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Software as a service (SaaS) has quickly become the standard choice for most new software deployments. In fact, many companies we have spoken to say that they no longer consider on-premises solutions for new systems. Nearly two-thirds (60%) of responding companies now report adopting at least some SaaS, and investment remains high. When implemented correctly, SaaS promises lower up-front costs, reduced infrastructure, increased flexibility, quicker upgrades, and scalability.
Figure 3 from our full study, SaaS Adoption Trends and Customer Experience, shows the percentage of organizations at each of the five adoption stages. Forty-two percent report that they have some SaaS in place and intend to increase investment. Another 18% report having SaaS in place but plan no further investment. With 58% of organizations implementing or increasing their investment in SaaS, adoption rates will continue to grow for the foreseeable future.
“The low percentage of companies who have SaaS in place and are not planning more activity shows the success of the SaaS model,” said David Wagner, vice president, research, for Computer Economics based in Irvine, Calif. “With the exception of areas there is a special need for on-premises systems, nearly all new application deployments will be SaaS based.”
One of the reasons why SaaS is so popular is that it is the rare technology that any size company can easily buy into. Since SaaS does not require a large up-front outlay of cash, small companies can invest in SaaS more easily than they can with many other technologies. In fact, small companies have an adoption rate (58%) not much lower than large companies (68%).
Because customers do not always distinguish between various types of SaaS architecture, our definition of SaaS, for the purposes of this study, is broad. It includes “cloud-only” providers such as Salesforce, Concur (now part of SAP), and NetSuite (acquired by Oracle) that developed their systems from the ground up as SaaS applications. It also includes hosted versions of on-premises systems, where a service provider takes responsibility for all hosting and maintenance of the system and offers it on a subscription basis. Most companies that were giants in on-premises software have begun to offer some hosted version of their software if not true cloud-based apps.
The full study quantifies the current investment trends for SaaS and identifies the benefits driving companies to expand their implementations. It also identifies which of a wide variety of SaaS applications are driving adoption and assesses adoption and investment trends by organization size and geography. Finally, we examine the positive ROI and TCO experience of adopters and conclude with practical advice for those considering deployment of SaaS solutions.