Gartner: Global SaaS Revenue to Beat $8.5 Billion This Year

Sky-high predictions for cloud services have become almost a daily occurrence, but this one is truly eye-catching; consultancy group Gartner has forecast global SaaS revenues for the enterprise market to surpass $8.5 billion this year. Thats up 14.1 percent from last years $7.5 billion. SaaS adoption has been so fast that it has driven growth to varying degrees across much of the enterprise software markets, leading to an increase in total SaaS revenues, from just over 10 percent of these combined markets last year, to more than 16 percent by 2014.

“After a decade of use, adoption of SaaS continues to grow and evolve within the enterprise application markets. As tighter capital budgets demand leaner alternatives, familiarity with the model increases, and interest in platform as a service and cloud computing grows,” said Sharon Mertz, research director at Gartner. “Adoption varies between and within markets, and although use is expanding to a wider range of applications and solutions, the most widespread use is still characterized by horizontal applications with common processes, among distributed virtual workforce teams and within Web 2.0 initiatives.”

SaaS has been spurred on by the industry emphasis on cloud services, which Gartner estimates accounts for 75 percent of todays SaaS delivery revenue; as business models mature, the total for the broader SaaS market could surpass 90 percent by 2014. Its been a while coming, Mertz says. SaaS really only began to take off about five years ago, but today, many businesses have begun to resolve key concerns about hosted services, particularly security, response time and service availability.

“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,” Ms. Mertz said. “Although some attrition occurred in 2009 due to business workforce reduction, nearly all SaaS vendors grew revenue, even during the economic downturn, as buyers continued to confirm their acceptance of on-demand. We certainly expect adoption of SaaS to far outpace market growth through 2014.”

Though SaaS overall is doing quite well, deployment levels vary widely between the broader enterprise application markets and specific market segments, depending on buyer demand and applicability of a particular app. Some sectors are booming, such as the project and portfolio management SaaS market, and customer relationship management SaaS, which pulled in almost 24 percent of the total revenue for that market last year; that number is expected to creep up to 26 percent this year. Similarly, Web conferencing SaaS accounted for roughly 82 percent of the market in 2009. By comparison, enterprise content management SaaS brought in a miserly 4 percent for the same period.

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