Gartner Warns Hosting Not Synonymous With Cloud, SaaS

"Because SaaS and cloud are hot concepts in the market, many suppliers are rebranding their hosting or application management or application outsourcing capabilities as SaaS or are claiming their solutions are available 'in the cloud.' Much relabeling of more-traditional application outsourcing approaches is occurring," cautioned Sharon Mertz, research director at Gartner, in a statement.

And if vendors and suppliers continue cloud-washing their traditional solutions, enterprises and other buyers could face an unwelcomed surprise, Mertz noted.

"Suppliers run the risk of confusing and antagonizing buyers if they persist in this approach. Enterprises run the risk of getting nasty shocks when the thing they thought they were buying turns out to be something altogether different," she added. "Hosting and application management are not synonymous with SaaS, nor do they necessarily comply with the definition of cloud computing."

Mertz's warning comes as Gartner examines the SaaS market in a recent report, "Forecast Analysis: Software as a Service, Worldwide, 2009-2014, Update."

Overall, Gartner found, worldwide SaaS revenue in the enterprise application software market is expected to hit $9.2 billion in 2010, which is a 15.7 percent increase from last year's revenue of $7.9 billion. And in 2011, SaaS market growth is projected to boom again, with worldwide SaaS revenue reaching 410.7 billion, a 16.2 percent jump from this year.

The massive increase in SaaS usage is fueled by many companies moving to cloud computing services while also becoming more comfortable with the security and reliability of SaaS.

"Initial concerns about security, response time and service availability have diminished for many organizations as SaaS business and computing models have matured and adoption has become more widespread," Mertz said. "Usage and vendors' on-demand ecosystems continue to evolve to provide additional business and technology services, more-vertical-specific functionality, and stronger communities of partners and buyers."

Gartner also pointed out that 75 percent of current SaaS delivery revenue can be considered as a cloud computing service, but that is expected to balloon to 90 percent come 2014.

During the past 12 months to 18 months the SaaS landscape has evolved and the decision to buy SaaS solutions has become both an IT conversation and a business process discussion, Gartner said.

"There is increasing involvement from executives in purchasing decisions, as well as greater participation from IT in the purchase process due to larger deals, the expanding footprint of SaaS in the enterprise, and a higher requirement for downstream integration as SaaS becomes incorporated in the enterprise business process," Mertz said.

Additionally, Gartner found that SaaS deployments are getting larger; and social media and social software are becoming more integrated with SaaS solutions.

Meanwhile, the leading component of the SaaS market continues to be content, communications and collaboration, which is on pace to reach $2.9 billion in 2010. Content, communications and collaboration is followed closely by CRM, which has revenue of $2.6 billion, Gartner found.