25% of New Business Software Will Be Delivered As Software As A Service by 2011

Software as a service (SaaS) represented approximately 5% of business software revenue in 2005 and, by 2011, 25% of new business software will be delivered as SaaS, according to Gartner.

According to a recent IDC study, the size of the SaaS market will grow from $2.3 billion in 2003 to $8.0 billion by 2007. Other studies cite similar numbers and refer to an annual growth rate of 25%. SaaS offerings currently take one of three different forms: managed services, hosted applications, and software-on-demand.

The adoption of the SaaS software delivery model has varied significantly by market segment. SaaS accounted for approximately 8% of CRM total software revenue in 2005 (Gartner estimates 2006 SaaS revenue to reach 12% of total CRM software revenue) and integration as a service had 10% adoption in its market. But, other markets, such as the ERP and supply chain management segments, had less than 4% adoption.

Salesforce.com is a dominant player in the the software-as-a-service movement. Salesforce.com is halfway to a million subscribers and a billion dollars in revenue, according to the company's Q2 2007 financial report. Some detailed by sector at Billion dollar SaaS sectors.

SaaS is hosted software based on a single set of common code and data definitions that are consumed in a one-to-many model by all contracted customers, at any time, on a pay-for-use basis, or as a subscription based on usage metrics. SaaS providers are enhancing their software functionality and improving the ease with which companies can customize and more uniquely configure SaaS software to meet business requirements.

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