From: Fabian Romankewicz (GECS-DE-ENT)
Sent: Thursday, July 29, 2010 5:13:59 PM
Subject: NEWSBANK: SaaS revenue to grow five times faster than traditional packaged software: IDC
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SaaS revenue to grow five times faster than traditional packaged software: IDC
28 July, 2010
Pretty much everyone in the IT industry is aware that the Software as a Service (SaaS) model's growth has outstripped conventional software. But a new study by IDC provides a quantitative examination of exactly how much higher the growth rate is, and the amount may surprise some.
The IDC study showed the Software as a Service (SaaS) market had worldwide revenues of $13.1 billion in 2009. IDC forecasts the market to reach $40.5 billion by 2014, representing a compound annual growth rate of 25.3%. By 2012, IDC expects that less than 15% of net-new software firms coming to market will ship a packaged product (on CD). By 2014, about 34% of all new business software purchases will be consumed via SaaS, and SaaS delivery will constitute about 14.5% of worldwide software spending across all primary markets.
"The SaaS model has become mainstream, and is quickly coming to dominate the planning -- from R&D, to sales quotas, to partnering, channels and distribution -- of all software and services vendors," said Robert Mahowald, vice president, SaaS and Cloud Services research at IDC.
"Enterprise IT plans are rapidly shifting to accommodate the growing choices for sourcing most or all IT software functions, from business applications to software development and testing, to service and desktop management, as SaaS services become available from established vendors and new models for accessing functionality in the cloud creates lower-cost options and more tailored models for consuming IT services," Mahowald added.
The study also forecast that by 2012, nearly 85% of net-new software firms coming to market will be built around SaaS service composition and delivery; by 2014, about 65% of new products from established ISVs will be delivered as SaaS services. SaaS-derived revenue will account for nearly 26% of net new growth in the software market in 2014.
Traditional packaged software and perpetual license revenue are clearly in decline, IDC says. They predict that a software industry shift toward subscription models will result in a nearly $7 billion decline in worldwide license revenue in 2010. As a result, a permanent change in software licensing regime will occur.
IDC also says that SaaS segment mix will shift toward infrastructure and application development and deployment/PaaS, and away from U.S. dominance. IDC expects that by 2014, applications will account for just over half of market revenue. This shift will happen in part as a result of increasing IT cloud spending by enterprise IT groups and commercial cloud services providers (cloud SPs) relative to end-user spending.