SaaS, PaaS and IaaS booming, say Gartner and Ovum

Software as a Service will decline from its currently dominant 87% of the market to 62% as IaaS and PaaS grow more prevalent, but there’s plenty of life in SaaS yet.

Research firms Ovum and Gartner have come out with two sets of research that at first glance seem slightly contradictory but in fact indicate that while SaaS is still a major priority for organisations, IaaS and PaaS are coming up fast.

According Ovum, the overall public Cloud market should expand from £11.4 billion this year to £42 billion in 2016 as the worldwide market for public Cloud services is set for a massive expansion over the next five years, with infrastructure and platform services likely to see particular traction.

Ovum Analyst Laurent Lachal said:

“Although the market size will see strong growth, the evolution of Cloud Computing within enterprises, and the IT trends that follow, will happen more slowly. IT teams will take a more holistic approach to connecting networks, hardware and software. They will also reduce their emphasis on maintenance and increase their innovation, while being encouraged to take more risks by giving employees the capacity to tackle high-reward ventures. But, as ever, preparation is the key to ensuring that Cloud computing delivers a positive outcome. ”

But according to rival research firm Gartner, more than 95% of organisations plan to maintain or increase their investments in SaaS and more than one-third have migration projects under way from on-premises to SaaS. That conclusion is based on a June/July study of 525 organisations in nine countries spanning 12 vertical industries. Sharon Mertz, research director at Gartner, said:

“Respondents cited ease and speed of deployment and cost-effectiveness as the top two reasons for adoption. Leading uses of SaaS were either replacements for on-premises applications or net-new SaaS solutions. This represents a shift from previous Gartner surveys where more respondents indicated SaaS was being used as an extension to an existing on-premises application. ”

Nearly 70% of organisations have used SaaS for less than three years. Gartner reckons that more enterprises are renegotiating contracts early not only to satisfy demands for more functionality and an expanding user base, but also to take advantage of improved financial terms as downward pricing pressures continue in the wake of economic turbulence and increasing vendor competition. Mertz stated:

“ Although adoption trends are generally positive, SaaS is not without its challenges. More than one-third of respondents indicated issues with their SaaS deployments, citing limited integration with existing systems, network instability, and longer-than-anticipated implementation cycles as the highest-ranked challenges during deployment. ”

She added:

“In addition, most respondents still indicate that no policies have been instituted to govern the evaluation and use of SaaS, suggesting that little progress has been made since the previous survey in developing governance processes. The importance of governance mechanisms will continue to increase as SaaS becomes a larger element of a company's overall sourcing strategy. ”

Many industries that have not pursued SaaS in the past are beginning to do so. Currently, communications (52%), utilities (51%), and banking and securities (49%) industries rank highest with respect to SaaS deployed across the horizontal and vertical-specific categories sampled.

In 2012, those industries ranking highest with respect to their plans to use SaaS include government (33%), banking and securities (22%) and wholesale trade (20%). Beyond 2012, top industries considering SaaS are manufacturing and natural resources (37%), wholesale trade and retail (each on 29%) .

When respondents' 2012 deployment plans are combined with those considering SaaS beyond the coming year, federal government ranked highest (60%), followed by manufacturing and natural resources (50%), wholesale trade (49%) and retail (46%).

Robert Anderson, research vice president at Gartner, commented:

“The survey illustrates how some industries lagging in past SaaS deployments are currently poised to use and consider it going forward and a remarkably strong upward trajectory with respect to the consideration of SaaS is occurring. Providers seeking to target industries with horizontal and vertical-specific SaaS applications should first analyse overall trends as to current deployments, 2012 plans and other longer-term considerations to improve the timing and prioritisation of their rollout strategies. ”

SaaS, PaaS and IaaS booming, say Gartner and Ovum

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