SaaS – What’s in store for 2008?

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Over the Holidays we saw a number of interesting articles and posts predicting that in 2008 SaaS will begin to go ‘mainstream’, resulting in a surge of demand for SaaS and On-Demand applications (for two of the better commentaries see Phil Wainewright’s great post on the Eight reasons SaaS will surge in 2008 and Jeff Kaplan’s Top Ten Reasons Why On-Demand Services will Soar in 2008). Some of the more compelling drivers of a potential breakout year (in terms of adoption and awareness) for SaaS in 2008?

  • Macroeconomic backdrop – the prospects of recession (which appear to be higher by the day) could actually drive increased demand for SaaS applications. The lower cost, more flexible SaaS subscription model will become even more attractive to organizations as capital budgets are cut and cost pressures increase. If organizations also accelerate office virtualization efforts in face of increasing cost pressures, SaaS will demand will benefit.
  • The heavyweights appear – 2007 saw not only large on-premise incumbents such as SAP, Oracle and others diving into the SaaS market, but also the introduction of major utility computing services from Amazon (EC2), IBM and Google, increasing the overall momentum towards SaaS that is sure to spill over into 2008.
  • Enterprise adoption – data from Salesforce.com and other SaaS vendors (as well as our own anecdotal evidence) suggests that enterprises are becoming increasingly accepting of the SaaS model, due both to the traditional cost and support benefits of the model over on-premise software and to the increasing push towards SOA and web services models. Enterprise adoption, if it follows the mid-market pattern, will accelerate significantly over the next 12-18 months.
  • Wall Street takes notice – with successful IPOs from NetSuite and SuccessFactors (and several more in the pipeline), initiation of M&A activity in the SaaS space with Cisco’s acquisition of Webex, and valuations that reflect substantially higher multiples than traditional on-premise software vendors, investors are quickly taking notice of the SaaS opportunity.

We believe that 2008 may also be the year that ‘the other shoe drops’ for SaaS – when offerings and adoption proliferates to a point where management of SaaS applications becomes a challenge at both the organizational and departmental level…

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One Response to “SaaS – What’s in store for 2008?”

  1. People Over Process » links for 2008-01-11 Says:

    […] SaaS – What’s in store for 2008? « Conformity Some predictions about the SaaS marketplace from Austin SaaS arms-dealer Conformity. (tags: predictions saas hosted) […]

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