The Market
Market Dynamics
In a world without borders, even small businesses now collaborate and communicate on a global basis. "Walled gardens" are being torn down, and those that can provide and deliver on-demand services, and have the right distribution and content partners, are finding abundant opportunities for growth. Gaining competitive advantage requires having the flexibility and scalability to quickly source, deliver, bundle, and support best-of-breed solutions to capitalize on the fast-growing on-demand services distribution opportunity.
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“Resellers, integrators and other providers, who have established trusted advisory relationships with their business customers, are in an ideal position to monetize the fundamental shift in how value is delivered to end-customers in the on-demand market.” Steve Hilton, Vice President, Yankee Group
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The Evolution of SaaS
The foundation for the On-Demand Services opportunity is the massive trend towards unified IP-based networks that are always on, and the convergence of networks and services offered by traditional telco, mobile, internet, television, and other service providers. A major component of the On-Demand Services opportunity is Software as a Service (SaaS), which many analysts believe has reached a “tipping point” in terms of market-readiness.
According to Saugatuck Technology, a leading analyst of the SaaS market, “The focus of SaaS will shift over time from cost-effective delivery of stand-alone application services (Wave I), to integrated business services enabled by web services APIs and ESBs (Wave II), to work-flow and collaboration-enabled business transformation.” What does this mean? Industry analysts are forecasting that:
- By 2010, at least 65 percent of businesses will have deployed at least one SaaS application, with more than 75 percent penetration in the US market
- By 2010, SaaS will be interwoven into the fabric of enterprise architecture, with large organizations acquiring SaaS solutions as part of their broader business services portfolio
- SaaS usages within mid-size and large enterprises will more than double by 2010, averaging more than 7 SaaS solutions in production
- Through 2010, spending on SaaS will increase annually by 25 percent or more
- Over 30 percent of all new business software will be delivered as SaaS by 2012
Opportunity
Service providers of all sizes and types have been looking beyond traditional voice and licensed software offerings and tapping into the growing Software as a Service (SaaS) market. The shift in strategy is a good one, according to analysts who track this fast-emerging market. Small to medium-sized businesses (SMBs) that have been hesitant to adopt the Web-based software delivery model will more likely embrace it when offered by an existing "trusted advisor" -- whether it's their carrier, MSP, or Reseller.
“Nearly 75% of North American SMEs subscribe to some type of bundled service. Buyers like the lower cost and single source that these deals bring.”
Forrester Research
SMBs comprise a huge and relatively untapped market for enterprise-class applications, making it a lucrative opportunity for today's service providers and resellers who have the ability to deliver on demand. According to IDC, SMBs comprise over 70 percent of the economy, over 50 percent of IT spending, and their rate of investment is growing twice as fast as large companies. Service providers and software developers are scrambling to capitalize on a $500 Billion opportunity that will account for more than 30% of all software sales by 2010.