Gartner is predicting that the worldwide SaaS market will grow from $6.3 billion in 2006 to reach $19.3 billion by the end of 2011. In 2006 the growth rate was 26 percent and the prediction is for growth to continue at 25 percent a year through the end of 2011. But Gartner sees big-name vendors like Oracle, SAP and Microsoft as missing out on the trend.
Ben Pring who wrote the Gartner report sees customers as rejecting a software + services model based on traditional software that ends up costing customers bug bucks and often includes functionality that may not be used or needed by the customer.
Large software vendors are not inclined to introduce SaaS products that may compete with their standard software offerings. SAP, Oracle and Microsoft have all attempted on-demand CRM, but Pring says that their attempts have been half-hearted and haven’t gotten much traction. Because of that smaller vendors are stepping up to the opportunity.
To address the SaaS market, Gartner gives the following advice to those smaller vendors:
- Use an SOA framework, Web Services, multitenant servers, and automated server farms
- Begin now. The opportunities are there and building out the solution will take time.
- Keep abreast of the market and continually reposition based on how the market evolves
[...] Yesterday at the Worldwide Partner Conference Steve Ballmer announced that Microsoft will be entering the software services space and launched MSCRM Live. The reaction is seems to run the gamut from downright surprise to outright consternation even though this has been a stated intention since the dotcom era. Lloyd Ketchum summarized the situation very well: “Microsoft has a problem – a big one and as software and services inverts to services and software [and that will happen], those in the channel are going to either drown, or make it to shore and do something else. There is a cat fight the likes of which we have never seen before that is brewing between Microsoft and Google. Where services over software will win out over software and services, because it is cheaper, easier to deploy and easier to support, and because it requires fewer “partners” (it may not happen over night, but it is going to happen) As networks and software begin to communicate with one another more, there is less room for partners as there is less need for them – there is less to set up and less to break.” I really like how Ketchum inverts the words “software” and “services” which I think is very illuminating. Software is maturing to the point where you plug-and-play technology to cater to a specific service need by a significant customer segment. AND, you can expect Microsoft to go after an opportunity like this in a big way. I almost want to say this again, but I’m sure you get the point. How big is the opportunity? Dick Weisinger claims: “Gartner is predicting that the worldwide SaaS market? will grow from $6.3 billion in 2006 to reach $19.3 billion by the end of 2011.? In 2006 the growth rate was 26 percent and the prediction is for growth to continue at 25 percent a year through the end of 2011.”? A growth rate of 25% a year is staggering. Every large ISV is thinking about their services strategy, not just Microsoft. If they are not, they should be. In the words of Mick Jagger and Keith Richards: “I said Hey, you, get off of my cloudHey, you, get off of my cloudHey, you, get off of my cloudDon’t hang around ’cause two’s a crowd on my cloud, baby” Not anytime soon…. Not anytime soon, baby. Published 11 July 07 11:03 by jvast [...]
[...] In March, Gartner had predicted an annual growth rate of 25 percent to continue through the end of 2011 when it was to have reached $19.3 billion. The new estimate calls for an average annual growth rate of 22.1 percent with the estimate for 2007 to come in at around 21 percent, utlimately becoming an $11.5 billion market by 2011. [...]