Joe McKendrick has an interesting post up as of June 14 quoting Gartner about how Software as a Service (SaaS)/cloud computing is reaching some saturation point in Gartner's opinion. According to Gartner according to Joe, SaaS/cloud computing equaled only about 3% of software spend in 2009. I would have thought the number a little higher but still in single digits somewhere. I suspect Gartner does not count Fiserve. ADP and other long time SaaS providers the way I do.
Whichever, the data is definitely directionally correct. Despite all the hype going on 10 years now (and promotion of the concept under various other terms for 50 years), deploying software in that manner is still a massive exception to the rule of deploying it on-premise because of IT departments' legitimate fears of security lapses and illegitimate not-invented-here philosophies.
Actually the percentage of SaaS/cloud-computing software spend may be even lower because I'm not aware of any market research that bothers to try to figure out how much of a SaaS supplier's revenue -- e.g., the total $1 billion subscription revenue of salesforce.com (CRM) -- is really displacing CPU and storage spend as opposed to software spend. After all, that's the SaaS/cloud-computing value proposition; it's all bundled together.
To be fair in a comparison, most SaaS revenue is truly accounted for as subscription revenue, which means it is not apples-to-apples comparable to about 30% of the consenus worldwide software revenue number of about $300 million. About $100 million of the annual revenue of IBM, Microsoft (MSFT), Oracle (ORCL), SAP, and other traditional software suppliers is a one-time fee for a perpetual license. That revenue gets spread out the way salesforce.com and similar companies report their revenues to the SEC.
(IBM, Microsoft, Oracle and SAP all have SaaS revenue too but it is a small piece of their overall software revenue streams although Oracle may be second only to salesforce.com in total SaaS/cloud-computing revenue.)
Also to be fair, the saturation point may only be an inflexion point. Joe points out that saleforce automation, content/collaboration and communications are major categories where SaaS is taking off. Perhaps IT is just taking a breather or awaiting a generation change before more important backoffice and transaction processing functions are moved into the cloud.
But Joe concludes:
"For companies with extensive IT operations, it’s going to be some time before they consider repositioning these assets as off-site services provided by outside parties."
Say it ain't so, Joe.
-- Dennis Byron
(no financial interest in companies mentioned)
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