Nearly 90% of organisations expect to maintain or grow their usage of software-as-a-service (SaaS), citing cost-effectiveness and ease/speed of deployment as primary reasons for adoption.

According to a recent survey by Gartner, replacement of on-premises solutions and net-new implementations were cited as major drivers of future deployments. More than one-third of respondents indicated plans to transition from on-premises to SaaS.
The key drivers cited included total cost of ownership (TCO), and unmet performance expectations with on-premises solutions, in addition to changes in sourcing strategy.
The survey was conducted across eight major countries worldwide in June and July 2008 with 258 qualified respondents completing the survey. Qualified respondents were those individuals within the organisations personally involved in the implementation support, implementation, planning and/or budget decisions related to the purchase of enterprise application software. Organisations participating in the survey were either currently using SaaS, or planned to use it within the next 12 months.
"Use of SaaS has been evolving during the past decade and the SaaS model has become increasingly popular over the past three or four years," says Sharon Mertz, research director at Gartner. "Our survey indicates that more than 40% of organisations have used SaaS for more than three years, implying a growing fluency with the model within the end-user base.
"Users are demanding higher levels of functionality, sometimes prompting organisations to renegotiate their contracts early to opt for more feature-rich solutions, or to add more users as the organisational footprint expands."
North American respondents showed a greater confidence that their organisations will increase investments in products offered as SaaS or through a subscription model through year-end 2010, compared with those in Europe and Asia/Pacific.
Sixty two percent of North American respondents said that they expected new investments to increase slightly and 15% said that they expected new investments to increase significantly compared with 49% and 15%t, respectively, in Europe; and 55% and 5%, respectively, in Asia/Pacific.
North America was an early adopter of solutions delivered through the SaaS model, with more than 20% of respondents indicating use for five years or longer and 60% having adopted it in the last three years.
Gartner's survey found that 37% of respondents were transitioning from a current on-premises solution to a SaaS solution. This drive is particularly significant in Asia/Pacific where 50% of respondents indicated that they were shifting away from on-premises and India indicated a 70% conversion.
When asked why their organisations were transitioning from a current on-premises solution to a SaaS solution, respondents' consistent message was that the TCO was becoming too financially onerous.
Given the likelihood of reduced discretionary spending in 2009 and perhaps 2010, Gartner expects that these driving forces will foster greater demand for SaaS solutions rather than budgets directed at enhancing – or furthering investment for – on-premises solutions.
Despite the increase in usage of SaaS, most respondents to Gartner¹s survey indicated that no policies had been instituted to govern the evaluation and use of SaaS.
Only 38% of total respondents that are currently using SaaS have a process or policy that guides the evaluation, procurement and deployment of SaaS. The majority of these organisations are based in Europe and North America. While another 30% indicated plans to develop these policies and or processes, another 26% have no plans at all to address this issue.
Mertz says the importance of governance mechanisms will increase as SaaS becomes a larger element of a company's overall sourcing strategy.