SaaS To Grow 21% in 2011, Gartner Says

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Worldwide software as a service (SaaS) revenue is forecast to reach $12.1 billion in 2011, a 20.7 percent increase from 2010 revenue of $10 billion, according to Gartner Inc. The SaaS-based delivery will experience healthy growth through 2015, when worldwide revenue is projected to reach $21.3 billion, the research firm reported.

Gartner defines SaaS as software that is owned, delivered and managed remotely by one or more providers. The provider delivers an application based on a single set of common code and data definitions, which is consumed in a one-to-many model by all contracted customers anytime on a pay-for-use basis, or as a subscription based on use metrics.

"After more than a decade of use, adoption of SaaS continues to grow and evolve within the enterprise application markets," said Tom Eid, research vice president at Gartner. "This is occurring as tighter capital budgets demand leaner alternatives, popularity and familiarity with the model increases, and interest in platform as a service (PaaS) and cloud computing grows."

Eid noted that Initial concerns about security, response time and service availability have diminished for many organizations.

He added that while the buzz around SaaS has shifted to cloud computer, Saas is a leading indicator of the cloud market performance. Gartner estimated that 75 percent of current SaaS delivery, as measured by revenue, could be regarded as cloud services, and this could exceed 90 percent by 2015 as the SaaS model matures and converges with cloud service models.

Customer relationship management (CRM) continues to be the largest market for SaaS. CRM is forecast to reach $3.8 billion in 2011, up from $3.2 billion in 2010. Further, Gartner said it expects SaaS to represent nearly 32 percent of the CRM market's total software revenue in 2011.

SaaS revenue from the content, communications and collaboration (CCC) market is on pace to surpass $3.3 billion in 2011, up from $2.8 billion in 2010. The CCC market continues to show the widest disparity of SaaS revenue generation, with SaaS representing just 5 percent of enterprise content management (ECM) in 2010 but approximately 83 percent of Web conferencing.

The proportion of enterprise resource planning (ERP) revenue attributed to SaaS overall is still in the single digits, at approximately 7 percent of the overall ERP market. ERP SaaS offerings contributed approximately $1.5 billion to the SaaS market in 2010, and by year-end 2011, Gartner expects this to increase to $1.7 billion. The penetration of SaaS within ERP varies greatly between subsegments, with human capital management (HCM) being the most penetrated (in terms of adoptions and revenue growth) and enterprise asset management (EAM) and manufacturing being relatively unaffected by SaaS.

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