Worldwide Software as a Service market expected to grow till 2015

1. Analysis & Outlook
Global SaaS Market 2012 – Emerging Markets will drive growth till 2015
Software as a Service also known as on-demand software is a delivery model in which
software and its associated data are hosted centrally and are accessed by users using a
web browser. After more than a decade of use and vast improvements in the cloud
computing technologies and many players like Amazon, Google, Saleforce.com, etc,
major software vendors, developers and independent software vendors too invested
significant resources both in terms of monetary, human and infrastructure to further
develop the cloud computing. Initially IBM kick started the trend towards cloud
computing with its On Demand computing initiative in 2003 and later in 2005 Amazon
took the market forward with its cloud offerings like the Elastic Cloud 2 (EC2). Even
Indian IT Services Vendors and other small & medium players too are focused on cloud
computing and particularly in Software as a Service offerings (SaaS). SaaS growth is an
alternative to the on premises software and also Cloud-based licensing is different from
traditional on-premises licensing and the market growth is only possible by
cannibalizing the traditional software market. SaaS was expected to capture significant
market share as its adoption benefits range from significant reduction in costs as buyers
need not invest on the IT infrastructure on their premises, pay as you use model, easy to
scale and upgrade, tighter IT budgets due to economic volatility in recent years and
mobility i.e. access from anywhere and with any device.
According to Gartner, worldwide software-as-a-service (SaaS) revenue is expected to
reach US$ 22.1 billion by 2015 as many companies are investing in cloud technology
and is expected to grow healthily by 17.9% to reach USD 14.5 billion in 2012 from
USD 12.3 billion in 2011. North America revenue is forecast to be US$ 9.1 bn in 2012
compared to US$ 7.8 bn in 2011, Western Europe revenue 2012 forecast US$ 3,2 bn
compared to US$ 2.7 bn (2011), Eastern Europe (2012) US$ 169.4 million compared to
US$ 135.5 million (2011), Asia Pacific (2012) US$ 934.1 mn compared to US$ 730.9
mn (2011), Japan (2012) US$ 495.2 mn compared to US$ 427 mn (2011) and Latin
America (2012) US$ 419.7mn compared to US$ 331.1 mn (2011). According to IDC,
SaaS market revenue which includes cloud applications, application development and
deployment, and system infrastructure software sales will rise to $53.6 billion by 2015
at a CAGR of about 26%. IDC also asserts that SaaS will grow faster than traditional
software and will comprise 80% of the software delivered by new ISVs. By 2015,
nearly $1 of every $6 spent on packaged software, and $1 of every $5 spent on
applications, will be consumed via the SaaS model. According to Forrester, the public
cloud market for SaaS is the biggest and fastest-growing of all of the cloud markets
($33 billion in 2012, growing to $78 billion by the end of 2015). According to market
research firm Global Industry Analysts, the global SaaS market will reach $26.5 billion
by 2015, as more companies will seek low-cost enterprise software solutions to
accommodate limited IT budget growth, which could slow due to the global economic
recession.
SaaS market growth is different in different geographies and compared to mature North
America market that contributes 2/3rd of the total SaaS market revenues is expected to
grow by 16.7% and Western Europe the second best market expected to grow by 18.5%
YoY, which is less when compared to 28% YoY growth for Asia Pacific excluding
Japan, 27% growth for Latin America, 25% growth for Eastern Europe and Japan too is
Rajesh Prabhakar Analyst Bio @ http://itbizcharts.blogspot.com/

2. Analysis & Outlook
expected too see low YoY growth of 16% like in the other mature markets. Data
highlights that SaaS market growth lies in the emerging markets as the countries in
those markets are improving their IT infrastructure and looking to adopt SaaS
technologies aggressively. Small and Medium Enterprises (SMBs) are driving the
growth when compared to large enterprises that find it difficult to migrate to cloud
computing from their existing on premise software and hardware systems as they have
made significant investments in building these systems for years and due to other
concerns like data security integrity, privacy, skilled man power, pricing and
contracting issues, regulations, etc. SaaS has become a common delivery model for
most business applications, including accounting like expense management, financials,
collaboration, customer relationship management (CRM), management information
systems (MIS), enterprise resource planning (ERP), invoicing, human resource
management (HRM), content management (CM) and service desk management.
Asia Pacific is high growth market for SaaS and this is driven by increased adoption in
India, China driven by adoption of financial applications like accounting. ERP
functions like Expense management and Employee Performance management, along
with office suites, email and CRM sales are the other applications that are being
deployed by companies in this region. Mature economic countries in this region like
Australia, New Zealand, Hong Kong, Singapore, South Korea and Taiwan are driving
SaaS adoption as they have good IT infrastructure that encourages increased adoption.
Emerging countries in this region like Malaysia, Thailand, Indonesia, Philippines, and
Vietnam where IT infrastructure is developing fast are also expected to increase SaaS
adoption. Japan was affected by the 2011 earthquake and Tsunami but SaaS market is
gaining traction as Japanese companies are looking at SaaS as a defense against future
power outages and disasters but there are concerns in terms of security, costs, and
integration. Despite Japan economic problems and tighter IT budgets the demand for
SaaS solutions is increasing due to their lower implementation costs and faster
deployment times. SMBs too are driving growth and according to AMI Partners, SMB
focused market research firm, forecast that the SaaS market in Asia/Pacific (excluding
Japan) will reach $1.5 billion by the end of 2012 and expects the market to more than
double by 2015.
Expense management, financials, email and office suites are the business apps deployed
through SaaS and Web conferencing is also highly used as most of the American
companies have global operations situated across the world but the market is also
facing problems in terms of limited flexibility of customization and limited integration
to existing systems according to Gartner. Gartner analysts said in Western Europe, the
most developed sub region, SaaS Market is rapidly increasing as North America-based
SaaS vendors further penetrate the region and the number of local European SaaS
vendors increases. In Eastern Europe and the Middle East and Africa, which are small
and emerging markets overall, the potential opportunity for SaaS is more in the medium
to long term due to ongoing infrastructure challenges that vendors need to overcome if
they are to be successful in these regions. In Latin America, SaaS has been deployed in
the areas of email, financial management (accounting), sales force automation and
customer service, and expense management. While regional adoption will be positive, it
is fully expected that Brazil and Mexico will drive a majority of adoption and revenue
opportunities.
Rajesh Prabhakar Analyst Bio @ http://itbizcharts.blogspot.com/