Revenue from software as a service will likely reach $12.1 billion
in 2011, up 20.7 percent from 2010's tally of $10 billion, research
firm Gartner said.
The market should continue to grow at a healthy pace through 2015, when Gartner predicts revenue will hit $21.3 billion.
"After more than a decade of use, adoption of SaaS continues to grow and
evolve within the enterprise application markets," said Tom Eid,
research vice president at Gartner, in a statement. "This is occurring as tighter
capital budgets demand leaner alternatives, popularity and familiarity
with the model increases, and interest in platform as a service (PaaS)
and cloud computing grows."
"Initial concerns about security, response time and service
availability
have diminished for many organizations as SaaS business and computing
models have matured and adoption has become more widespread," he said.
"Usage and vendors' on-demand ecosystems continue to evolve to
provide additional business and technology services, more
vertical-specific functionality, and stronger communities of partners
and buyers."
About 75 percent of current SaaS delivery "could be regarded as
cloud services," and that number could top 90 percent by 2015 as the
SaaS model matures and becomes more integrated with cloud services,
Gartner said.
Customer relationship management software is at the forefront of the
SaaS market, with CRM SaaS revenue expected to reach $3.8 billion this
year, up from $3.2 billion last year. Nearly one-third of the CRM
market will be SaaS in 2011, Gartner predicts.
"The market landscape for on-demand CRM continues to evolve and
mature as the availability and use of SaaS solutions become more
pervasive," Eid said. "Greater market competition and increased focus
on megavendors reinforce the legitimacy of on-demand solutions,
mitigating initial objections about security and availability for many,
as acceptance of SaaS as a viable model for enterprise computing
services grows."
Cloud Computing 
