I've just seen a press release from our friends at Gartner, trailing their Gartner Outsourcing Summit, March 19-21 in Dallas. They say the worldwide SaaS market reached $6.3 billion in 2006 and is forecast to grow to $19.3 billion by year-end 2011. There were a few quotes I just had to pick out.
At one point Ben Pring, research vice president for Gartner, says:
"There is now a widespread consensus among the movers and shakers of the IT industry that SaaS is an important and meaningful issue which can no longer be regarded as the 'lunatic fringe'."
Well I have to admit, it has felt like that at times over the past few years, but it's nice to hear that us SaaS evangelists are taking over the asylum.
The other key message is a recognition that the scale of change for traditional software vendors is too hard for many of them to manage:
"Due to the law of large numbers, traditional IT solution models are becoming victims of their own success, while the relative smallness of new approaches facilitates growth much more easily," said Mr. Pring. "For large, established IT solution providers, the SaaS market so far hasn't appeared to have enough incremental growth potential to meaningfully contribute to revenue growth. As a result, they have tended to ignore it. This has left the door open for smaller, newer players, who are now pouring into this gap. Incumbent IT solution providers are slowly waking up to this and are entering the market to leverage SaaS market interest."
This is exactly why the likes of Sage originally trailed their Sage Hosted Online 50 product way back in November 2005, but didn't formally announce it till last month - 15 months later. In the end, it isn't actually a Software as a Service approach, but their existing Windows product hosted with Citrix technology. Others are using this approach, but surely these are just stopgap solutions which can't give the kind of benefits of the full SaaS approach. Gartner's definition of SaaS is as follows:
"SaaS is hosted software based on a single set of common code and data definitions that are consumed in a one-to-many model by all contracted customers, at any time, on a pay-for-use basis, or as a subscription based on usage metrics."
It's the one-to-many model that provides the opportunity for economies of scale that can be shared by the user community and provide a better Total Cost of Ownership. Watch out for the Financial Software as a Service Manifesto, coming soon on AccountingWEB.