Worldwide software-as-a-service (SaaS) revenue is forecast to reach $14,5-billion in 2012, a 17,9% increase from 2011 revenue of $12,3-billion, according to Gartner. SaaS-based delivery will experience healthy growth through 2015, when worldwide revenue is projected to reach $22,1-billion.
“After more than a decade of use, adoption of SaaS continues to grow and evolve regionally within the enterprise application markets,” says Sharon Mertz, research director at Gartner. “Increasing familiarity with the SaaS model, continued oversight on IT budgets, the growth of platform as a service (PaaS) developer communities and interest in cloud computing are now driving adoption forward.”
Although growing interest has been observed in vertical-specific software, the most widespread use is still characterised by horizontal applications with common processes, among distributed virtual workforces and within web 2.0 activities.
“The top issues encountered when deploying SaaS vary by region,” says Mertz. “Limited flexibility of customisation and limited integration to existing systems are the primary reasons in North America. In EMEA, network instability is the issue most frequently encountered, whereas longer-than-expected deployments are the top issue in Asia/Pacific. Vendors are more aggressively pursuing SaaS buyers outside traditional markets by offering local-language availability, forming alliances and constructing data centres to accommodate local requirements.”
North America, specifically the US, currently represents the largest opportunity for SaaS, and it is the most mature of the regional markets. SaaS software revenue is forecast to total $9,1-billion in 2012, up from $7,8-billion in 2011. Consistent with other regions, North America shows the highest SaaS deployments in expense management, financials, email and office suites. Use of web conferencing is higher in North America than in other regions, in part because of a highly distributed workforce.
In Western Europe, SaaS revenue is forecast to surpass $3,2-billion in 2012, up from $2,7-billion in 2011, while SaaS revenue is Eastern Europe is projected to reach $169,4-million, up from $135,5-million last year.
Gartner analysts say SaaS adoption in EMEA is currently running at two speeds. In Western Europe, the most developed subregion, SaaS offerings and adoption rates are rapidly increasing as North America-based SaaS vendors further penetrate the region and the number of local European SaaS vendors’ increases. In Eastern Europe and the Middle East & Africa, which are small and emerging markets overall, the potential opportunity for SaaS is more in the medium to long term due to ongoing infrastructure challenges that vendors need to overcome if they are to be successful in these regions.
SaaS revenue in Asia/Pacific is on pace to reach $934.1 million in 2012, up from $730.9 million in 2011. Overall, SaaS adoption in Asia/Pacific has been fragmented. Asia/Pacific (excluding Japan) is a combination of mature markets, such as Australia, New Zealand, Hong Kong, Singapore, South Korea and Taiwan, and emerging markets, including China, India, Malaysia, Thailand, Indonesia, Vietnam and the Philippines. SaaS financial (accounting) applications are most popular, particularly in China and India. The next-highest SaaS usage is for enterprise resource planning (ERP) functions — such as expense management and employee performance management — followed by office suites, email and the customer relationship management (CRM) sales function.
While the Japanese economy is still struggling and IT budgets are limited, the demand for SaaS solutions is increasing due to their lower implementation costs and faster deployment times. SaaS revenue in Japan is forecast to reach $495,2-million in 2012, up from $427-million in 2011. Gartner forecasts that growth of the SaaS market in Japan through 2015 will be led by CRM and email/groupware, which already have actual demand. Users have found that using SaaS reduces the burden of application management, increases the ease and agility of deployment, and reduces initial costs of implementation. In addition, since the 2011 earthquake and tsunami, users have looked to SaaS adoption as a defence against future power outages and disasters. However, many companies are still concerned about SaaS-related issues, such as data security risk, true cost-effectiveness and the difficulty of linking with other systems.
SaaS revenue in Latin America is forecast to total $419,7-million in 2012, up from $331,1-million last year. In Latin America, SaaS has become most popular to deploy in the areas of email, financial management (accounting), sales force automation and customer service, and expense management. While regional adoption will be positive, it is fully expected that Brazil and Mexico will drive a majority of adoption and revenue opportunities. In the next two years, buyers are most likely to purchase SaaS solutions in packaged CRM, procurement and ERP applications.
Gartner defines total software revenue as revenue from new licenses, subscriptions, and software maintenance and technical support services that include license sales to update/upgrade an existing license to a new version, telephone support and on-site remedial support. SaaS is primarily a software delivery and management approach that exists in established markets, such as CRM or ERP.