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SaaS adoption on the rise

Most North American companies don't have the know-how to evaluate and use SaaS

More than 95 per cent of organizations expect to maintain or grow their use of software as a service (SaaS), said Gartner.

The research firm lately unveiled results of a survey where respondents cited significant integration requirements and a change in sourcing strategy as the top two reasons for adoption followed by high total cost of ownership (TCO).

The survey, said Gartner, was conducted in December 2009 and January 2010 and involved 270 IT and business management professionals from a variety of industries in North America, Europe, and AsiaPacific who were personally involved in the implementation support, implementation, planning and/or budget decisions related to the purchase of enterprise application software.

However, most companies still don’t have policies governing the evaluation and use of SaaS with only 39 per cent of respondents indicating that such a policy or process exists, up just one per cent from 38 per cent in 2008, said Gartner.

“SaaS applications clearly are no longer seen as a new deployment model by our survey base, with almost half of those surveyed affirming use of SaaS applications in their business for more than three years,” said Sharon Mertz, research director at Gartner. “The varying levels of maturity within the user base suggest growing opportunities for service providers along the adoption curve, as organizations seek assistance with initiatives ranging from process redesign to implementation to integration services.”

Popular SaaS apps

The scope of functionality of SaaS applications has broadened significantly in recent years, Mertz noted. In terms of popularity for SaaS usage, the survey showed that e-mail, financial management (accounting), sales force automation and customer service, and expense management are the most popular in terms of current use, with more than 30 per cent of the survey base using these types of applications.

In terms of expected investment levels in SaaS offerings over the next two years, survey respondents gave generally encouraging responses for software and service providers, with on average 53 per cent of organizations expecting to increase investment levels slightly and 19 per cent significantly, said Gartner. However, not all buyers intend to increase usage, with almost one-quarter of all respondents expecting investment levels to remain about the same, and four per cent looking at a slight decrease in investment levels, the analyst house added.

In comparing current with new investments in future on-premises and SaaS investments within their organizations, 72 per cent of respondents believeSaaS investments will increase, while 45 per cent hold the same notion about on-premises budgets, according to the report.

Regionally, North America and Asia Pacific respondents indicated a stronger interest in procuring tools via a SaaS model, and, compared with those in Europe, show greater confidence that their organizations will increase investments in products offered as SaaS or through a subscription model through year-end 2010, Gartner noted.

The survey also found that some organizations have found SaaS offerings to be less than optimal for some buyers, and 16 per cent of respondents said that they are transitioning from SaaS to on-premises solutions.

Although there was no single outstanding reason that caused respondents to shift to on-premises, in general, the majority of organizations in this position was facing significant integration requirements and became unsatisfied with a TCO that became too high, said Gartner.

Despite the continuous adoption of SaaS across regions, more than one-third of the respondents have noted concerns on their recent SaaS deployments.

Most respondents with these issues are located outside North America, specifically in Asia Pacific where high-speed high-availability networks, are not as readily available as in North America, said Gartner, adding that issues with integration and customization were some of the primary issues cited by respondents overall.