What's Driving SaaS Adoption?

All the consultant talk and vendor hype about Software as a Service (SaaS), plus some of the widely promoted benefits, are leading to a major shift in technology implementation and spending. While there are some distinct differences in how large versus medium-sized companies look at SaaS, the overall interest in the key component of cloud computing is stronger than you may realize.

A survey about SaaS conducted in August 2009 by BusinessWeek Research Services found that four out of five managers and senior executives in North America are either interested in, or in the process of, adopting the Software as a Service approach to information technology. In fact, roughly a third of the 326 respondents’ companies have already fully or partially adopted the SaaS approach for at least one application.

The key distinction is the level of interest in SaaS for mission-critical apps. In general, execs at medium-size companies ($100 million to $1 billion in annual revenues) are adopting SaaS for key applications, while managers at larger companies are typically only comfortable considering SaaS for less vital tasks.

Check out this table below to get a snapshot of the current level of SaaS interest:

The level and type of interest by big companies isn’t surprising. Most companies with more than $1 billion in annual revenues are not going to throw away their huge investments in their legacy systems.

However, utilizing SaaS as a solution to a new technology or business problem makes sense. Especially in the current economic environment.

Another aspect of SaaS for big companies is the adoption of the technology to augment existing operations. Using SaaS to provide applications access to a new operating unit of an existing company is a fast and economical way to solve a problem, notes Shailesh Rao, senior vice president, large enterprise on-demand, at SAP.

The leading ERP vendor sees a number of its existing customers using SAP’s on-demand service as a way of quickly provisioning an application without having to worry about the integration risks.

“They see SaaS as a way of extending their investment dollar to develop new applications or provide service for new division, for example, ” explains Rao. “For these situations, SaaS becomes a great solution, since it will be automatically integrated with what they already have.”

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