IDC: SaaS Momentum Skyrocketing

Interest in the SaaS (software as a service) delivery model is growing to the point that by 2012, almost 85 percent of new vendors will be focused on SaaS services, according to new research from analyst firm IDC.

Also by 2012, some two-thirds of new offerings from established vendors will be sold as SaaS, IDC said.

SaaS revenue numbers will jump up accordingly in the next few years, rising from US$13.1 billion in 2009 to $40.5 billion by 2014, according to the analyst firm.

License revenues for traditional on-premises applications will drop roughly $7 billion this year and are likely in permanent decline, since SaaS is generally sold via subscription, the report adds.

IDC’s estimate includes applications, application development, deployment and infrastructure software delivered in SaaS form. Over the next several years, the latter two categories will gain more market share, according to IDC.

The Americas accounted for about 74 percent of the overall SaaS market in 2009, but by 2014 their share will drop to 54 percent. Europe, the Middle East and Africa will account for 34 percent; and Asia-Pacific about 12 percent, IDC said.

Companies are apparently turning to SaaS for faster deployments, the lack of a need to purchase and maintain hardware, and easier upgrades.

But there are certain pitfalls to avoid as well, analyst firm Altimeter Group warned in its SaaS “bill of rights” released last year.

For one, customers should make sure they own and have unfettered access to their data, the firm said.

Unforeseen additional costs regarding data storage present another danger, that report said. “SaaS clients often find out after the fact that the storage allocations do not meet actual usage requirements. Once hooked into the product, ongoing storage costs could prove to be the largest expense item.”

Other Altimeter recommendations, such as customer indemnification from intellectual-property suits filed against their vendor, and access to multiple tiers of support, are carryovers from the world of on-premises software.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris’s e-mail address is Chris_Kanaracus@idg.com