According to analysts at Gartner, the SaaS enterprise applications markets will more than double by 2012 to $14.8 billion, after a strong demand in 2008. Worldwide SaaS revenue in the enterprise application market is set to surpass $6.4 billion in 2008, a 27% annual rise, it says.

“The popularity of the on-demand deployment model has increased significantly within the last four years. Initial concerns over security, response time, and service availability have diminished for many organisations as SaaS business and computing models have matured and adoption has become pervasive,” says Sharon Mertz, a research director at Gartner.

The core proposition behind SaaS/on-demand is the delivery of multi-tenant services from a remote location over an Internet protocol (IP) network via a subscription-based outsourcing contract. And Gartner makes a distinction between that and hosting/application management or application outsourcing.

Some of the key industry trends that contribute to the rapid growth of SaaS globally include businesses examining ways to reduce their IT capital expenditure budget; the increased availability of broadband, which extends the viability of web-based service solutions globally; and the demand from firms to rapidly implement software that supports a specific business need.

The fastest-growing markets for SaaS are office suites and digital content creation although the content, communications and collaboration (CCC) and CRM application areas remain the largest. In 2008, CCC generated 2.1% of SaaS application revenues, while CRM SaaS revenues exceed $1.7 billion.

Further reading
The emerging role of enterprise mash-ups
Mash-ups may not have had the starring role in enterprise software that some in the industry foresaw. But with web services proliferating, they are set to become an indispensable integration tool