The software-as-a-service model hasn't lived up to its "early grand promises," declared research firm Gartner today, adding that organizations should take a closer look at their needs when considering cloud-based applications.

According to Gartner, only 10 percent of SaaS implementations actually qualify as "pay as you go," which is often pointed to as a big benefit of the approach. And bad on-premise practices aren't going away just because the software is hosted -- such as shelfware.

"Shelfware as a service is the concept of paying for a software subscription that is not being accessed by an end user," said Gartner VP David Cearley. "This most commonly occurs in large organizations, but it could happen to any company, especially those that have downsized their workforce, or one that has oversubscribed to trigger a volume discount."

Gartner says that SaaS accounted for 3.4 percent of enterprise software spending in 2009, a modest gain from 2.8 percent the year before. Total SaaS spending reached $7.5 billion last year, and the research firm expects that number to grow to $8.8 billion this year.

But a little less than four years ago, Gartner estimated that about 25 percent of new business software would be delivered via an SaaS model by 2011. Now, Gartner says that SaaS "will have a role in the future of IT, but not the dominant future that was first thought."

Newly cautious, the research firm suggest that companies understand what they're losing with SaaS. "While it limits infrastructure overheads and management, and lowers short- to medium-term total cost of ownership, third-party application tools are limited and SaaS applications cannot be counted as assets on a balance sheet," says Gartner.