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By Bob Violino
Software as a service (SaaS) is fast emerging as an efficient way to acquire software applications, at a time when many organizations are looking for ways to cut costs and increase business agility.
As demand for SaaS grows, so do the options for companies seeking to procure software this way. SaaS offerings today span many different types of software, and CIOs have a growing number of choices.
SaaS allows organizations to buy software "on demand" from vendors, which host the applications on their own Web servers or download the software to customers' systems. By using SaaS, businesses don't have to bother with loading their devices with many kinds of applications that might not even be used by employees. They also don't have to deal with maintenance concerns such as software patches and don't have to pay for licenses for each device.
Organizations are increasing their reliance on software services, expanding its use into larger deployments and more application areas, according to a report published by Forrester Research in March. The Cambridge, Mass., firm reported that 21% of the 239 U.S.-based companies surveyed in the fourth quarter of 2008 said they're using or piloting SaaS, compared with 18% in the previous year.
A survey of 200 U.S.-based IT professionals, conducted in November 2008 by research firm IDC in Framingham, Mass., showed that nearly one in five of the organizations were fully committed to SaaS, expecting 80% to 100% of their software to be procured via SaaS in the next four to five years. About the same percentage are "fairly committed" to SaaS, planning to have half their software delivered as SaaS within four to five years.
SaaS usage has grown well beyond its early roots, where it was mainly used in customer resource management (CRM) and human resource (HR) deployments, the Forrester report says. "SaaS offerings continue to proliferate across a variety of application areas and continue to push the boundaries in areas like customization and integration with existing enterprise IT solutions," says Liz Herbert, senior analyst at Forrester.
"The combination of the vendor activity-more SaaS offerings, more sophisticated SaaS offerings, entry from leading software vendors [and] the buyer appetite for SaaS means that SaaS continues to grow and will continue to grow across a range of applications, deployment sizes and geographies," Herbert says.
The SaaS market includes major software vendors as well as lesser known niche providers. Here's a look at some of the application areas SaaS is moving into, and some of the vendors that are emerging as key players.
Business intelligence. BI is a relatively new category within SaaS, and numerous vendors have appeared on the market. These include such established providers as SAP (through Business Objects), but many of the vendors are smaller companies.
The potential of SaaS BI is strong, Forrester says, particularly its potential to improve the end-user experience and access to analytics, as well as its ability to enable collaborative or benchmarking-type reporting scenarios.
Among the companies that are offering BI SaaS are Adaptive Planning, Birst, Blink Logic, SAP/Business Objects, Cloud9 Analytics, Good Data, Host Analytics, Kognitio, LucidEra, Oco, PivotLink and Telemetree.
Collaboration. Web 2.0 is hot, and lots of organizations are getting their collaboration applications via SaaS. Technologies used for collaboration include everything from email and instant messaging to wikis and blogs.
"The content, communications and collaboration [segment] remains the largest contributor to the overall SaaS enterprise application markets," with revenue exceeding $2.1 billion in 2008 and expected to amount to $4.7 billion by 2012, says Sharon Mertz, research director, Software Market Research Team at Garner Inc. in Stamford, Conn. The two largest sub-markets for SaaS within the collaboration area are Web conferencing and team collaboration, Mertz says.
Among the leading vendors in team collaboration software, according to Mertz, are Designlinks International, IntraLinks, Grove Technologies, Huddle/Ninian Solutions, Jive Software and TeamSpace. For Web conferencing, vendors include Adobe, Cisco, Citrix, IBM, InterCall and Microsoft.
Enterprise content management. ECM technology is being adopted by more organizations as they look for ways to reduce paperwork and improve workflows. Companies deploy ECM to create, manage and distribute a variety of content types.
Among the vendors in the SaaS ECM market are EMC, IntraLinks, Microsoft and SpringCM.
Some organizations are beginning to look at content management SaaS solutions as alternatives to large on-premise applications, Forrester says, and the number of enterprises investing in content management SaaS continues to grow.
Enterprise resource planning (ERP). One of the trends in the ERP market is the emergence of SaaS delivery of these enterprise applications used to manage organizations' back-office processes such as human resources, accounting and order management.
Traditional ERP vendors such as SAP and Oracle will push farther into alternative delivery methods such as SaaS to compensate for slower growth in on-premise ERP, according to Robert Mahowald, director of SaaS and on-demand research at IDC.
SAP in September 2007 launched SAP Business ByDesign, on-demand business software aimed at mid-size companies. The offering includes ERP software with built-in service and support.
SaaS ERP offers a pay-as-you-go alternative to packaged applications or custom-built ERP systems. The vendors offering SaaS ERP include ADP, Coda, Glovia, Intacct, NetSuite and Applicor.
Supply chain management (SCM). Applications that help organizations run their supply chains more efficiently as a whole have not yet reached the stage of notable SaaS adoption, Forrester says. But within the SCM category certain areas such as supplier relationship management, global trade management and supply chain event management have started to show movement toward adopting SaaS.
More collaborative supplier management applications are likely to accelerate in adoption, Forrester notes, while other areas of supply chain-especially those with heavy customization and integration needs-likely will be adopted later on.
Among the vendors addressing this market are Aravo, GT Nexus and Sterling Commerce.
Given the potential benefits of SaaS-the IDC survey cited such gains as ease of deployment, lower costs and access to the latest functionality-it's likely more organizations will jump on the SaaS bandwagon. As long as there's healthy demand, expect vendors to continue to support new applications.
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