Global support for software-as-a-service grows

Gartner finds half of Asia Pacific enterprises are shifting to SaaS

Half of Asia Pacific enterprises are shifting away from on-premises software to software-as-a-service (SaaS), according to new research by Gartner.

SaaS's cost effectiveness, ease and speed of deployment, meant that nearly 90% of organisations surveyed, in eight major countries in the Asia Pacific, Europe and the US, expected to maintain or grow their use of the "remotely-hosted software rental" model.

In the June and July 2008 global survey, which attracted 25 qualified respondents, Gartner found that organisations consistently said they were changing to a SaaS solution, because the total cost of operation of traditional software was becoming too costly.

Overall, Gartner's survey found that 37% of respondents were currently transitioning from an on-premises solution to a SaaS solution. This drive is particularly significant in the Asia Pacific where 50% of respondents indicated that they were shifting away from on-premises and India indicated a 70% conversion.

North American respondents showed a greater confidence that their organisations will increase investments in products offered as SaaS or through a subscription model through year-end 2010, compared with those in Europe and the Asia Pacific. Sixty two per cent of North American respondents said that they expected new investments to increase slightly and 15% said that they expected new investments to increase significantly compared with 49% and 15% respectively, in Europe and 55% and 5%, respectively, in the Asia Pacific.

Given the likelihood of reduced discretionary spending in 2009 and perhaps 2010, Gartner expects that these driving forces will foster greater demand for SaaS solutions rather than budgets directed at enhancing — or furthering investment for — on-premises solutions.

"Use of SaaS has been evolving during the past decade and the SaaS model has become increasingly popular over the past three or four years," said Sharon Mertz, research director at Gartner. "Our survey indicates that more than 40% of organisations have used SaaS for more than three years, implying a growing fluency with the model within the end-user base.

"Users are demanding higher levels of functionality, sometimes prompting organisations to renegotiate their contracts early to opt for more feature-rich solutions, or to add more users as the organisational footprint expands."

Replacement of on-premises solutions and net-new implementations were cited as major drivers of future SaaS deployments. Globally, more than one-third of respondents indicated plans to transition from on-premises to SaaS. The key drivers cited included total cost of ownership (TCO), and unmet performance expectations with on-premises solutions, in addition to changes in sourcing strategy.

Despite the increase in usage of SaaS, most respondents to Gartner's survey indicated that no policies had been instituted to govern the evaluation and use of SaaS. Only 38% of total respondents that are currently using SaaS have a process or policy that guides the evaluation, procurement and deployment of SaaS.

Mertz said that the importance of governance mechanisms will increase as SaaS becomes a larger element of a company's overall sourcing strategy.

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