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What's wrong with SaaS?

By Christine Burns, Network World
July 10, 2012 02:18 PM ET

Network World - The software as a service market is still in a state of flux and before SaaS can reach its full potential, service providers must overcome integration, customization and brokerage issues.

Gartner pegs total worldwide software revenue at $267 billion in 2011 and expects it to hit $288 billion this year. But Gartner puts worldwide SaaS revenue at only $12.3 billion and $14.5 billion, respectively, which comes out to less than 5% of annual software sales.

“At 10 years old, or 10 years young — however you want to specify its age — SaaS has the power to change everything. It should be viral, like a really hilarious YouTube video. And it just isn’t. Why not?” asks Jason Currill. He is CEO of Ospero, a U.K. startup looking to use its VMware cloud running on an infrastructure-as-a-service (IaaS) platform to build a better SaaS delivery channel across Europe.

IDC also asserts that SaaS will grow faster than traditional software and will comprise 80% of the software delivered by new ISVs. By 2015, nearly $1 of every $6 spent on packaged software, and $1 of every $5 spent on applications, will be consumed via the SaaS model, according to a recent IDC report.

Robert Mahowald, research vice president of SaaS and cloud services at IDC, sees back-end data integration between SaaS vendors as a significant step toward ubiquitous SaaS adoption.

Industry analysts across the board assert that an orchestrated move away from the existing “load software on a pallet and ship it out” software distribution channel and toward an emerging class of cloud delivery intermediaries called cloud service brokerages (CSB) will be another driving force in SaaS.

To read more about SaaS and the 10 companies to watch in this sector, download this pdf and become a Network World Insider (free registration is required). This part of the Enterprise Cloud Services series also takes a look at the American Society of Composers, Authors and Publishers and its use of SaaS.

Read more about cloud computing in Network World's Cloud Computing section.

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