SAAS Adopters in for Big Challenges

Use of software-as-a-service has more than doubled since the beginning of 2006 and will double again by the end of the decade, creating challenges for customers and vendors as they attempt to integrate hosted offerings with on-premise software, according to research released this week by Saugatuck Technology, a business and market strategy consulting firm focused on emerging IT markets.

As companies increasingly use software-as-a-service products for mission-critical applications, integration with in-house software will likely require service-oriented architectures, (SOA) the report states.

"SAAS is going to complicate and hybridize user IT and business operational environments faster, and to a greater degree, than most user and vendor executives understand at this point," Saugatuck writes. "The vast majority of user IT departments will simply not have the resources to handle the influx of enterprise-level SAAS" expected to occur over the next seven years.

Saugatuck's research paper, titled "Three Waves of Change: SAAS Beyond the Tipping-Point," is based on surveys of 250 business and IT users, briefings with more than 30 software-as-a-service vendors and extensive interviews with senior executives at 15 companies that use software-as-a-service.

Saugatuck divides the software-as-a-service adoption trend into three "waves." The first wave of early adoption was characterized by cost-effective software delivery involving stand-alone applications. The current phase of mainstream adoption is characterized by growth of business solutions increasingly integrated with on-premise applications.

Saugatuck predicts there will be a third wave of ubiquitous adoption that will begin next year and involve "workflow-enabled business transformation, optimized business and IT ecosystems, inter-enterprise collaboration, maturation of the IT utility and of SAAS infrastructure providers."

More than a quarter of companies are using at least one software-as-a-service application, up from 11 percent at the beginning of 2006, the report states. By the end of this year Saugatuck predicts software-as-a-service adoption will grow to 47 percent and that by 2010 it will reach at least 65 percent worldwide.

"Much of this growth is coming without any sort of plan or management structure," report lead author Mark Koenig states in a press release.

The average number of software-as-a-service applications used by midsize and large enterprises will reach seven per company by 2010, more than double the current amount, the research firm also predicts.

"Everyone thinks SAAS is an [small to midsize business] phenomenon," says William McNee, report co-author and president and CEO of Saugatuck Technology "While that is true, it is crossing all kinds of customers."

The trend of software-as-a-service applications being tightly integrated with business services behind the firewall will necessitate a change in how IT departments view application security, and will lead them to consider "security-as-a-service" vendors, McNee says.

"This is where the security perimeter needs to be extended beyond what is currently managed today, to incorporate new types of applications and services and solutions," he says.

This story, "SAAS Adopters in for Big Challenges" was originally published by Network World.

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