SaaS Set To Explode In 2010: Survey

According to Gartner, more than 95 percent of organizations will maintain or grow their SaaS use through 2010 fueled mostly by integration requirements, a change in sourcing strategy, and total cost of ownership.

“SaaS applications clearly are no longer seen as a new deployment model by our survey base, with almost half of those surveyed affirming use of SaaS applications in their business for more than three years,” said Sharon Mertz, research director at Gartner, in the survey. “The varying levels of maturity within the user base suggest growing opportunities for service providers along the adoption curve, as organizations seek assistance with initiatives ranging from process redesign to implementation to integration services.”

Despite the pending upswing in SaaS use, Gartner also found that many companies don’t have policies governing the evaluation and uses of SaaS. The survey revealed that 39 percent of respondents had policy or processes governing SaaS, which was up just one percent from 2008.

Gartner conducted the survey in December 2009 and January 2010, querying 270 IT and business management professionals involved in the implementation, support, planning and budgeting decisions regarding enterprise application software.

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The survey found that the most popular SaaS applications include email, financial management and accounting, sales force automation, customer service and expense management, with more than 30 percent of survey respondents using those applications.

Additionally, 53 percent of organizations expect to increase their SaaS investment slightly over the next two years and 19 percent expect to boost SaaS investments significantly. Still, about 25 percent of respondents expect SaaS investments to remain level and 4 percent will reduce their SaaS spend slightly. Meanwhile, 72 percent of respondents believe SaaS investments will increase compared to current investments while 45 percent said on-premise budgets will increase compared to where they currently are.

And while it appears SaaS is ready to rapid and strong enterprise growth, the Gartner survey did reveal that some organizations find SaaS solutions less than optimal. Sixteen percent of respondents said they are transitioning from SaaS to on-premise solutions. While Gartner found now specific reason for the shift away from SaaS, organizations moving to on-premise software were faced with significant integration requirements and were unsatisfied with the TCO.

“These issues aside, organizations are becoming more savvy when it comes to renegotiating their SaaS contracts,” according to Mertz. “A key survey finding was that more enterprises are renegotiating contracts for greater functionality, additional users and improved financial terms. Thirty percent of respondents said that they had renegotiated their SaaS contracts before the end of the initial term.”