I recently read a report from Gartner titled “User Survey Analysis: Software as a Service, Enterprise Application Markets, Worldwide, 2008” that had some interesting results regarding the adoption of SaaS products in enterprises. The bottom line: first, enterprises love SaaS. Second, there is still plenty of room for SaaS to grow in the enterprise space.
The report indicated that more than 40% of survey participants have already been using SaaS for more than three years. That is terrific because not only does that indicate that there are lots of early adopters…but they are sticking with the model and not “trying it out” only to bail back to the old software licensing model. I don’t believe that customers are locked in because of contracts either. The nature of SaaS means that the SaaS vendors are earning the business every day while the customer uses the product and not just the day the customer bought the licenses or equipment. Long term use is a great thing to see for SaaS products.
40% adoption is a great number, but that still leaves the majority of the market that is still in a wait-and-see mode. So, there is plenty of room to grow for SaaS products. SaaS products have a lot going for them in this regard. Much of the movement to SaaS in the enterprise space has to do with enterprises seeking a better total cost of ownership as well as seeking out products and solutions that will solve the needs left unmet by on-premise solutions. On both points, I believe SaaS has an advantage. The case studies that I have seen indicate that total cost of ownership seems to tip its hat in the direction of SaaS products more often than not. And since SaaS applications are typically more modern and more frequency in their feature releases, the chances of meeting performance expectations has the advantage as well.
As always, I love to hear your experiences transitioning from on-premise to SaaS products. Share your stories with me at firstname.lastname@example.org.