Business is increasingly understanding that SAAS is the way ahead for future technology investment.  Today, major research firm  Gartner Inc. confirmed this, based on its mid- 2011 SaaS study.   Here is an overview:

SaaS Survey Findings & Conclusions

• Over 95 % of organizations expect to maintain or increase their investments in software as a service (SaaS)
• Over 1/3 of them have migration projects under way from on-premises to SaaS.
• Key Reasons for SaaS:
  • 1) ease and speed of deployment, and
  • 2) cost-effectiveness.
• Leading uses of SaaS: replacements for on-premises applications; or, net-new SaaS solutions  (instead of prior research findings whereby SaaS was uses more as an extension to an existing on-premises application. )
• Nearly 70% of organizations have used SaaS for < 3 years.
• More enterprises are renegotiating contracts early,
  • to satisfy demands for more functionality
  • for an expanding user base
  • to take advantage of improved financial terms.

SaaS Deployment Challenges

"Although adoption trends are generally positive, SaaS is not without its challenges," Ms. Mertz said. "More than one-third of respondents indicated issues with their SaaS deployments, citing limited integration with existing systems, network instability, and longer-than-anticipated implementation cycles as the highest-ranked challenges during deployment.

"In addition, most respondents still indicate that no policies have been instituted to govern the evaluation and use of SaaS, suggesting that little progress has been made since the previous survey in developing governance processes. The importance of governance mechanisms will continue to increase as SaaS becomes a larger element of a company’s overall sourcing strategy."

Executive Interest in SaaS: on the Rise

A comparison of Gartner SaaS user-survey results from 2008 and 2010 indicate that the percentage of decisions made at the executive level is increasing. The latest survey results show that the decision process is shifting to a joint decision between the business and IT.

SaaS Adoption & Planned Deployment for 2012 and Beyond

Analysts found that deployments of both horizontal and vertical-specific SaaS solutions (VSS) vary greatly by industry, as do planned deployments for 2012 and those considered beyond. Many industries that have not pursued SaaS in the past are beginning to do so.

Currently, mid-2011, the following industries* rank highest in existing SaaS deployment:

• 52%: communications
• 51%: utilities
• 49%: banking and securities.

(*across the horizontal and vertical-specific categories sampled)

In terms of SaaS deployment plans in 2012, those with the highest rankings are:

• 33% federal government
• 22% banking and securities
• 20% wholesale trade.

Looking further into the future, i.e. from 2013 onwards, top industries considering SaaS :

• 37% manufacturing and natural resources
• 29% wholesale trade
• 29% retail.

When respondents’ 2012 deployment plans are combined with those considering SaaS beyond the coming year, federal government ranked highest (60 percent), followed by manufacturing and natural resources (50 percent), wholesale trade (49 percent) and retail (46 percent).

Interpretation of SaaS Survey Results

“The survey illustrates how some industries lagging in past SaaS deployments are currently poised to use and consider it going forward and a remarkably strong upward trajectory with respect to the consideration of SaaS is occurring," said Robert Anderson, research vice president at Gartner.

"Providers seeking to target industries with horizontal and vertical-specific SaaS applications should first analyze overall trends as to current deployments, 2012 plans and other longer-term considerations to improve the timing and prioritization of their rollout strategies.” 

In its press-release today, Gartner explains:

Vertical-Specific SaaS Solutions

Similarly, opportunities for vertical-specific SaaS solutions vary across and within the industries surveyed. Healthcare,  insurance and retail industries currently have the highest level of SaaS-based VSS already deployed. Healthcare (49 percent) is also ranked by respondents as the top industry planning to consider SaaS in the future, followed by banking and securities (45 percent) and federal government (42 percent).

Popular VSS solutions where SaaS will be considered going forward in these industries include medical coding/transcription and physician electronic medical health records in healthcare, core banking and related services in banking and securities, and case and records management in federal government. "There are significant variations of VSS SaaS deployed both across and within industries surveyed.

Many that have delayed consideration of SaaS for VSS until now, such as federal government and banking and securities, plan to use it in the future," Mr. Anderson said. "Providers planning to target VSS SaaS opportunities should analyze current and planned future deployments across and within industries, as experience and interest levels vary and are shifting rapidly."