Gartner Says Organisations Need to Re-Evaluate the Rationale for SaaS

Software as a service (SaaS) will have a role in the future of IT, but not the dominant future that was first thought, according to Gartner, Inc. Organisations should carefully assess their software needs in light of the current promises delivered on by SaaS.

“In 2009, SaaS represented 3.4 percent of total spending on enterprise applications, up from 2008 at 2.8 percent,” said David Cearley, vice president and fellow at Gartner. Gartner predicts that the global enterprise applications software market will reach US$8.8 billion in 2010.

From a market perspective, most spending on SaaS is occurring in content, collaboration and communication and the customer relationship management markets. Collectively, they represented 65 percent of the global enterprise applications software market in 2009.

Many of the bad practices that occurred in the on-premises world are now moving their way into SaaS. The biggest example is shelfware. “Shelfware as a service is the concept of paying for a software subscription that is not being accessed by an end user,” said Mr. Cearley. “This most commonly occurs in large organisations, but it could happen to any company, especially those that have downsized their workforce, or one that has oversubscribed to trigger a volume discount.”

SaaS may not have delivered on its early grand promises - of the current SaaS deployments we estimate that a total of 90 percent of SaaS deployments are not pay-per-use -, but it has re-energised the software market and added choice. SaaS does not solve all the challenges of software delivery, but can provide advantages based on the specific circumstances of a deployment as it is quicker to implement and configure for less-complex problems. “SaaS changes the role of IT from implementing its own operations to inspecting a vendor’s operations,” Mr. Cearley added.

Gartner said that SaaS will likely penetrate every company at one level or another and recommends that organisations consider four steps when evaluating SaaS:

1-      Determine Value

SaaS is not a panacea, and companies need to evaluate and understand the trade-offs that SaaS presents. While it limits infrastructure overheads and management, and lowers short- to medium-term total cost of ownership, third-party application tools are limited and SaaS applications cannot be counted as assets on a balance sheet.

2-      Develop Governance

The next step is to develop a SaaS policy and governance document. This document should be a collaborative effort between the business and IT to create internal and external SaaS governance model.

3-      Evaluate Vendors

Organisations need to evaluate SaaS vendors for specific application needs as applicable. A vendor’s commitment to SaaS is not just measured in business performance, but in technical considerations, such as operations management capabilities.

4-      Develop an Integration Road Map

This step will be a continuous process of developing an integration road map on how SaaS applications will integrate with on-premises applications and other SaaS solutions deployed.

Gartner analysts will discuss SaaS and other software trends during the Gartner SOA & Application Development and Integration Summit, 28-29 July 2010 at the Sydney Convention Centre. The Summit gives a complete view of service oriented architecture (SOA), application development, application integration, and the future of software including trends such as cloud computing and agile development. Additional details are available at www.gartner.com/ap/soa. Members of the media can register by contacting Susan Moore at susan.moore@gartner.com

About Gartner

Gartner, Inc. (NYSE: IT) is the world's leading information technology research and advisory company. Gartner delivers the technology-related insight necessary for its clients to make the right decisions, every day. From CIOs and senior IT leaders in corporations and government agencies, to business leaders in high-tech and telecom enterprises and professional services firms, to technology investors, Gartner is the valuable partner to 60,000 clients in 10,800 distinct organizations. Through the resources of Gartner Research, Gartner Executive Programs, Gartner Consulting and Gartner Events, Gartner works with every client to research, analyze and interpret the business of IT within the context of their individual role. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and has 4,300 associates, including 1,200 research analysts and consultants, and clients in 80 countries. For more information, visit gartner.com.

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