This month, we will begin to explore Software As a Service, and the notion that we are now in what I refer to as, “The New Age of SaaS.” Over the next few weeks, in collaboration with various members of BI-SAM’s executive team, I will address the five ideas outlined below, which I believe signal the evolution of SaaS.
Five Reasons Why We Are in the New Age of SaaS
Reason 1: SaaS applications leverage new technology
The principles behind SaaS are not new. The idea of using software running on IT infrastructure maintained centrally by a 3rd-party dates back to the 1960s when mainframe providers operated bureau services. In the 1990s, 3rd-party services like ASP and On-demand Software started to be adopted. Even the SaaS term itself is 15 years old.
But today, SaaS is not an old ‘new term’ for an old ‘old idea’. Modern SaaS applications are not client-server applications running on a different deployment model. They are developed using the latest web technology. Today, SaaS is new technology that requires new development skills to deliver a new user experience.
Reason 2: SaaS is a growth industry
Global SaaS revenues are forecasted to be $106Bn in 2016, a 21% increase over 2015. By 2016, 25% of all new enterprise software purchases are expected to be SaaS applications, representing 14% of all software spending. And the entire SaaS market will see a compound annual growth rate (CAGR) of 21% over the next two years.
This growth is not just because of an expected growth in IT spending. Between 2013 and 2018, SaaS revenue is expected to grow at 17.6% CAGR; on-premise revenue growth is forecast at 3.1% CAGR.
Reason 3: the Cloud is Big Business today
SaaS is one branch of Cloud computing, but there are other branches of Cloud computing. If SaaS is a growth industry, then Cloud computing is big today. It is estimated that Amazon has taken $4Bn revenues in the past 12 months for non-SaaS Cloud-based computing services.
Reason 4: SaaS is not just for small firms
On the surface, the benefits of SaaS appeal most to businesses with limited resources to implement and operate complex IT applications and infrastructure. Maybe that was the case once, but not anymore. 42% of IT Directors are planning to increase spending on Cloud computing in 2015, and the largest growth (52%) will be in businesses with over 1,000 employees.
Reason 5: SaaS is used by asset management firms
Asset management organizations are, for very good reasons, very conservative when it comes to adopting new, disruptive technologies. Many industry sectors may well have entered a New Age of SaaS, but what about the Asset Management industry?
CRM systems are now widely used by asset management organisations. SaaS is now the dominant deployment model for CRM applications, with 47% of all CRM implementations operating on the SaaS model. If SaaS has been adopted in one area of asset management firms, we can expect it to be adopted in others.
What do you think? As always, we look forward to your thoughts and invite you to contribute to the discussion as we further explore these ideas.