Gartner Rethinks SaaS Role and Strategies for Business

By Doug Allen Comments
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Uh-oh. As if providers, partners and end-users alike weren’t already confused enough about cloud services, it now appears that network-based solutions, such as software-as-a-service (SaaS) may not be the panacea it’s so often portrayed as, at least according to recent comments from the Gartner consultancy.

Speaking at the analyst group’s recent SOA & Application Development and Integration Summit in London, several analysts downgraded SaaS’ place in the future of IT, saying it will play a significant role, but doesn't have the “dominant future that was first thought.” Though this may not come as a surprise to cloud-service skeptics, Gartner did offer a cohesive strategy to help businesses more effectively evaluate their software business requirements in relation to the viability of current SaaS offerings.

“In 2009, within enterprise applications, SaaS represented 3.4 percent of total enterprise spending, slightly up form 2008 at 2.8 percent,” said David Cearley, vice president and fellow at Gartner, which expects the global enterprise applications software market to hit $8.8 billion this year. Breaking that total down, Gartner found most SaaS spending comes from the content, collaboration and communication and customer relationship management space. Taken together, these purchases account for 65 percent of that global enterprise applications software market for 2009.

So what’s the problem? It seems SaaS solutions are starting to take on some of the bad deployment practices that afflict their on-premises counterparts. Cearley cites shelfware as a prime example: “Shelfware as a service is the concept of paying for a software subscription that is not being accessed by an end-user. This most commonly occurs in large organizations, but it could happen to any company, especially those that have downsized their workforce, or one that oversubscribed to trigger a volume discount.” Gartner estimates that up to 90 percent of SaaS implementations are not pay-per-use, clearly the most effective model for businesses.

The speakers went on to caution that while SaaS may not be living up to its original potential, the technology has revitalized the overall software market and provided more delivery options. Gartner was quick to point out that SaaS does not address all the issues surrounding software delivery, but can be highly effective for businesses that need a quick-to-implement, easy-to-configure solution for less complex  environments. “SaaS changes the role of IT from implementing its own operations to inspecting a vendor’s operations,” Cearley added.

Nevertheless, Gartner still maintains that SaaS will play a role in every company to some degree and calls for customers to move cautiously when contemplating SaaS. At the core of this assessment strategy lies four key principles:

  1. Determine the overall value of using SaaS, balancing the pros and cons, which include lower short-to-medium term TCO offset by more limited third-party applications tools
  2. Create and maintain an evolving SaaS policy and governance framework that takes into account both business and IT requirements and goals, setting up an internal and external SaaS governance model;
  3. Evaluate SaaS vendors for specific application performance as well as technical considerations such as operations management capabilities;
  4. And develop an integration plan, or “road map,” that details how SaaS applications will work with existing on-premises applications and other, third-party SaaS solutions that may be deployed now or in the future.
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