by: Christian Smagg

With only a few days left before 2008 hits us, I thought it was the
perfect timing to dive into what Saugatuck Technology just reported as
being their SaaS predictions. Their recent research alert highlights five key trends in SaaS for 2008 and beyond.

Bullet-arrow  SaaS platforms and marketplaces will begin to proliferate,
becoming a significant channel opportunity for vendors, as well as a
key means by which users will gain access to SaaS solution
capabilities. During the past several years, SaaS marketplaces and
platforms have evolved well beyond their initial capabilities, offering
customisation, integration, data pipes for BI or data sharing, data
storage, content management, workflow, development tools and APIs.
Ecosystems have formed to enrich the value of their offerings through
the synergy of functionality brought together on these platforms. SaaS
platforms now express a wide range of capabilities that are driven by
the business model of the ecosystem and the needs and characteristics
of the marketplaces they enable.

Bullet-arrow  SaaS is becoming an international phenomenon,
driven by both local demand as well as large multi-nationals who are
adopting SaaS business solutions on a global basis. While US SaaS
adoption is clearly going “mainstream”, Europe and Asia are only now
beginning to experience the steep adoption ramp that the US has
witnessed over the past two years. Europe is beginning to go through a
very similar adoption profile that the US has – albeit with an 18 month
lag. A very strong European growth can be anticipated for US-based SaaS
giants aggressively expanding into this region as well as regional and
country-specific players. Whereas average US market growth rates will
likely slow into the 35-40 percent range in 2008, European market
growth rates should exceed 60-70 percent next year.

Bullet-arrow  SaaS merger & acquisition activity will explode.
No doubt a serious feeding frenzy is about to unfold and it could be
anticipated that a large number of venture-backed start-ups and
emerging SaaS companies in the $5 million - $20 million range would be
put up for sale over the next 12-18 months – and acquired by either
SaaS pure-plays, ISVs hungry to enter the SaaS fray or on-shore &
off-shore IT services and BPO providers who are eager to leverage a
SaaS model. The upcoming year is an important one where next-generation
horizontal and vertical franchises will be cemented.

Bullet-arrow  Traditional on-premise application ISVs will earnestly begin to fight back.
Approximately 15-20 percent of ISVs have already either begun new skunk
works initiatives or gained access to SaaS assets and development
experience through M&A activity. However, over the next 12-24
months, this number is anticipated to rise dramatically, as a tougher
economic climate will only exacerbate an already challenged on-premise
and traditional perpetual license model. To be successful, ISVs will
need to fully understand the journey that they will be on across five
key dimensions – economic, technological, operational, organisational
and cultural – as well as take advantage of the many best practices
available based on the hard-fought experience of early adopters.

Bullet-arrow  SaaS
development platforms will evolve and 2008 will see explosive growth in
the adoption and use of SaaS-based software development platforms and
services
, beginning with significant growth in the use of
vendor-specific, application-specific, and
marketplace/ecosystem-specific development platforms and services. Wide
availability of open, standardised tools and technologies in
subscription-based, on-demand environments will help streamline and
reduce the costs of software development and customisation. It will
also foster use and growth of services-oriented architecture
development strategies.

 

Other insights and Strategic Planning Positions provided by the research include the following predictions:

Bullet-shieldexclam 
By 2012, 30 percent or more of all new business software will be
deployed and delivered as SaaS. 15 percent of SaaS solution revenue
will be accessed through SaaS marketplaces. At least 75 percent of the
revenue generated by SaaS marketplaces will be driven by five or fewer
SaaS platform providers.

Bullet-shieldexclam

 
By YE2008, greater than 55 percent of North American-based businesses
will have deployed at least one SaaS application, with Western European
close behind at greater than 40 percent. 

Bullet-shieldexclam

 
60 percent or more of SaaS firms funded prior to 2005 will either be
acquired or go out of business by 2010. By 2012, all bets are off as it
concerns traditional on-premise licensing schemas.

Bullet-shieldexclam 
By 2010, 40 percent of traditional on-premise application ISVs will
bring to market SaaS solution offerings, either via acquisition,
development of new single-instance multi-tenant applications, or
through virtualised (multi-tenant) versions of their traditional
on-premise offerings. Less than half of the ISVs in transition will
actually succeed.

Bullet-shieldexclam 
By YE2008, the number of user enterprises taking advantage of
SaaS-based software development platforms, services and offerings will
number in the tens of millions worldwide. 

 

These important trends will no doubt shape how the SaaS applications
and business services sector will evolve, including changes to how
vendors will go to market, as well as how customers will gain value
from SaaS solutions.

Original Post: http://www.saastream.com/my_weblog/2007/12/saas-prediction.html

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