Worldwide SaaS revenue to grow 18 Per Cent in 2009 – but ERP is slow

16th November 2009

Gartner the analyst firm says that worldwide software as a service (SaaS) revenue will reach $7.5 billion in 2009, a 17.7 per cent increase from 2008. The market will show consistent growth through 2013 when worldwide SaaS revenue will total over $14 billion for the enterprise application markets. But FSN discovered that the financial software market will considerably lag growth in other application areas.

Customer Relationship Management (CRM) and Digital Content Creation account for around 64 percent of the overall market with the ERP market accounting for just 16 percent.  But when it comes to growth the ERP SaaS market is forecast to grow just 5 percent this year compared to 41 percent for Digital Content Creation (email, e-learning, instant messaging and the like) and 22 percent for CRM.

So FSN spoke to Sharon Mertz, research director at Gartner to understand why ERP is lagging other important segments of the overall market.  According to Mertz, Gartner’s analysis of ERP is actually comprised of Enterprise Asset Management, Financial Management, Strategic Human Capital Management (SHCM), Manufacturing and Operations. Mertz told FSN, “Financial management and SHCM are exhibiting some growth but the other areas remain flat.” But she lays the blame on the economy more than doubts concerning SaaS as a viable alternative to on-premise solutions. “We are seeing attrition across the SaaS market as businesses downsize in response to the economy and reduce the level of subscriptions to SaaS services”, Mertz told FSN.

However, Mertz points to more success for SaaS in the SME financials market than the other segments. “There are structural or physical constraints in manufacturing and operations which make SaaS solutions less of a good fit,” she added.

CRM on the other hand shows consistent growth which may be good news for CODA which recently partnered with and re-branded its financial offering

David Turner, group marketing director of UNIT 4 Agresso, CODA’s parent company, told FSN, “From the outset we new that the uptake of SaaS would be slow in the accounting and ERP market despite the obvious benefits of the solution, which is why we decided to align ourselves with a proven platform.  In choosing we have the benefit of a very successful CRM solution in the cloud and a market that has already committed in some shape or form to cloud computing.”

“The market landscape for on-demand CRM continues to evolve as the availability and usage of SaaS solutions becomes more pervasive,” said Ms Mertz. “The rapid adoption of SaaS and the marketplace success of have compelled vendors without an on-demand solution to either acquire smaller niche SaaS providers or develop the solution internally in response to increasing buyer demand,” added Mertz

This week, COA Solutions also threw its hat into the Saas Ring with the launch of COA Solutions On Demand. Based at COA Solutions’ Bridgwater facility, the company said its “On Demand” service is designed to deliver business applications as managed and bureau services, addressing market requirements for more flexible ways to adopt and run software.  

COA’s new offering includes, financial systems, human resources (HR), payroll and payroll bureau, procurement systems, collaborative tools for budgeting and forecasting as well as business intelligence. Mark Thompson, Managing Director of COA Solutions, said, “Many organisations just don’t have the time and resources to effectively manage their own business applications. Our On Demand services are ideal for such organisations, providing them with a cost-effective and tailored solution with the reassurance that it is being managed by a highly experienced and dedicated team.”

But SaaS isn't an "all or nothing" capability.  a half-way house, software + services is also getting traction. Bryan Richter, UK Country Manager for Mamut, told FSN, "What the research seems to suggest is that some applications lend themselves better to a SaaS delivery model than others. IIn our view the debate regarding SaaS versus traditional applications has focused too much on the architecture and too little on the benefits for customers. It is not the delivery mechanism that is important but the ability to match the functional needs a user may have with the way that they want to access the data.  Most users get more value from combining both methods into a seamless user experience,  known as Software plus Services." 

"The Software plus Services model means customers can keep business-critical data stored locally, while at the same time enables, say, sales and marketing information to be hosted in the cloud for easy access on the go – ideal for sales people and employees working from home or while travelling. This flexible design provides users with the right information on the right device, anywhere and at any time, without any additional investments in infrastructure. We believe that this approach provides the optimum combination of functionality and accessibility," added Richter.