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Study: SaaS Adoption Accelerating

More companies than ever before see software-as-a-service (SaaS) in their futures.

A new study from Aberdeen Group shows that companies of all sizes have begun adopting SaaS in order to get solutions implemented more quickly, achieve faster ROI and lower their IT costs.

The study shows that businesses are also adopting SaaS for a greater variety of applications than ever before.

"More than half the companies we surveyed are using or are interested in exploring the possibility of using software as a service in the future," said Beth Enslow, senior vice president for enterprise research at Aberdeen.

"It's no longer a minority of companies."

Enslow told internetnews.com that 2006 marks the first year that this is the case.

SaaS is now considered a quick way to resolve a pressing business issue, with quick ROI and lower total costs of ownership (TCO).

According to the study, 74 percent of companies said they implemented a SaaS customer relationship management (CRM) solution in two months or fewer.

These same companies also reported achieving ROI in six months or fewer.

"Those numbers are two to four times faster than what we're used to seeing with traditional on-premise enterprise applications," noted Enslow.

Moreover, said Enslow, this type of metric is not limited to CRM.

"It's not like these benefits are a fluke limited to CRM. We're seeing these types of results consistently across all the major application areas."

The Aberdeen study also puts the lie to the conceit that the market for SaaS is limited to small and medium sized business (SMBs) needing a CRM solution.

She credited the success enjoyed by early adopters of the SaaS model with changing minds among executives at large enterprises.

"It's the track record. They see their peers start to use it, and see people get consistently solid results," said Enslow.

That said, CRM remains the most widely adopted SaaS solution, with 84 percent of SMBs and 69 percent of larger enterprises using or considering the adoption of an on-demand CRM solution.

Such areas as financial management, product lifecycle management (PLM), procurement and sourcing, and supply chain management (SCM) are adopting SaaS.

Only 26 percent of companies currently use SaaS as a financial management solution, but the study shows that 76 percent of companies are considering or willing to consider adopting an on-demand solution in this area.

Yet more surprising still, 64 percent of large and midsize companies would consider using SaaS as a financial management solution.

Also according to the study, more than half of all companies plan to make a three year commitment to a SaaS procurement and sourcing solution, as a precursor to fully committing to that delivery method.

Enslow explained that CIOs at large enterprises have changed their thinking about SaaS.

Previously, they perceived it as a threat to their power over IT.

Now, they see it as a way of fulfilling business mandates without stretching their thin IT budgets, particularly as there is no end in sight to the short supply of skilled IT workers.

"IT skills constraints are not diminishing," said Enslow. "Inserting SaaS into that mix gives [CIOs] a lot more budget and staffing flexibility than they had before.

That said, enterprises are still adopting SaaS to address specific needs rather than as wholesale replacements for on-premise solutions.

"Leading CIOs are making SaaS an important part of their IT portfolio," said Enslow. "They see them as being more as point solutions to address specific business pressures or customer mandates, as opposed to going to wall-to-wall SaaS."