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July 8, 2011

Worldwide SaaS revenue to grow 21% in 2011: Gartner

SaaS to represent nearly 32% of the CRM market's total software revenue in 2011

By CBR Staff Writer

Worldwide Software as a Service (SaaS) revenue is forecast to grow 20.7% to $12.1bn in 2011 compared to $10bn revenue in 2010, and will grow to $21.3bn in 2015, according to Gartner.

The IT research firm said the significant industry buzz surrounding SaaS and other off-premises models has shifted to cloud computing during the past two years.

An estimated 75% of current SaaS delivery, as measured by revenue, could be regarded as cloud services, and this could exceed 90% by 2015 due to maturity of the SaaS model and its convergence with cloud service models.

Gartner research vice president Tom Eid said initial concerns about security, response time and service availability have diminished for many organisations as SaaS business and computing models have matured and adoption has become more widespread.

Eid said, "Usage and vendors’ on-demand ecosystems continue to evolve to provide additional business and technology services, more vertical-specific functionality, and stronger communities of partners and buyers."

SaaS revenue within the customer relationship management (CRM) market is forecast to reach $3.8bn in 2011, up from $3.2bn in 2010, with Gartner expecting SaaS to represent nearly 32% of the CRM market’s total software revenue in 2011.

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"The market landscape for on-demand CRM continues to evolve and mature as the availability and use of SaaS solutions become more pervasive," Eid said.

"Greater market competition and increased focus on megavendors reinforce the legitimacy of on-demand solutions, mitigating initial objections about security and availability for many, as acceptance of SaaS as a viable model for enterprise computing services grows."

2e2 CTO Nathan Marke said it is clear that SaaS is becoming an increasingly attractive way for organisations to receive the applications and services they need.

"Being able to pay for services such as CRM on a pay-for-use or subscription basis can provide organisations with the flexibility they require, but at the same time help them reduce their capital expenditure at a time when IT budgets remain tight, Marke said.

SaaS revenue within the content, communications and collaboration (CCC) market is on pace to surpass $3.3bn in 2011, up from $2.8bn in 2010.

Within the CCC market, SaaS represented just 5% of enterprise content management (ECM) in 2010 but approximately 83% of web conferencing.

SaaS contributes just 7% of the overall enterprise resource planning (ERP) market, with ERP SaaS offerings contributing approximately $1.5bn to the SaaS market in 2010, and is expected to increase to $1.7bn by year-end 2011, Gartner said.

As far as SaaS penetration within ERP is concerned, human capital management (HCM) is the most penetrated (in terms of adoptions and revenue growth) and enterprise asset management (EAM) and manufacturing being relatively unaffected by SaaS.

"The figures from Gartner show that IT environments are starting to change with more and more organisations taking services from the ‘cloud’. The challenge for many organisations is how to effectively manage these services alongside the ones they currently receive on premise," Marke said.

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