SaaS Won't Succeed in Some Markets

Given all the hype about the software-as-a-service model, you'd think that it could be applied to every category of software. Not so, says a new report from Forrester Research Inc.

In fact, SaaS will be "a disruptive force" in software categories that account for about a quarter of global software spending but will have "little or no effect" on many of 123 market segments studied, Forrester analysts Liz Herbert and Andrew Bartels wrote.

Forrester said that SaaS faces major obstacles in four broad software sectors:

• Lower-level elements of the stack, such as operating systems and databases.

• Software for internal IT management and data management.

• Entrenched process applications.

• Vertical applications, such as securities transaction processing systems.

Such systems account for 40% of all software spending, and Forrester's report said they are likely to stay mostly in-house for "pretty obvious" reasons: security concerns, existing infrastructure investments, and the need to tightly integrate with other applications.

But SaaS is making inroads in mature application areas such as supply chain management, particularly among users who haven't already purchased the same functionality in an on-premises product, according to the report.

Meanwhile, SaaS is starting to shake things up in areas like customer relationship management and human resources, where hosted offerings are replacing on-premises systems. SaaS is also moving into application development and the niche of governance, risk and compliance software, the analysts said.

The Forrester report said that SaaS is now the dominant model for software sales and delivery in areas such as e-purchasing, expense reporting tools, blogging and wikis.

Still, categories where SaaS has taken hold of at least 50% of revenue amount to only 3% of the total software market, Forrester said.

This version of this story was originally published in Computerworld's print edition. It was adapted from an article that appeared earlier on Computerworld.com.

Join the discussion
Be the first to comment on this article. Our Commenting Policies