Fewer than one in five IT execs adopt software-as-a-service

Users turn to hosted software before IT

Despite the hype, most IT execs haven’t adopted software-as-a-service, according to a Forrester Research study.

Users seem to be ahead of IT when it comes to embracing software-as-a-service.  A new Forrester survey of more than 1,000 IT decision-makers in North America and Europe found that 16% of enterprises had adopted SaaS as of 2007 – an increase from 12% the previous year but still a small minority.

Actual enterprise adoption of SaaS might be much higher, though, because business units often deploy hosted applications on their own, sometimes seeing it as a way to free themselves from relying on IT, says Forrester analyst Liz Herbert.

"A lot of SaaS is still deployed at the business unit level. [IT executives] might not necessarily be aware of all the SaaS that's deployed in the organization," Herbert says.

While 16% of Herbert's survey sample were using or piloting at least one SaaS application, another 46% were planning a pilot or interested in having one, according to the Forrester report, "Competing in the Fast-Growing SaaS Market."  About 37% had no interest in software-as-a-service.

Executives who aren't interested in SaaS most commonly pointed to concerns about integration, total cost, lack of customization and security. (Compare security products.) Application performance concerns and vendor lock-in were also preventing some enterprises from using SaaS.

But the number of IT executives who have at least some interest in hosted software indicate to Herbert that IT involvement in SaaS projects is poised for a big increase.

"It's not like that 84% [that haven't deployed SaaS] is sitting there and saying 'there's no place for software-as-a-service in our organization,'" she says.

The hosted software market is growing more mature, with extensive customization and integration into an enterprise's internal systems, she notes. And whereas SaaS applications are typically for general business tasks like human resources, there are now hosted applications designed specifically to help IT staffers manage an enterprise's technology, she says.

Still, the most commonly used SaaS tools are for human resources, collaboration and CRM, Herbert reports. Nearly half of SaaS users were using HR tools, 38% were using collaboration software and 36% were using CRM.

Here are a few more findings from Herbert's survey:

*North American companies are twice as likely as European ones to adopt SaaS

*Hosted software is most commonly used by the energy, utilities, retail and services industries 

*SaaS vendors have improved customization and integration capabilities but haven't caught up to packaged software vendors in this regard

*Pricing is a concern: Many buyers of hosted software believe the service-based model is more expensive in the long run, though less expensive upfront.

*Security concerns are holding back adoption. Many customers worry about whether a vendor has adequate hosting and backup facilities, or think a hosted application will give untrained business users too much control over roles and access rights.

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