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IDC Predicts SaaS Will Re-Order Software Landscape by 2012


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International Data Corporation (IDC) today released their latest market report, Worldwide Software as a Service 2010-2014 Forecast: Software Will Never Be the Same.  IDC is a well-respected research firm known for their expertise in quantifying market trends and dynamics, and this report delivers useful insights into the impact they anticipate SaaS will have in the enterprise software industry.

Here are the key take-always from the report:

  • IDC states that in 2009, worldwide revenues of SaaS software generated $13.1 billion in revenue. They forecast revenue by 2014 will total $40.5 billion, representing a 25.3% compound annual growth rate (CAGR).  26% of net new market growth will be on the SaaS platform by 2014 according to the study.
  • From 2009 to 2014, SaaS revenue will grow at just over five times the growth rate of traditional packaged software. Supporting this finding, IDC states that by 2012, less than 15% of net new software firms will ship a packaged CD product and by 2014, 34% of all new business software will be delivered via SaaS.  With 85% of new software firms shipping some form of SaaS-enabled application by 2012, IDC claims the software utility business model will be a significant financial force in the software industry.
  • IDC sees perpetual licensing being replaced by subscription-based license models, and a resulting permanent change to software licensing occurring by 2014.
  • There will be small deployments, trials, and flexible pricing mechanisms occurring as a result of the shift in software purchasing. As a result, more net-new prospects will turn into buyers, as SaaS applications contribute to the selling process rather stay separate from it, which is common in enterprise software today.
  • Programming languages that deliver performance gains for Web-based application development will proliferate including AJAX, Ruby on Rails, Python and others. Social networking will turn into the proving grounds for entirely new applications according to the report.
  • IT governance will change to be more real-time as the U.S. Securities and Exchange Commission has defined through their XBRL initiatives, and storage and data management through SaaS platforms will be a catalyst of market growth.

Bottom line: The economics of enterprise software are about to go through a major shift, forcing software vendors to be more focused on how to deliver value at the business strategy level than ever before.

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2 Comments Post a comment
  1. Brad #

    IDC is right about SaaS taking off. However, large enterprises are slow to adopt them when they have customized solutions. Medium and small businesses will get the most benefit from SaaS products because the model makes them more affordable. Looking at a range of SaaS products many of them are geared exactly to the SMB market. I’m sure they will evolve just like to meet enterprise needs.

    July 31, 2010

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