Sunday, March 15, 2009

Forrester Research: SaaS gains enterprise adoption, expands beyond 'vanilla' offerings

Software as a service (SaaS) is coming into its own, as interest and adoption continue to grow among enterprises and SaaS itself expands to meet the challenge.

This is the conclusion of a Forrester Research report, TechRadar For Sourcing & Vendor Management Professionals: Software as a Service. After talking to customers, vendors, and researchers, Forrester discovered that about 21 percent of enterprises were piloting or already using SaaS and another 26 percent are interested in it or considering it.

I expect this growth of SaaS use to increase under the dour economy as companies look to increase applications productivity but without any up-front capital spending, and also as they shut off expensive standalone applications on older hardware. SaaS as an economic appeal well suited to the challenges facing IT managers.

At the same time, says Forrester, companies are taking a more strategic approach to SaaS, which until now often flew in under the radar. That means IT didn't bring SaaS apps in, workers and managers did. Part of the strategic interest now comes from IT too -- to rein in system redundancies and costs.

Any responsible IT department should now conduct the audits and due-dilgence to determine which old and new applications would be best delivered as SaaS from third parties. The ability to absord these apps well also puts IT department in a better position to leverage cloud-based services and infrastructure fabrics.

SaaS's march into enterprises is tempered, however, from real or perceived increased security risks that come from using off-premises systems. This may account for the fact that the number of people not interested in using SaaS has increased over the past year. Do we hav a culture gap on SaaS use? I advise enterprises to thing like start-ups these days -- and that means use SaaS aggressively.

Another key finding of the March 13 report: SaaS offerings have proliferated and moved beyond their traditional "vanilla" customer relationship management (CRM) and human capital management functions.

Forrester determined 13 areas where SaaS applications are making headway. These include:
One benefit of an increased use of SaaS, according to Forrester, is that it has changed the software game, giving business users ownership over the full application lifecycle. That upside is balanced by the downside of new risks, especially in the areas of contracts, data security, and data access privileges.

The bottom line for enterprises considering getting into the SaaS arena:
Sourcing and vendor management executives must keep ahead of the growing trend to understand where SaaS is most heavily used and where it lurks on the horizon, so that they can enable their business users to be more successful in business led SaaS deployments as well as to consider SaaS as a viable alternative to IT-led vendor evaluations. Regardless of where the SaaS deployment originates, sourcing and vendor management executives have a key role to play in contracts and pricing, due diligence, and vendor governance and risk.
The full Forrester report is available from

None of this is surprising news to regular readers of BriefingsDirect or those who listen regularly to the podcasts. Our analysts and guests talk about the growing reliance on SaaS applications, especially in view of the economic decline. In fact, our year-end predictions for 2009 focused quite intensely on the role of SaaS in helping companies weather the storm -- and even chart a new course for the enterprise.

One of our regular analyst-guests and fellow ZDNet blogger Phil Wainewright charted out most of the 2008 developments over a year ago in his 2008 predictions. His predictions were based on what he saw as an awakening among users and vendors as to the potential of SaaS.

Jeff Kaplan in his Think IT Strategies blog made many of the same arguments in his 2009 predictions, in which he predicted that the thinking among IT executives was beginning to shift from whether to do SaaS to how to do it.

These bullish predictions and observations stand in stark contrast to a crepe-hanging piece last July in BusinessWeek, in which Gene Marks of the Marks Group declared SaaS overhyped, overpriced, and in need to debunking. The Marks Group sells customer relationship, service, and financial management tools to small and midsize businesses.

Nothing like a recession to focus the mind on practicality over ideology.

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