SaaS Adoption Nearly Doubles

November 13, 2008 - Arlington, Massachusetts

Jeffrey M. Kaplan


A recent survey by Cutter Consortium revealed that 63% of responding organization are using a software-as-a-service (SaaS) solution, up from 32% in 2007.

Over the past four years, Cutter has been charting the growth of the SaaS market with a series of yearly customer surveys. This effort has been spearheaded by Cutter Senior Consultant Jeffrey M. Kaplan. "Our surveys were the first to find widespread interest and substantial adoption of SaaS in 2005," states Kaplan, "In 2006, we began to see businesses of all sizes adopting SaaS solutions specifically designed to meet their vertical market needs as well as their horizontal application requirements. In 2007, we found customers were beginning to examine the platform capabilities of SaaS vendors as they sought to identify those vendors that could serve as strategic sources for their SaaS requirements.

"This year, our vanguard research has uncovered a new round of important market trends that have implications to IT and business decision makers. In 2008, we found a growing number of IT professionals adopting SaaS solutions to help them address their day-to-day IT management requirements."

In Cutter's 2007 survey, 32% of the respondents reported they were currently using a SaaS solution. This year, 63% are currently using SaaS solutions.

Figure 1

Figure 1 -- SaaS adoption has doubled in 12 months.

Remarks Kaplan, "Last year, the survey gave us a hint that this jump in adoption might occur. Even before escalating fuel costs and the recent collapse of the credit markets, 80% of our SaaS survey respondents last year who reported they were considering SaaS solutions stated they expected to adopt a SaaS solution by the end of 2008. This year, 85% of those who are considering SaaS expect to adopt a SaaS solution by the end of 2009. That could take the proportion of survey respondents using SaaS solutions to 75% next year!"

Why?

There are plenty of external forces pushing organizations to adopt SaaS: A combination of a higher TCO for IT systems and business applications, along with lower ROI has proven to be a disastrous equation for many organizations that are now confronted with a worldwide economic crisis that is placing greater constraints on operating budgets. The financial challenges are coming at the same time that the competitive landscape is being reshaped by globalization and e-commerce. Simultaneously, the traditional workplace is a thing of the past. Mobile workers need to access corporate data and need to collaborate with their peers, raising a new set of management and security challenges.

"These trends have certainly fueled the growth of SaaS," says Kaplan. "But we were particularly interested in understanding the primary objectives that the survey respondents are trying to achieve, which have led them to implement or consider SaaS solutions.

"We discovered that eliminating additional infrastructure and staff costs is the primary objective of three-quarters of the survey respondents. This isn't surprising given today's tough economic climate."

To request a copy of the Business Technologies Trends & Impacts Executive Update (Vol. 9, No. 19), containing these remarks, or to schedule an interview with Jeff Kaplan, contact Kim Leonard (+1 781 641 5111 or kleonard@cutter.com).

More Findings

Survey Demographics

Cutter Consortium conducted its fourth annual SaaS survey via the Web in September/October 2008. The survey was completed by 113 respondents, representing a broad cross-section of industries worldwide.

Approximately 40% of the respondents are in senior management and policy-making positions.

Two-thirds of the respondents work for organizations headquartered or based in North America. An equal proportion are employed within organizations with annual revenues of less than US $50 million, and 70% work for organizations with fewer than 500 employees. Approximately 16% work in companies with annual revenues of more than $1 billion and more than 10,000 employees.

Although the majority of the respondents can be classified as small and medium-sized enterprises, we were unable to identify any significant variance in the survey responses by size of organization.

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