SaaS rides high as budget constraints prove a driver

Enterprises are beginning to feel more relaxed about using software as a service (SaaS) and the traditional concerns about hosting software on company premises are starting to lift, according to a Gartner study. More than a third of respondents said they had plans to transition from on-premises software to SaaS and almost 90% of enterprises expect to maintain or grow their SaaS usage.

“Our survey indicates that more than 40% of organisations have used SaaS for more than three years, implying a growing fluency with the model within the end-user base,” said Sharon Mertz, research director at Gartner.

So finally it looks like software as a service has turned a corner and, having survived the still-birth of ASP offerings, organisations are now dialled in to the benefits. The Gartner study certainly seems to think so citing total cost of ownership (TCO), changes in sourcing strategy and unmet performance expectations from on-premises solutions as reasons for increased willingness to commit more heavily to SaaS.

North American companies still show a greater appetite from SaaS investment than their European or Asian counterparts and Gartner thinks that, in the light of reduced discretionary spending in 2009 and perhaps 2010, SaaS could gain at the expense of further investments in on-premise solutions. It is confident that a drive away from on-premises solutions is happening right now and that drive is especially strong in Asia, where 50% of companies are shifting towards SaaS. In India the drive is strongest with an indicated 70% conversion towards SaaS.

There’s just one caveat. Gartner warns only 38% of companies that currently use SaaS have a process or policy that guides their evaluation procurement and deployment of such services. Greater governance will be required to maximise SaaS activity.