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.”

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