a panacea, and companies need to evaluate and understand the trade-offs that SaaS presents. While it limits infrastructure overheads and management, and lowers short- to medium-term total cost of ownership, third-party application tools are limited and SaaS applications cannot be counted as assets on a balance sheet.
- Develop Governance The next step is to develop a SaaS policy and governance document. This document should be a collaborative effort between the business and IT to create internal and external SaaS governance model.
- Evaluate Vendors Organizations need to evaluate SaaS vendors for specific application needs as applicable. A vendor’s commitment to SaaS is not just measured in business performance, but in technical considerations, such as operations management capabilities.
- Develop an Integration Road Map This step will be a continuous process of developing an integration road map on how SaaS applications will integrate with on-premises applications and other SaaS solutions deployed.