Businesses are looking to a new model for delivering core enterprise applications – and its good news for ISPs
Software as a service is shaking up the enterprise applications market with an increasing number of companies choosing to buy their software on demand. Its advocates say that it is easier to use and manage, quicker to deploy, offers better performance and lower cost of ownership. And perhaps most importantly it gives business units the ability to buy their own services directly.
The market for software as a service (SaaS) is booming. Gartner Group predicts that the worldwide revenue from SaaS will surpass $5 billion in 2007. This is a 21% increase over 2006, and the analyst expects the market to grow considerably through to 2011, when it will reach $11.5 billion.
Software as a service grew out of the failed application service provider (ASP) model first seen in the Internet boom. However, unlike most ASP services, SaaS is architected specifically for network delivery. Customers pay for the software by subscription or through a pay-as-you-use utility model and it is hosted on either a shared or a dedicated platform.
Making the match
Some software is clearly better suited to online delivery than others, with adoption rates varying between 1% to in excess of 75% of total software sales, according to Gartner. E-learning and Web conferencing have a 60% and 70% adoption rate respectively, while enterprise content management (ECM) has an uptake of only 1%.
The ease of use and simple deployment of SaaS has also given business units the freedom to acquire their own applications without having to go through the IT department. Freed from long development and deployment cycles, business units can meet their immediate need with services delivered over the network. Although this helps align IT with business objectives, businesses need to ensure that it does not spawn a flood of rogue buying. To prevent this, the IT department should continue to have a role in the governance of all new services, even if acquired directly by the business units.
“SaaS adoption is highest in applications that support simplified, common business processes or large, distributed virtual workforce teams,” said Sharon Mertz, research director at Gartner. “Ease of use, rapid deployment, limited upfront investment in capital and staffing, plus a reduction in software management responsibility all make SaaS a desirable alternative to many on-premises solutions, and they will continue to act as drivers of growth.”