Sizing Up the IT Management SaaS Market

Our prior commentary on SaaS and Managed Services: Big Service Providers Plug In does a good job pointing out how various service providers are attempting to deliver a widening array of Software-as-a-Service (SaaS) solutions and managed services.

This trend is being driven by two major forces. First, the commodization of traditional transport services. Second, the shift in customer attitudes regarding IT management.

Service providers can no longer differentiate themselves based on the quality of their transport services. As a consequence, service pricing, customer loyalty and profitability of this mainstay business continue to decline.

To compensate for this erosion of their traditional transport business, service providers are seeking to deliver a new generation of value-added services which can give them greater 'stickiness' with their customers.

It's a Win-Win Scenario
At the same time, customers are seeking to offload, or out-task, a broader assortment of IT management responsibilities so they can improve the reliability of their systems and software, reduce their operating costs, and focus their limited resources on more strategic and/or innovative corporate initiatives.

THINKstrategies uncovered the growing level of interest and adoption of IT management SaaS solutions among IT professionals in 2007 as a key finding of annual survey with Cutter Consortium (download a complimentary copy of "SaaS Penetrates the IT Department").

Forrester recently published a report entitled -- "How Big is SaaS in IT Management Software?" -- which suggests that SaaS solutions only represent 1 percent of total IT management software sales today, but will grow to 10 percent by 2013.

Given that 25 percent of IT professionals who responded to THINKstrategies and Cutter Consortium's survey a year ago said they were already using SaaS solutions to address their IT management requirements, Forrester's forecast is probably low.

Multitude of SaaS Solutions
Smart vendors, service providers and VARs are recognizing this trend and seeking to win a share of this rapidly growing market. The good news for IT professionals is that they will have plenty of SaaS solutions and suppliers to chose from.

As always, the best choice will be selecting the supplier that you trust the most to meet your particular business needs and requirements.

The IT Management Implications of SaaS Growth

THINKstrategies recently unveiled the initial findings of its fourth annual Software-as-a-Service (SaaS) customer survey, in conjunction with Cutter Consortium, which revealed that 63% of the responding organizations are using a SaaS solution -- almost double the 32% who were using SaaS solutions in 2007.

Over the past four years, we have seen tremendous growth of the SaaS market spurred along by rising frustration with the challenges of deploying traditional software products and the hassles of keeping enterprise applications up and running.

Our surveys were the first to find widespread interest and substantial adoption of SaaS in 2005.

Changing workplace requirements have led to more workers needing to access applications and corporate data remotely, which has also led many organizations to adopt web-based SaaS solutions.

The Shift Away from CAPEX
But, the most important consideration has been the financial savings generated by shifting from upfront capital investments in perpetual licenses and systems to a more flexible, 'pay-as-you-go', subscription model. This approach has become particularly attractive in today's tough economic climate.

Despite these advantages, many IT organizations were reluctant to accept SaaS, and even resisted its adoption in many cases because of concerns about the reliability, security and performance of these web-based applications.

However in 2007, THINKstrategies survey found growing acceptance of SaaS solutions by IT professionals who were not only learning that SaaS solutions could be trusted to successfully support their business units and end-users, but also discovered that a new generation of SaaS solutions were available to help them better manage their IT operations.

Business Case for Out-Tasking IT
Leveraging SaaS and a broader array of 'cloud' computing services is an extension of the same mindset which is driving many IT departments to recognize the benefits of contracting for managed services.

This 'out-tasking' strategy allows IT professionals to offload many of the day-to-day technology deployment and management responsibilities which can be performed in a routine fashion more economically by a specialized third-party, so the IT staff can finally focus their limited time and resources on more strategic initiatives or even innovative projects.

Click here to obtain the first of a series of three Executive Update reports based on the THINKstrategies/Cutter Consortium SaaS survey results.