Monday, July 11, 2011

Worldwide Software as a Service Revenue Is Forecast to Grow 21 Percent in 2011

Worldwide software as a service (SaaS) revenue is forecast to reach $12.1 billion in 2011, a 20.7 percent increase from 2010 revenue of $10 billion, according to Gartner, Inc. The SaaS-based delivery will experience healthy growth through 2015, when worldwide revenue is projected to reach $21.3 billion..

Gartner defines SaaS as software that is owned, delivered and managed remotely by one or more providers. The provider delivers an application based on a single set of common code and data definitions, which is consumed in a one-to-many model by all contracted customers anytime on a pay-for-use basis, or as a subscription based on use metrics.

During the past two years, the significant industry buzz surrounding SaaS and other off-premises models has shifted to cloud computing. Cloud computing is a broad concept, of which SaaS is only one variation, representing the application layer of the overall cloud architectural stack. However, SaaS has been a lead indicator of the cloud concept for some time. Gartner estimates that 75 percent of current SaaS delivery, as measured by revenue, could be regarded as cloud services, and this could exceed 90 percent by 2015 as the SaaS model matures and converges with cloud service models.

Customer relationship management (CRM) continues to be the largest market for SaaS. SaaS revenue within the CRM market is forecast to reach $3.8 billion in 2011, up from $3.2 billion in 2010. Gartner expects SaaS to represent nearly 32 percent of the CRM market's total software revenue in 2011.

SaaS revenue within the content, communications and collaboration (CCC) market is on pace to surpass $3.3 billion in 2011, up from $2.8 billion in 2010. The CCC market continues to show the widest disparity of SaaS revenue generation, with SaaS representing just 5 percent of enterprise content management (ECM) in 2010 but approximately 83 percent of Web conferencing.

The proportion of enterprise resource planning (ERP) revenue attributed to SaaS overall is still in the single digits, at approximately 7 percent of the overall ERP market. ERP SaaS offerings contributed approximately $1.5 billion to the SaaS market in 2010, and by year-end 2011, Gartner expects this to increase to $1.7 billion. The penetration of SaaS within ERP varies greatly between subsegments, with human capital management (HCM) being the most penetrated (in terms of adoptions and revenue growth) and enterprise asset management (EAM) and manufacturing being relatively unaffected by SaaS.

More information on Software as a Service can be found at

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