Report: SaaS to Take Off This Year

By Josh Catone
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According to a survey conducted by Evans Data Corporation, more than half of all developers around the world are expecting to work in some capacity on software as a service (SaaS) applications in 2009, reports InfoWorld. Evans Data surveyed 1300 developers at the end of 2008 and found that the strongest development market for SaaS apps currently is North America, with 30% of all developers working on software as a service apps.

That market is expected to see a lot of growth this year, and Evans Data sees that as evidence of a trend toward acceptance of software as a service in the enterprise. The survey is seen as confirmation that enterprise IT managers are starting to believe in the potential benefits of SaaS over on-site software, such as lower costs and easier deployment.

This is potentially bad news for current market leaders, who are finding themselves in the awkward position of needing to compete with upstart software as a service products and not wanting to cut into their current on-premises software product lines that bring in large amounts of revenue. We recently wrote that the growing acceptance and popularity of software as a service is resetting the playing field and allowing new players to have a chance to compete in markets that are currently dominated by a few large software vendors.

One of the most obvious and public SaaS vs. traditional desktop software battles that will be waged over the next couple of years is general office software (word processing, spreadsheets, presentations). Google is the SaaS leader in the space with their Google Docs and Spreadsheets product. So far, though, other than a handful of high profile corporate and university deployments, they haven’t been able to make much of a dent in Microsoft’s stranglehold on the market (with their ubiquitous Office products, Word, Excel, PowerPoint, etc.).

That might change, though. According another recent report, this one from Forrester Research, most enterprise customers are apparently using Microsoft Word out of habit, rather than because they actually need to. Taken in tandem with the Evans Data study, the indication is that it might be a bad year for Microsoft’s Office cash cow.

Of course, Microsoft isn’t sitting on the sidelines when it comes to SaaS. They demoed a web based version of Office at their annual Professional Developers Conference in Los Angeles last October, and are expected to open up some sort of public beta for it sometime in the next few months. We expect that it will be very competitive. That said, Microsoft is in that awkward position of not wanting to damage software-based Office sales as much as possible. Also at PDC, Microsoft announced their Windows Azure platform for cloud-based services.

However, the signs are increasingly pointing toward software as a service options becoming very popular in the enterprise world over the next 12-24 months, and that means new competition for companies like Microsoft. Because of software as a service, the status quo is changing. Established enterprise software players will face competition from smaller or more experienced startups and web companies in 2009 and that could preface a major shift in computing mindshare.

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  • This is definitely very encouraging, as I’m moving into the SaaS space with my own projects. Although, the competition isn’t the greatest, it further validates the business model and I’m excited to see where other developers & designers take it.

  • julianmag

    I’m moving into SaaS too. And of course the benefits are visible for clients and providers. Most of these services you pay on demand for what you really use.

  • I have been working on SaaS in both my day job and my personal projects.

  • Christopher

    I think one of the issues that we are going to see come to the forefront is Saas security and lack of control over data. There is a a real concern within the enterprise about data being stored on vendor’s servers, when using Google docs or other online doc services. I am hoping these new Saas start ups will develop products that allow for data to be stored on the server of our choice.

  • I’m definitely going to allow users to store the data on their own servers. It really isn’t a feature that is hard to implement (at least, not on a small scale) so I expect it to definitely be a popular implementation this year.

  • dudsen

    Can someone please explain the difference between a timesharing mainframe and a SaaS service? because to me it does look like SaaS is really just a new name for something that used to be the normal way of doing corporate computing.