The harsh economic climate and worldwide recession are expected to accelerate the adoption of software as a service (SaaS) platforms.

"Revenue from SaaS services will increase in 2009 - 2010 more than we previously estimated," Robert Mahowald, research director at IDC told IT Examiner. "SaaS thrives in down cycles, and as with the 2000 - 2001 downturn that gave Salesforce.com its start, the current freeze in IT and related Capex spending will help assure solid growth for most SaaS providers. In interviews, SaaS vendors report stability and good pipelines, and new sales within established customers, and since the SaaS model provides visibility into earnings 12 months out, many pure-play vendors including Concur, Netsuite, Salesforce, and Taleo, at this point have good visibility into their full year," said Mahowald.

The research director also explained that demand-side survey data appeared to confirm IDC's optimistic prediction. "The growing ecosystem around SaaS, including distributors, aggregators, and global integrators, is strengthening. When sales are tough, partners will push projects/products which earn them recurring revenue, and customer adoption of SaaS solutions will accelerate the shift to SaaS for the whole value chain as the promise of a recurring revenue stream," said Mahowald.

Indeed, a recent IDC report projected SaaS growth at 42 per cent for 2009 and estimated that 76 per cent of US organisations will deploy at least one  SaaS-delivered application for business use. Meanwhile, the percentage of US firms planning to spend at least 25 per cent of their IT budgets on SaaS applications is expect to increase from 23 per cent in 2008 to nearly 45 per cent in 2010.

"There will be pain, but it will be contained," says Mahowald, who explained that cash-flow issues related to slow-paying clients and limited resources continue to plague US-based SaaS vendors.

A recently published report by Evans Data expressed similiar, optimistic sentiments and predicted that over half of all developers would create SaaS related programmes during the next 12 months.

According to Evans Data, the number of engineers currently working on SaaS implementations is highest in North America, where over 30 per cent of programmers confirmed that such solutions are part of their current development efforts. However, new adoption expectation is strongest in the Asia-Pacific region, where at least 53 per cent of developers are likely to create SaaS applications within a 12 month perdiod.

"These SaaS results definitely reaffirm the success of this concept in replacing the traditional model of business applications being run in-house with traditional software licences," explained John Andrews, president and CEO of Evans Data. "SaaS is delivering on the promise of rapid deployment, limited upfront investment in capital and staffing, plus a reduction in the software management responsibility, all making SaaS a very desirable alternative to software on a user's premise," added Andrews. X

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