2009 Demand Trend Analysis of the U.S. SMB SaaS/Hosted Services Market

The market for Software-as-a-Service (SaaS) is experiencing strong momentum among US small and medium enterprises. Lured by attractive pricing and annuity-based payment models, companies are increasingly shifting expenditures from legacy applications to online hosted alternatives. Likewise, relatively under-developed product categories are getting a lift from SaaS as more firms find the business model accessible. SaaS, as well as the broader outsourced managed services market, are also benefiting from the impact of the economic slowdown. As firms apply a keener eye to stretching their working capital, SaaS and managed services are proving cost effective options to traditional application and IT management models. In this report, we provide perspective on enterprise demand trends for SaaS and managed services and potential plays around key vertical and horizontal segments.

Key points of coverage include:

1. Five year spending projections on SaaS and managed services (2009 - 2014)
2. Demand trends/growth drivers
3. Recent adoption by application category
4. Growth themes/alternative positioning strategies
5. Prevailing routes to market through third-party channels

Outline

Summary of Findings

Software-as-a-service (SaaS) - Hosted Delivery Model

U.S. SMB SaaS Spending Growth

SaaS Investment Drivers

SaaS - Second Largest Software Budget Item

U.S. SMB SaaS Adoption Accelerating

Narrow Point Solutions - Highest Market Acceptance

Shift to SaaS Within Mature Application Categories

Business Process Transformation Applications Experiencing Double-Digit Growth

Projected Increases in SMBs' SaaS Budgets Suggest Reasonable ROI

Converting SMB Market Demand for SaaS Could Drive Net New Adoption

Cross-industry Strategy that Addresses Specific Workflows

Key Success Factors for PSOs

IP-intensive SMBs Need Solutions that Streamline Discovery Processes and Protect/Market Assets

Manufacturing and Inventory-Intensive Businesses Require Highly Efficient Processes

Industry Shift to Hosted Applications Part of Broader Movement Towards Managed Services

SMBs have Integrated Wide Array of Managed Services

Spending on Managed Services Set to Exceed $60 Billion by 2014

Strengthening the Case for Managed Services

Commitment to SaaS and Managed Services Strong Within Channels

ISVs Best Route to Market for SaaS Vendors and Solutions Providers

SaaS Channel Partners Less Vested than Peers in Commoditized Hardware

Channel Play Around Managed Services

MSPs Better Positioned to Provide Advanced IT Hardware and Services Support