IDC is warning in a newly released report that the challenging economic climate is actually going to accelerate the adoption of the software-as-a-service (SaaS) model. I can't understand why anyone would be surprised by this finding. As enterprises rein in technology budgets, they are driven to easier, lower cost and more tactical solutions. SaaS delivers to that agenda nicely.
Based on the results of their survey, IDC has increased its SaaS growth projection for 2009 from 36% growth to 40.5% growth over 2008.
Additional findings from the IDC study include:
- By the end of 2009, 76% of U.S. organizations will use at least one SaaS-delivered application for business use.
- The percentage of U.S. firms which plan to spend at least 25% of their IT budgets on SaaS applications will increase from 23% in 2008 to nearly 45% in 2010.
- This market's growth prospects will accelerate the shift to SaaS for the whole value chain as the promise of a recurring revenue stream, and the opportunity to tap OPEX and project-related dollars, will benefit the whole SaaS ecosystem.
- While demand for SaaS is strongest in North America, new contracts from customers in Europe, Middle East, Africa (EMEA) and Asia/Pacific (excluding Japan) also look particularly positive, and IDC expects that by year-end 2009, nearly 35% of worldwide revenue will be earned outside of the U.S.
- On the downside, IDC interviews with SaaS providers highlighted several issues, such as cash-flow shortfalls related to slow-paying current clients, liquidity challenges stemming from tight credit at lenders, and — on the horizon — limited resources to scale up with expanded infrastructure to support new customers and new service offerings.