By the end of 2009, Gartner forecasts that global SaaS revenue will reach $7.5 billion, which is an 18 percent increase from 2008 revenue of $6.4 billion. For SaaS ERP apps, in particular, Gartner projected a small increase in worldwide revenues: from $1.17 billion to $1.24 billion in 2009. "Adoption of the on-demand deployment model has continued to grow as on-demand vendors have extended their services through alliances, partner offerings, and more recently, by offering and promoting user application development through platform as a service capabilities," noted Sharon Mertz, research director at Gartner, in a report. "Although usage and adoption is still evolving, deployment of SaaS still varies between the enterprise application markets and within specific market segments because of buyer demand and applicability of the solution." Looking out even farther, Gartner predicts that the SaaS market will show consistent growth through 2013 when global SaaS revenue will total more than $14 billion for the enterprise software markets.
SaaS vendors have had to fight the niche product label from the get-go; AMR's Richardson says the perception is that "SaaS guys continue to nibble at the edges." It's likely that they will have to wage even more fierce battles in the future, according to data from market researcher Saugatuck Technology. Despite continued and sizable investments in SaaS development and adoption around the world, SaaS "will not become the primary IT standard and practice by year-end 2012," notes the report, "An Endless Cycle of Innovation." Instead, notes the report, SaaS will be viewed primarily as an important "agent of change" through this period. Two years from then, in 2014, is when Saugatuck predicts big change: "SaaS will become integral to infrastructure, business systems, operations and development within all aspects of user firms, with variations in status and roles based on region and business culture."
The research houses are equally bullish on cloud computing's future: David Cappuccio, Gartner's chief of research for the infrastructure teams, ranked it as one of the top trends affecting companies' technology use during the next five years. IDC's cloud services revenue forecast jumps from $17.4 billion in 2009 to $44.2 billion in 2013.
All projections and speculation are subject to change without notice, of course, but once loyal on-premise companies get a taste of SaaS and cloud-based services, they typically come back for seconds, however small a bite it may seem to the big ERP vendors, analysts say. NetSuite's McGeever boasts that the vendor "gets more incremental revenue from selling to our installed base than we do from new business." (See "5 Questions with NetSuite's CFO.")
Converts are proclaiming their newfound faith more and more. Todd Pierce, CIO of Genentech, a $13 billion biotech company, among other initiatives, purchased a Google Apps suite for 18,000 accounts and has moved ERP functionality to iPhone apps. In an interview with Abbie Lundberg (a former CIO magazine editor-in-chief), Pierce offers a convincing overview of the huge savings, benefits and "revolutionary" usability factors that Genentech has experienced by moving enterprise software apps to Web-based and cloud computing software-delivery models.