More than 95% of organisations expect to maintain or grow their use of software as a service (SaaS), according to a survey by Gartner. Survey respondents cited significant integration requirements and a change in sourcing strategy as the top two reasons for adoption followed by high total cost of ownership (TCO).
However, Gartner found that most companies still do not have policies governing the evaluation and use of SaaS with only 39% of respondents indicating that such a policy or process exists, up just 1% from 38% in 2008.
The survey was conducted in December 2009 and January 2010 and involved 270 IT and business management professionals from a variety of industries in North America, Europe and Asia/Pacific who were personally involved in the implementation support, implementation, planning and/or budget decisions related to the purchase of enterprise application software.
"SaaS applications clearly are no longer seen as a new deployment model by our survey base, with almost half of those surveyed affirming use of SaaS applications in their business for more than three years," says Sharon Mertz, research director at Gartner. "The varying levels of maturity within the user base suggest growing opportunities for service providers along the adoption curve, as organisations seek assistance with initiatives ranging from process redesign to implementation to integration services."
Mertz says the scope of functionality of SaaS applications has broadened significantly in recent years. In terms of popularity for SaaS usage, the survey showed that e-mail, financial management (accounting), sales force automation and customer service, and expense management are the most popular in terms of current use, with more than 30% of the survey base using these types of applications.
In terms of expected investment levels in SaaS solutions over the next two years, survey respondents gave generally encouraging responses for software and service providers, with on average 53% of organisations expecting to increase investment levels slightly and 19% significantly. However, not all buyers intend to increase usage, with almost one-quarter of all respondents expecting investment levels to remain about the same, and 4% looking at a slight decrease in investment levels.
In comparing current with new investments in future on-premises and SaaS investments within their organisations, 72% of respondents believe SaaS investments will increase, while 45% hold the same notion about on-premises budgets. Regionally, North America and Asia/Pacific respondents indicated a stronger interest in procuring solutions via a SaaS model, and, compared with those in Europe, showed greater confidence that their organisations will increase investments in products offered as SaaS or through a subscription model through year-end 2010.
However, the survey found that some organisations have found SaaS solutions to be less than optimal for some buyers, and 16% of respondents said that they are transitioning from SaaS to on-premises solutions. Although there was no single outstanding reason that caused respondents to shift to on-premises, in general, the majority of organisations in this position was facing significant integration requirements and became unsatisfied with a TCO that became too high.
Despite the continuous adoption of SaaS across regions, more than one-third of the respondents have noted concerns on their recent SaaS deployments. Most respondents with these issues are located outside North America, specifically in Asia/Pacific where high-speed high-availability networks, are not as readily available as in North America. Issues with integration and customisation were some of the primary issues cited by respondents overall.
"These issues aside, organisations are becoming more savvy when it comes to renegotiating their SaaS contracts," says Mertz. "A key survey finding was that more organisations are renegotiating contracts for greater functionality, additional users and improved financial terms. Thirty per cent of respondents said that they had renegotiated their SaaS contracts before the end of the initial term."