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Analysis & OutlookGlobal SaaS Market 2012 – Emerging Markets will drive growth till 2015Software as a Service also known a...
Analysis & Outlookexpected too see low YoY growth of 16% like in the other mature markets. Datahighlights that SaaS market...
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Global SaaS Market 2012 – Emerging Markets will drive growth till 2015


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Worldwide Software as a Service market expected to grow till 2015

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Global SaaS Market 2012 – Emerging Markets will drive growth till 2015

  1. 1. Analysis & OutlookGlobal SaaS Market 2012 – Emerging Markets will drive growth till 2015Software as a Service also known as on-demand software is a delivery model in whichsoftware and its associated data are hosted centrally and are accessed by users using aweb browser. After more than a decade of use and vast improvements in the cloudcomputing technologies and many players like Amazon, Google,, etc,major software vendors, developers and independent software vendors too investedsignificant resources both in terms of monetary, human and infrastructure to furtherdevelop the cloud computing. Initially IBM kick started the trend towards cloudcomputing with its On Demand computing initiative in 2003 and later in 2005 Amazontook the market forward with its cloud offerings like the Elastic Cloud 2 (EC2). EvenIndian IT Services Vendors and other small & medium players too are focused on cloudcomputing and particularly in Software as a Service offerings (SaaS). SaaS growth is analternative to the on premises software and also Cloud-based licensing is different fromtraditional on-premises licensing and the market growth is only possible bycannibalizing the traditional software market. SaaS was expected to capture significantmarket share as its adoption benefits range from significant reduction in costs as buyersneed not invest on the IT infrastructure on their premises, pay as you use model, easy toscale and upgrade, tighter IT budgets due to economic volatility in recent years andmobility i.e. access from anywhere and with any device.According to Gartner, worldwide software-as-a-service (SaaS) revenue is expected toreach US$ 22.1 billion by 2015 as many companies are investing in cloud technologyand is expected to grow healthily by 17.9% to reach USD 14.5 billion in 2012 fromUSD 12.3 billion in 2011. North America revenue is forecast to be US$ 9.1 bn in 2012compared to US$ 7.8 bn in 2011, Western Europe revenue 2012 forecast US$ 3,2 bncompared to US$ 2.7 bn (2011), Eastern Europe (2012) US$ 169.4 million compared toUS$ 135.5 million (2011), Asia Pacific (2012) US$ 934.1 mn compared to US$ 730.9mn (2011), Japan (2012) US$ 495.2 mn compared to US$ 427 mn (2011) and LatinAmerica (2012) US$ 419.7mn compared to US$ 331.1 mn (2011). According to IDC,SaaS market revenue which includes cloud applications, application development anddeployment, and system infrastructure software sales will rise to $53.6 billion by 2015at a CAGR of about 26%. IDC also asserts that SaaS will grow faster than traditionalsoftware 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 onapplications, will be consumed via the SaaS model. According to Forrester, the publiccloud market for SaaS is the biggest and fastest-growing of all of the cloud markets($33 billion in 2012, growing to $78 billion by the end of 2015). According to marketresearch firm Global Industry Analysts, the global SaaS market will reach $26.5 billionby 2015, as more companies will seek low-cost enterprise software solutions toaccommodate limited IT budget growth, which could slow due to the global economicrecession.SaaS market growth is different in different geographies and compared to mature NorthAmerica market that contributes 2/3rd of the total SaaS market revenues is expected togrow by 16.7% and Western Europe the second best market expected to grow by 18.5%YoY, which is less when compared to 28% YoY growth for Asia Pacific excludingJapan, 27% growth for Latin America, 25% growth for Eastern Europe and Japan too isRajesh Prabhakar Analyst Bio @
  2. 2. Analysis & Outlookexpected too see low YoY growth of 16% like in the other mature markets. Datahighlights that SaaS market growth lies in the emerging markets as the countries inthose markets are improving their IT infrastructure and looking to adopt SaaStechnologies aggressively. Small and Medium Enterprises (SMBs) are driving thegrowth when compared to large enterprises that find it difficult to migrate to cloudcomputing from their existing on premise software and hardware systems as they havemade significant investments in building these systems for years and due to otherconcerns like data security integrity, privacy, skilled man power, pricing andcontracting issues, regulations, etc. SaaS has become a common delivery model formost business applications, including accounting like expense management, financials,collaboration, customer relationship management (CRM), management informationsystems (MIS), enterprise resource planning (ERP), invoicing, human resourcemanagement (HRM), content management (CM) and service desk management.Asia Pacific is high growth market for SaaS and this is driven by increased adoption inIndia, China driven by adoption of financial applications like accounting. ERPfunctions like Expense management and Employee Performance management, alongwith office suites, email and CRM sales are the other applications that are beingdeployed by companies in this region. Mature economic countries in this region likeAustralia, New Zealand, Hong Kong, Singapore, South Korea and Taiwan are drivingSaaS adoption as they have good IT infrastructure that encourages increased adoption.Emerging countries in this region like Malaysia, Thailand, Indonesia, Philippines, andVietnam where IT infrastructure is developing fast are also expected to increase SaaSadoption. Japan was affected by the 2011 earthquake and Tsunami but SaaS market isgaining traction as Japanese companies are looking at SaaS as a defense against futurepower outages and disasters but there are concerns in terms of security, costs, andintegration. Despite Japan economic problems and tighter IT budgets the demand forSaaS solutions is increasing due to their lower implementation costs and fasterdeployment times. SMBs too are driving growth and according to AMI Partners, SMBfocused market research firm, forecast that the SaaS market in Asia/Pacific (excludingJapan) will reach $1.5 billion by the end of 2012 and expects the market to more thandouble by 2015.Expense management, financials, email and office suites are the business apps deployedthrough SaaS and Web conferencing is also highly used as most of the Americancompanies have global operations situated across the world but the market is alsofacing problems in terms of limited flexibility of customization and limited integrationto existing systems according to Gartner. Gartner analysts said in Western Europe, themost developed sub region, SaaS Market is rapidly increasing as North America-basedSaaS vendors further penetrate the region and the number of local European SaaSvendors increases. In Eastern Europe and the Middle East and Africa, which are smalland emerging markets overall, the potential opportunity for SaaS is more in the mediumto long term due to ongoing infrastructure challenges that vendors need to overcome ifthey are to be successful in these regions. In Latin America, SaaS has been deployed inthe areas of email, financial management (accounting), sales force automation andcustomer service, and expense management. While regional adoption will be positive, itis fully expected that Brazil and Mexico will drive a majority of adoption and revenueopportunities.Rajesh Prabhakar Analyst Bio @