Enterprise SAAS Adoption Grows: Gartner

We knew the cloud was huge in 2010, but if recent numbers are to believed, the SaaS or “cloud” delivery model gained major ground in the enterprise sector this year.

Vendors with SaaS (Software as a Service) models for enterprise applications were able to score $9.2 billion this year—that’s up 15.7 percent from 2009 which sized the market at $7.9 billion, said top-tier analyst firm Gartner. Momentum shows no signs of slowing as SaaS and cloud continue to converge in 2011, with the firm predicting a more than 16 percent growth rate for 2011 SaaS revenue to hit $10.7 billion.

Gartner defines SaaS as “software that is owned, delivered and managed remotely by one or more providers. The provider delivers an application based on a single set of common code and data definitions, which is consumed in a one-to-many model by all contracted customers anytime on a pay-for-use basis, or as a subscription based on use metrics.” Call it on-demand, the cloud, or SaaS, but the most surprising thing may be that enterprises have overcome their concerns which were a major inhibitor to enterprise adoption.

Success of the SaaS adoption models shows the market has evolved significantly from the early days of “ASPs.” Early enterprise opposition to the adoption of off-site, hosted delivery models remained steadfast around enterprise assets placed outside of firewalls, other security concerns, and worries about custom configurations when versions were released into what is now termed “the cloud.”

"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," said Sharon Mertz, research director at Gartner.

The largest enterprise application sectors where SaaS models are having the most success are within the content, communication and collaboration market—services such as GoToMeeting and WebEx where SaaS delivery is the go-to standard for web conferencing –which will reach $2.9 billion this year. The second largest is the customer relationship management (CRM) market—think Salesforce.com’s ownership of the on-demand model for SFA and a large chunk of enterprises and  SMBs—which will reach $2.6 billion this year.