Saugatuck Research on SaaS Presented At Computerworld’s SaaScon

IT executives recently converged on Computerworld’s Software-as-a-Service Conference (SaaScon) in Santa Clara, CA (March 25-26), to share their experiences and best practices about implementing SaaS solutions in their businesses.

On day two of the event, research agency Saugatuck Technology presented some preliminary highlights from its most recent SaaS research program, including results from their January 2008 worldwide web survey of buyer demand, conducted in partnership with BusinessWeek Research Services. Much of this research will be published to their CRS subscription research clients in the coming weeks.


Below are seven key SaaS industry trends and takeaways that Saugatuck highlighted in their presentation:

– SaaS adoption / penetration continues to grow in enterprises of all sizes: Although collaboration and CRM continue to lead the SaaS charge, “core” systems of record (e.g., finance, HR) and BI / CPM are growing quickly as well. Longer-term acceptance of SaaS for mission-critical business processes is growing — not only with SMB customers, but Large Enterprises.

– SaaS goes international, especially in key geographies: European SaaS adoption is on the brink of exploding, lead by local innovation and strong demand in the UK, Benelux and the Nordic countries — which appear to be following a similar trajectory to the US (albeit with a 12 mo lag). Adoption in Germany and France is growing, as well as in much of the Asia/Pac region — all of which are projected to experience a similar adoption scenario (particularly in the SMB space), but with a 18-24 month (or longer) lag to US curve (although in many cases, adoption will dependent on availability of high-speed bandwidth).

– SaaS customer satisfaction is surprisingly strong: This is especially true around SaaS Wave I requirements, such as solution functionality, response time, availability and pricing. Satisfaction around SaaS Wave II and III requirements — especially around support for customized, personalized workflows, integration with on-premise data and process, and greater inter-company collaboration — is much lower, and something that vendors need to focus on to succeed longer-term.

– SaaS becomes more fully integrated with on-premise architectures: The focus of SaaS shifts from cost-effective delivery of stand-alone application services (Wave I), to integrated business solutions enabled by web services APIs and ESBs (Wave II), to workflow- and collaboration-enabled business transformation (Wave III), leading to measured, monitored and managed business processes (Wave IV).

– SaaS Platforms proliferate — and embrace user development / runtimes: Robust SaaS-based software development platforms and run-time environments emerge with a diverse set of supporting service offerings emerge that are viable alternatives to traditional on-premise development.

– ISVs migrate en masse to SaaS: But transitions prove difficult for most, primarily due to the need for substantial cultural and operational (not only technical) transformation.

– SaaS merger & acquisition will accelerate: Through 2010 M&A is fueled by ISVs gobbling up smaller venture-backed SaaS providers (as an important culture-change driver), as well as by mid size -to-large pure-play SaaS vendors seeking to solidify key solution areas franchises.

Saugatuck has found that user organizations are overwhelmingly satisfied with the SaaS solutions their organizations have adopted thus far. They were surprised by how the high satisfaction levels actually were (something we actually notice when we talk to our customers, as well). Eighty four percent (84%) of the 418 senior business and IT executives who participated in the 2008 worldwide survey were “satisfied” or “strong satisfied.” Satisfaction is especially high with regard to application functionality, system response time, availability and pricing.

However, evolving mainstream adoption will increasingly center on the IT organization, and issues of customization, personalization, integration and access to – and analysis of – data. These are all Wave II and Wave III requirements. These key attributes of enterprise-ready SaaS and On-demand Infrastructure will require IT organizations and their business users to work together on best practices, and a consistent approach to architecture (and to process flows) to bring SaaS into the fabric of the broader applications portfolio.

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