July 2007 Research Study: Software as a Service

Finding 1:
SaaS on the Rise
Still, half of our survey respondents say their companies use or will soon deploy SaaS. Half of those deployments, however, are within specific business units, functions or geographic regions; fewer are companywide. Most companies use SaaS and application service providers on a case-by-case, application-by-application basis.

Finding 2:
Use of SaaS Is Wide, Not Deep…Yet
So far, few users have more than a handful of SaaS applications. Yes, there are many signs that the SaaS market will grow. Many companies that don’t use SaaS are exploring the option; most companies that do use SaaS plan to expand their reliance on it. Still, SaaS has a long way to go until it’s as widespread as SOA and Web services. Few companies that use or plan to use SaaS run more than 10 applications. And only a few kinds of applications—in particular, customer relationship management (the most popular SaaS application),
human resources, billing and collaboration—are procured as services by more than 20 percent of SaaS users. SaaS is no longer in its infancy, but it hasn’t gotten far beyond kindergarten. SaaS vendors must demonstrate they can deliver capable, reliable and secure products if SaaS is to really take off.

Finding 3:
User Acceptance and Security Cast Shadows on SaaS
Users give SaaS good marks for quality. Most respondents who use SaaS applications say these applications are as good as software from conventional vendors. However, nearly half report significant user resistance and say use of SaaS applications isn’t lowering their software costs. While most SaaS users say security is as good or better than security in conventional software, non-users generally don’t share that perception. If SaaS offerings exceed their competitors at security, quality and capability, it may not matter whether SaaS saves companies money in the short term. Yet, one of the arguments for SaaS is that it can help companies do away with software upgrade and maintenance costs. Unless SaaS vendors and proponents mollify the concerns of users and IT executives, it may take a long time for SaaS to establish a greater foothold.