SaaS revenue to reach $14bn this year

According to research firm Gartner, global software-as-a-service (SaaS) revenue is forecast to reach $14.5 billion in 2012, representing a 17.9 per cent increase from 2011 revenue of $12.3 billion. Growth in SaaS-based delivery will continue through 2015, when worldwide revenue is projected to reach $22.1 billion.

 

Sharon Mertz, research director at Gartner, says that after more than a decade of use, adoption of SaaS continues to grow and evolve regionally within the enterprise application markets:

 

“Increasing familiarity with the SaaS model, continued oversight on IT budgets, the growth of platform as a service (PaaS) developer communities and interest in cloud computing are now driving adoption forward.”

 

According to the Gartner research, the most widespread use of SaaS is within horizontal applications with common processes, among distributed virtual workforces and within Web 2.0 activities.

 

North America currently represents the largest opportunity for SaaS, with software revenue forecast to total $9.1 billion in 2012, which is up from $7.8 billion in 2011.

The region shows the highest SaaS deployments in expense management, financials, email and office suites.

 

SaaS revenue in Western Europe is forecast to exceed $3.2 billion in 2012, up from $2.7 billion in 2011. SaaS offerings and adoption rates are rapidly increasing as North America-based SaaS vendors become more dominant in the region and the number of local European SaaS vendors increases. In Eastern Europe, by contrast, SaaS revenue is projected to reach just $169 million, up from $135 million last year. Vendors supporting businesses in Eastern Europe and MEA will struggle with short-term opportunities, as they face ongoing infrastructure challenges.

 

In Asia Pacific, SaaS revenue should reach $934 million in 2012, up from $731 million in 2011. Overall though, the Gartner research shows a fragmented SaaS adoption pattern in the region, with its combination of mature markets and emerging markets. SaaS financial applications are most popular, particularly in China and India, with the next-highest SaaS usage being expense management and employee performance solutions.

 

Sharon Mertz explains that the top issues encountered when deploying SaaS vary by region:

 

“Limited flexibility of customization and limited integration to existing systems are the primary reasons in North America. In EMEA, network instability is the issue most frequently encountered, whereas longer-than-expected deployments are the top issue in Asia/Pacific. Vendors are more aggressively pursuing SaaS buyers outside traditional markets by offering local-language availability, forming alliances and constructing data centres to accommodate local requirements.”

 

Gartner defines total software revenue as revenue from new licenses, subscriptions, and software maintenance and technical support services.