Software Vendors, Solution Providers Eye SAAS Disruptive Threat

By Jessica Davis  |  Print this article Print


Desktop-as-a-Service Designed for Any Cloud ? Nutanix Frame

A report from Forrester Research estimates that 14 percent of SMBs and 15 percent of large enterprises adopted software as a service in 2007. So it's no surprise that software vendors and IT solution providers are keeping an eye on the potential disruptive threat SAAS poses.

IT solution providers aren't the only businesses keeping a watchful eye on the potential disruptive threat from software-as-a-service offerings.

Software vendors have been watching the trend too, as companies such as Salesforce.com have made a splash in the SAAS market and put established business applications players such as SAP and Oracle scrambling for a defensive position.

Now IT analyst company Forrester Research says more software vendors are vulnerable to the disruptive threat from SAAS and should take action now to avoid finding themselves on the defensive. And solution providers would be wise to heed that message as well.

Specifically, Forrester notes that 15 percent of enterprises and 14 percent of small and midsize businesses adopted SAAS in 2007, while another 10 percent of enterprises and 2 percent of SMBs were either launching a pilot or planning a pilot project.

"While the majority of these SAAS projects are business applications solutions with standardized business processes across large, distributed user groups, SAAS also continues to encroach on the IT management software market, where it is becoming a disruptive dynamic for both software vendors and service providers," Peter O'Neill, a Forrester analyst, writes in his report.

Forrester estimates that the SAAS market is worth close to $200 million in 2008, and forecasts that the market will exceed $1 billion in early 2011, with a CAGR (compound annual growth rate) of 115 percent from 2008 through 2010. SAAS currently accounts for 1 percent of the IT management software market and will grow to 4 percent in 2010, reaching 10 percent in 2013.

O'Neill says a number of new SAAS contracts will displace other outsourcing projects, including service desk and remote infrastructure management.  

"Some managed service providers and outsourcers have quickly repositioned their hosting or outsourcing offerings to SAAS—or at least to be 'on demand'—by converting to a subscription-based business model, but have made few other changes to the technologies employed," O'Neill writes. Solution providers should proceed with care, however, because there is a danger of confusing customers with what look to them like cosmetic changes.

The Forrester report points out that some established vendors are already making a move to SAAS, including Microsoft, Oracle and SAP. And the following established vendors are moving in that direction, too, with announcements in the past few months, according to Forrester:

  • HP – The computer giant leveraged its existing Mercury Managed Services offering and now offers a series of SAAS products too, going to market through the license software business unit channels.
  • CA – CA is developing its IT management SAAS guided by its enterprise IT management plans. An initial SAAS offering, Clarity, offers project and portfolio management.
  • BMC Software – While the company offers some performance and capacity management products as remote services via subscription and has partnered with service providers on IT service management solution offers, it does not currently have a separate SAAS business.
  • IBM – IBM Global Services offers several solutions based on IBM Tivoli software plus solutions from partners. In addition, through its hosting center from the MRO acquisition, Tivoli provides managed services offerings for its enterprise asset management and service desk products.
  • Symantec – Symantec's acquisition of MessageLabs, an established security SAAS company, and its plans to merge MessageLabs technology with the Symantec Protection Network "[raise] the possibility that it could offer many of its IT management software offerings on a SAAS platform very quickly," writes Forrester.
Jessica Davis covers the channel for eWeek and Channel Insider. Her technology journalism career began well before anyone heard of the World Wide Web and has included stints at Infoworld, Electronic News/EDN, and the Philadelphia Business Journal. Her work has also appeared on CNN and Forbes.com. She has covered hardware, software and networking, as well as the business side of technology. She has won several journalism awards, including a national ASBPE award for best staff-written column, and was named Marketing Computers hardest working tech journalist on their inaugural list of top tech journalists. Jessica can be reached at jessica.davis@ziffdavisenterprise.com

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