SaaS Global Revenues to Grow 20% to $12 Billion in 2011, Gartner Report

SaaS Global Revenues to Grow 20% to $12 Billion in 2011, Gartner Report

North American companies are estimated to account for nearly 64 percent of global software-as-a-service (SaaS) revenue with their share slightly decreasing from 63.6 percent in 2011 to 60.8 percent in 2015, a report by Gartner, Inc. revealed. In 2011, global market for SaaS products would generate $12.1 billion, a growth of 20.7 percent year-over-year, the report said.

The United States are still the most attractive marketplace for SaaS providers, being the most developed market for such services. Evidently, North America is the largest single regional market with projected revenues totaling $7.7 billion in 2011, compared to $6.5 billion in the previous year, a growth of 18.7 percent year-over-year.

In North America, ease and speed of deployment are primary reasons for SaaS adoption, followed by lower TCO,” Sharon Mertz, research director at Gartner, said in a statement. “Limited capital expense is also considered more important in North America than in the other regions. Consistent with the other regions, CRM shows the highest use of SaaS among enterprise applications while use of Web conferencing, e-learning and travel booking is higher in North America than in the other regions,” she added.

According to her, the main drivers behind growing adoption rates of cloud-based solutions is increasing familiarity with the model, continued oversight on IT budgets, and the growth of platform as a service (PaaS) developer communities. European, Middle Eastern, and African markets (EMEA) are influenced mainly by total cost of ownership (TCO) when the matter in hand is to adopt cloud solutions, while SaaS adoption in North American and Asia/Pacific regions is boosted by ease of deployment. SaaS adoption rates are affected by lack of flexible customization in EMEA markets, and North American and Asia/Pacific customers experience problems related to limited integration to current business applications they use to run their businesses.

Western Europe is the second largest market in terms of SaaS revenue with regional revenues projected to increase by 23.3 percent annually, reaching $2.7 billion in 2011. Eastern European SaaS market revenue is forecast to grow 29.8 percent year-over-year to $131.4 million in 2011. Gartner experts estimate Eastern European SaaS market revenues would stay at $270.1 million in 2015.

The U.K., Ireland, the Netherlands and Nordic countries represent the most developed segment of Europe’s SaaS market, Mertz said, adding that the main factor behind those countries’ fast-growing SaaS adoption rates is well-established Internet infrastructure while little or no localization is required by North American software vendors to enter these particular markets.

Asia/Pacific would see regional SaaS revenue grow by 27.7 percent year-over-year, totaling $768.3 million in 2011, and exceeding the $1 billion mark by 2015. Gartner, forecast the region is to witness regional SaaS revenue hit $1.7 billion in 2015.

SaaS adoption is more prominent in the more mature markets in Asia/Pacific, such as Australia, New Zealand, Hong Kong, Singapore and South Korea, because of their established infrastructure, such as more-stable networks, as well as the availability of vendor sales, marketing and support service structures. In many cases, the use of English as a common language in these countries, except in South Korea, makes them an attractive destination for foreign providers investing in the region,” Mertz said.

Latin American market for SaaS is expected to post revenues worth $328.4 million in 2011, growing 23.5 percent year-over-year, and increasing two-fold to $694.2 million in 2015.

A two-digit growth in most regions signals good years ahead for SaaS providers but a careful analysis of data provided by Gartner should take into account the basis from which every market starts to grow. North American market still shows huge potential but it would not grow as fast as Latin American markets due to higher SaaS penetration and other factors that prevent it from reaching the pace of growth of markets in less developed regions of the world.

By Kiril Kirilov

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