SaaS Beyond the Tipping Point: Three Waves, Four Key Management Challenges, Five Strategic Planning Positions
The issue of whether SaaS is truly a core disruptive technology and business services phenomenon is no longer in doubt. SaaS is now a basic fact of life in IT and in business. Already, SaaS has moved from simple to sophisticated – and from a departmental adjunct, to becoming a fundamental part of business and IT infrastructure & operations. SOA, Open Source, Collaboration, Mobility, Mash-ups and Web 2.0 are now converging on SaaS platforms, providing rich, configurable applications and business value.
While the pace of growth and change has been fast, longer-term success with SaaS will require that both users and vendors rethink how business software deployment strategies and architectures will evolve so as to fully understand the impacts of this new delivery and licensing approach. This is one of the important conclusions of Saugatuck Technology’s research report published earlier this year, “Three Waves of Change: SaaS Beyond the Tipping Point”.
Saugatuck Technology, a strategic advisor to senior executives, information technology vendors and investors, focusing on emerging technologies, key business & IT challenges and effective management strategies, based this research report in part on a worldwide web survey of 250 senior business and IT executives, 30+ briefings with leading SaaS providers and 15 deep dive interviews with early adopter SaaS users. This survey provides a comprehensive look at the state of the SaaS industry and user adoption as well as valuable insights relative to the realities of SaaS today, and where it is going tomorrow.
SaaS has moved beyond the tipping point from standalone, cost-driven software functionality to sophisticated, integrative, business-process-driven platforms & services and accelerating into mainstream adoption. We’re seeing breakthrough levels of SaaS acceptance for mission-critical computing, from SMBs to the largest enterprises worldwide. The second wave of SaaS as a next-generation business platform is already here and delivering powerful business advantages.”
Other key findings and conclusions from the report include:
Managing and reducing software costs remain important attractions for SaaS, but users have shifted their key SaaS decision criteria to service levels, intra- and inter-company collaboration and integration with data & workflow.
The increasing presence of “cloud-based” SaaS business solutions that must be integrated with on-premise applications will require SaaS Integration Platforms (SIPs) and Enterprise Service Busses (ESBs) to form coherent and flexible IT portfolios of integrated business solutions. Hybrid application architectures are emerging – SaaS is increasingly linked to on-premise data, applications and processes through web services-based integration APIs.
Saugatuck’s research also helps clarify how SaaS is shifting and evolving and how these changes will affect user and vendor organisations over the next several years. It indicates three distinct and over-lapping waves of SaaS adoption and usage:
Wave I: Early Adoption, characterised by the cost-effective delivery of stand-alone application services. Adoption is mainly driven by a buyer focus on total cost of ownership and rapid deployment.
This research also highlights four essential management challenges that enterprises as well as SaaS vendors will be confronted with and will need to resolve:
- Integrating SaaS workflows with enterprise business processes,
- Collaboration across Business Units or other enterprises,
- Customising and personalising business workflow,
- Utilising SaaS business analytics, both built-in and as adjunct services.
It won’t be until Wave III that we will see widespread solutions to the above challenges. SaaS providers will have to ensure that mission-critical SaaS, whether delivered best-of-breed, or in a vertical or horizontal ecosystem, can become seamlessly part of enterprise business processes and provide platforms that can enable knowledge worker collaboration securely. Moreover, support for workflow customisation and personalisation, mashups and other Web 2.0 features will prove essential to success in the SaaS marketplace, as cloud-based and on-premise solutions blend together in the enterprise. Business intelligence will be increasingly built-in and more sophisticated analytic capabilities from SaaS solution providers will interoperate with platform solutions.
Other insights and Strategic Planning Positions (SPPs) provided by the research include the following predictions:
By 2010, at least 65 percent of businesses will have deployed at least one SaaS application – with the U.S. achieving deployment rates in excess of 75 percent. Western Europe growth will parallel that of North America, with an 18-24 month lag.
By 2010, SaaS will be woven into the fabric of enterprise architecture, as buyers become increasingly comfortable with acquiring SaaS solutions as part of their broader business services portfolio.
SaaS usage within mid-size and large enterprises will more than double by 2010 – averaging more than 7 SaaS solutions in production.
Through 2010, spending on SaaS will grow at a 25 percent or greater compound annual growth rate.
By 2012, 30 percent or more of all new business software will be deployed and delivered as SaaS.
It becomes clearer every day that SaaS has set in motion forces that will inexorably change business in enterprises of all sizes, across all industries and geographies worldwide. While North America clearly leads the world in SaaS adoption today, Europe is currently poised for rapid growth.
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