(from Antone Gonsalvez at InformationWeek)
SaaS Revenue Growing, Market Set To Double By 2012
Driving the growth in SaaS deployments is businesses' desire to reduce their IT capital expenditure budget and to rapidly implement software that supports a specific business need, Gartner said.
Worldwide software-as-a-service revenue in the enterprise application market is
on pace to surpass 2007 sales by 27% and to more than double by 2012, a market
research firm said Wednesday. Revenue this year is on track to rise above
$6.4 billion, compared with $5.1 billion last year, Gartner said. In four years,
revenue is expected to reach $14.8 billion.
While it is always a little dangerous to follow predictions from analysts with considering your specific market or application, this announcement is an interesting one given the current economic conditions. In essence they are endorsing that the SaaS model has increasing leverage over existing software models as the IT spending tightens.
We share this premise at Hummer Winblad and have invested heavily in the SaaS model...with over 15 portfolio companies to date including Omniture (web analytics), EmployEase (HR management), Aria Systems (Subscription Billing), etc. We see the model having some key strengths in this market:
1) Lower entry point customers - easier to get started, lower risk to trial, limited upfront expenditure. Also, the ability to buy or try without getting all the traditional enterprise sales points involved (IT, finance, etc)
2) Build vs Buy for business services - SaaS models become more interesting as companies debate if they should try to build out the service themselves via internal teams, or go with a known working solution where they can leverage existing best practices.
3) Lower TCO - often the best way to justify a SaaS offering is to have a customer lay out the true cost of the internal infrastructure
The SaaS wave appears to be continuing to gain momentum...lets hope we can really see the category double by 2012...