Software-as-a-Service (SAAS), as the name suggests, is here to stay. It is becoming an international phenomenon, driven by both local demand and large multinationals, who are adopting SAAS business solutions on a global basis.
SAAS merger and acquisition activity is on the verge of explosion. It could be anticipated that a large number of venture-backed start-ups and emerging SAAS companies in the $5 million – $20 million range would be put up for sale over the next 12-18 months or acquired by either SAAS pure-plays, ISVs eager to enter the SAAS fray or on-shore and off-shore IT services and BPO providers, who are eager to leverage a SAAS model.
The upcoming year is an important one where next-generation horizontal and vertical franchises will be cemented. By 2010, 40 per cent of traditional on-premise application ISVs will bring to market SAAS solution offerings, either via acquisition, development of new single-instance multi-tenant applications, or through virtualized (multi-tenant) versions of their traditional on-premise offerings.
By 2012, 30 per cent or more of all new business software will be deployed and delivered as SAAS. 15 per cent of SAAS solution revenue will be accessed through SAAS marketplaces.
At least 75 per cent of the revenue generated by SAAS marketplaces will be driven by five or fewer SAAS platform providers.
These important trends will shape the evolution of SAAS applications and business services sector, including changes to how vendors will go to market, as well as how customers will gain value from SAAS solutions.
Reasons for companies shifting to SAAS
Purchasers believe that the current cost of software is disproportionate to the value that it creates. In these budget-conscious times, there is intense pressure to reduce the cost of acquisition and maintenance of software solutions.
Organizations are striving to reduce risk, and want a far more tangible relationship between software’s benefit and its cost. The drive for reduced risk demands a much greater predictability of the running costs of the organization’s software solutions. The value of solutions is no longer determined by the functionality available (in fact, most organizations are only using a small subset of the functions available in their software products), but by the feelings and experience of the users in the way that they use and interact with the solution.
What is SAAS?
SAAS is an application owned, delivered and managed remotely by one or more service providers. The provider delivers an application based on a single set of common code and data definitions, which are used by all contacted customers at any time. The service is fully owned by the service provider and delivered over the network as a service rather than as software. It is based on a pay-for-use basis or as a subscription based on usage metrics.
