Barbara Gengler May 29, 2007
AS the software-as-a-service market continues to pick up steam, analysts say established enterprise software providers cannot ignore the trend.
One researcher even predicts the emergence of surprising new participants.
"For large, established IT solution providers the SaaS market so far has not appeared to have enough incremental growth potential to meaningfully contribute to revenue growth," Gartner analyst Ben Pring says.
However, "incumbent IT solution providers are slowly waking up to this and are entering the market to leverage SaaS market interest".
That analysis is backed up by another researcher, IDC, where senior research vice-president Frank Gens says SaaS "sleeping giant" IBM will awaken, and shake up the SaaS space with its WebSphere range of products.
Microsoft and SAP will increase their commitment with newer products aimed at smaller markets. In a seemingly off-the-wall prediction, Gens says SaaS market leader Salesforce.com is ripe for takeover but he does not think IBM, Oracle or SAP will be the acquirer.
Gens says it will be either Google or Yahoo, allowing them to move deeper into the enterprise market from their consumer roots.
The worldwide SaaS market reached $US6.3 billion ($7.7 billion) in 2006 and is forecast to grow to $19.3 billion by the end of 2011, according to Gartner.
Gartner defines SaaS as hosted software based on a single set of common code and data definitions that are consumed in a one-to-many model by all contracted customers, at any time, on a pay-for-use basis, or as a subscription based on usage.
The report emphasises that SaaS adoption is broadening out from areas such as customer relationship management and human resources into new areas such as procurement and compliance management.
The scale of change involved in moving to a SaaS approach is proving hard for many to manage.
"Hosted services have come a long way from the lunatic fringe to emerge as an accepted norm," Pring says. "Other than IBM and more recently Google, large players have given the technology a wide berth, in part because of its lack of perceived growth potential."
Driven by debate over the technology, the concept of core competence and the economics of capital allocation, SaaS sees the pendulum swinging away from today's accepted norms and towards a business model that predates it.
After a period of supply-side stagnation (2000-04) new players such as Salesforce.com, Case Central, Axentis, Rearden Commerce, NetSuite and Invoice Insight have emerged.
By 2011 Gartner expects that about a quarter of all applications being used by companies will delivered SaaS-style, Pring says.
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