Worldwide software-as-a-Service (SaaS) revenue in the enterprise application markets will hit $6.4 billion in 2008, a 27 per cent increase from $5.1 billion in 2007, according to Gartner.

The market is expected to reach $14.8 billion in 2012. According to Gartner, some of the key industry trends that contribute to the rapid growth of SaaS globally include businesses examining ways to reduce their IT capital expenditure budget, increased availability of broadband, which extends the feasibility of web-based service globally, and the demand from businesses to rapidly implement software, which supports a specific business need. 

According to Gartner, the fastest-growing markets for SaaS are office suites and digital content creation (DCC), although they are starting from small bases. Gartner estimates that the revenue attributed to SaaS within the office suites market will touch a 99.2 per cent compound annual growth rate (CAGR) from 2007 through 2012, with total SaaS revenue reaching $1.9 billion in 2012. By 2012, web-based freeware such as Google Apps, Adobe Buzzword, Thinkfree, Zoho and SaaS offerings are estimated to account for a nine per cent share of total software revenue. These are projected to coexist with traditional office products, such as Microsoft Office and complement the way people work today. Gartner forecasts that the revenue attributed to SaaS in DCC market will be 96.1 per cent CAGR from 2007 through 2012.

The content, communications and collaboration (CCC) market is the largest contributor to the overall SaaS enterprise application market, with revenue exceeding $2.1 billion in 2008, and expected to reach $4.7 billion in 2012. The second largest contributor to the overall SaaS enterprise application markets is customer relationship management (CRM). Gartner expects CRM SaaS revenue to exceed $3.2 billion in 2012.

Chris Pang, principal analyst at Gartner, said that before IT leaders deploy SaaS, they need to determine where SaaS is most appropriate within the organisation’s overall sourcing and applications strategy and whether economically SaaS is the better choice. X

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