Gartner Forecasts 16% Increase In Enterprise SaaS Revenue During 2011

Gartner has released a forecast that predicts a 16.2 percent increase in SaaS revenue in the enterprise application market from 2010. The SaaS revenue in the enterprise application software market in 2009 was $7.9 Billion and, according to the analyst firm, it is forecasted to increase to $9.2 Billion in 2010, a solid 15.7 percent increase from 2009, considering the kind of resistance SaaS has been seeing in the enterprises due to concerns over

• Security
• Availability
• Integration issues

According to Sharon Mertz, research director at Gartner, the initial concerns have considerably diminished as SaaS model matured and saw widespread adoption. Clearly, SaaS is heading towards a large scale enterprise adoption in the coming years.

The research conducted by Gartner in the past 12-18 months saw some interesting shifts in the market. Some of the shifts observed by them include (my comment in the parenthesis):

• There is an increasing involvement of executives in the purchasing decisions and an increased participation by IT in the process
• A higher requirement for downstream integration as SaaS gets incorporated in the enterprise business process
• An increasing number of enterprises are using a variety of SaaS applications from multiple vendors that were procured and deployed without participation from IT, creating management issues and challenges. (Possibly, IT’s interest in the purchasing process mentioned above could be a fallout of this particular observation)
• SaaS deployments are becoming larger, with deals more frequently appearing in the range of thousands to tens of thousands of users within large enterprises
• Social media and social software are becoming increasingly integrated with SaaS solutions, as social platforms such as Facebook and Twitter are leveraging customer service, sales and marketing initiatives. In contrast, recent research indicates that social software has the lowest adoption rate by buyers of SaaS solutions. (This is a surprising observation and I would love to hear about this from vendors who pushing social integration into their applications strongly. In this regard, I want to point out to an observation made by Raju Vegesna of Zoho on this topic)
• Content, communications and collaboration (CCC) continues to lead the enterprise SaaS market with worldwide CCC revenue on pace to reach $2.9 billion in 2010, followed by customer relationship management (CRM) revenue of $2.6 billion. For CCC technologies, SaaS use varies across the market segments. For certain markets, such as ECM and search, SaaS is barely used at all, while for Web conferencing, it is the predominant form of software access. (I completely agree with this observation. Though there is some level of cloudwashing on the ECM side, there is no strong interest among vendors to go SaaS)
• Gartner estimates that 75 percent of the current SaaS delivery revenue could be considered as a cloud service, and that could exceed 90 percent by 2014 as the SaaS model matures and converges with cloud services models

One of the observations made by Gartner Analysts is very important as enterprises consider moving to SaaS. It is about cloudwashing. According to Gartner, “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“. As many cloud evangelists and analysts always warn the customers, beware of cloud washers.

Related articles

• Gartner Predicts Strong Growth for Both Enterprise SaaS and Social Software in 2011 (readwriteweb.com)
• Gartner: Enterprise SaaS $9.2 billion and growing (news.cnet.com)
• Enterprise SaaS market hit $9.2bn in 2010 (v3.co.uk)
• 2011 CRM Forecast – What’s Up Wit’ Dat – Part II (enterpriseirregulars.com)
• Enterprise social software market shows steady growth (v3.co.uk)
• SaaS Growth, Dogfood, and Images (enterpriseirregulars.com)