SaaSPert: Software as a Service (SaaS) Insights

According to a Gartner Report released on 22 October 2008: “Worldwide software-as-a-service (SaaS) revenue in the enterprise application markets* is on pace to surpass $6.4 billion in 2008, a 27 per cent increase from 2007 revenue of $5.1 billion, according to Gartner, Inc. The market is expected to more than double with SaaS revenue reaching $14.8 billion in 2012.”
A number of interesting posts have been written in response to this fact so I certainly won’t rewrite it all. Instead, here is a short list of my observations and my interpretation for what that might mean for those of us in the business of designing and building SaaS products:

• The SaaS market is growing strongly and evolving (within the enterprise application market) – this strengthens the argument of SaaS businesses being great businesses
• Entrants are challenging incumbents – this makes it an incredible atmosphere for entrepreneurs and startups
• Interest in Platfrom as a Service (PaaS) is growing – this means more synergies between infrastructure providers (like ISPs) and SaaS vendors
• Many of the initial concerns that purchasers of SaaS had in the past have been answered or mitigated – this means less detractors and an easier sale
• Some vendors who don’t truly offer SaaS are using the buzzword in their marketing efforts because it is a “hot” topic – this means that your offering needs to be crystal clear to your clients and pre-purchase education is vital
• SaaS billing models bring down Total Cost of Ownership and minimize CAPEX spend – this is favorable, especially in the world right now
• Hot SaaS growth areas are digital content creation (DCC) and office suites – this means that if your product is in this domain and you have something fresh and reliable, you have a strong chance of success
• Web based freeware is going to take a bigger chunk of the overall spend by 2012 (e.g. Google Apps, Adobe Buzzword, ThinkFree and Zoho) – this means that if your product is freeware (or you are a freeware integrator), you have a strong chance of success
• The Content, Communications and Collaboration (CCC) SaaS market remains the largest and is set to more than double – this means that if your product is in this domain, although it is already competitive, you have a strong chance of success (provided you pitch it correctly)
• Customer Relationship Management (CRM) is the second biggest market. My views is that a large portion of this revenue is earned by a few well established companies such as SalesForce.com, SugarCRM and VTiger. This is a tough market to make inroads into unless your idea is revolutionary or you have deep pockets.

However you look at it, this is excellent news for SaaS entrepreneurs, developers, integrators and vendors.

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Further reading about the Gartner Report:

• The Garner Release
• Saas Market to Skyrocket by 2012
• Worldwide SaaS Revenue in the Enterprise Application Markets Will Grow 27 Per Cent in 2008
• Gartner and IDC predict bright future for SaaS