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Software-as-a-Service (SaaS) applications, software applications that are accessed and updated via the Web, are becoming commonly known as the more flexible, user friendly, cost effective, and easier-to-manage alternative to traditional in-house software. SaaS applications shift the responsibility and the cost of developing, updating, maintaining, securing and hosting an application to the provider. This business model lets SaaS users focus on growing their businesses and products, rather than dealing with the backend software and associated overhead.

The SaaS business model, where a vendor will develop and host an application which users can then sign onto for a fee and using only a web-browser, is popular but not exactly new. Hosted solutions, and the companies that provide them, have been around for many years under different names: Application Service Providers (ASPs), On-Demand software, Cloud Computing applications, etc. However, in 2009 as the economy entered into a recession and companies searched for ways to cut costs and reduce overhead, the SaaS market grew exponentially. The appeal of "renting" software and services in a shaky market, rather than purchasing them outright, is readily apparent. Additionally, with most SaaS providers, users don't sign any long term contracts and can discontinue using the service at any time without penalty. Not only did new vendors enter the SaaS market, but older established software companies began offering their services and applications via the web as well. As the market grew, so did media exposure of this "new" business model.

As with any other industry, as the SaaS marketplace continues to get more crowded, vendors will need to find new ways of differentiating themselves in order to appeal to new customers. This shift will likely coincide with the increased ubiquity of mobile devices in the workplace. According to a November 2009 report from Forrester Research, 13% of information workers use smartphones for work at least weekly*. As this number continues to grow, so will the range of services targeted toward this market.

Just as earlier networks consisted of several portals which connected via a mainframe, mobile devices and smartphones will increase in ability, eventually operating more as portals to a cloud based server. Workers will begin using their mobile devices more and more for in-depth business process. While it's quite obvious now to even the most casual observer that the days of mobile phones being used primarily for communication are almost over, this is a trend that will likely continue with greater speed in the New Year. As this shift towards a mobile workforce rapidly increases a whole new category of mobile software for business operations will likely result. With new services like Project Management, CRM, Document Management, Issue and Ticket Management geared toward mobile users, entire businesses could effectively be run from a mobile device.

While some vendors already offer mobile applications that work with their hosted software; the opportunity will exist for a greater push into this market. Rather than just applications offering a glimpse of the actual product, users will be able to purchase software applications for email and issue management, client fulfillment, project management and more. These could be applications that are designed for mobile devices and integrated into a desktop solution. This would be a 180 degree turn from the current standard.

The US workforce is becoming more mobile and workers are encouraged to keep frequent contact; these factors point toward future growth in not just the mobile device industry but also in the SaaS industry as well. Indeed, overall SaaS growth seems imminent. Many companies scaled back during the 2009 business year by closing offices and hiring remote workers. As a result, 2010 will start off with a large number of workers located outside of a main office, working in satellite locations. SaaS solutions work especially well in situations like this, since SaaS solutions eliminate the need to provide employees with hardware and software meeting certain specifications. All companies now need to provide remote workers, aside from a working computer and an internet connection, are an account name and password.

As the SaaS marketplace grows in 2010 and beyond and vendors need to differentiate themselves from the competition, there will be increased growth in vertical markets. Practically any software solution that currently exists can be hosted on a vendor's servers, and offered as a SaaS application. However, as companies explore these new opportunities in vertical markets, they'll benefit greatly from working with other SaaS providers. Why reinvent the wheel when you can enter into an API partnership with a provider in a different market?

Integration among SaaS providers will not only be a result of industry growth, but it will also help to fuel additional growth. Vendors themselves can cut development costs by teaming up, while offering their customers a wider range of products and services in marketplace where they have already established a loyal customer base. Partnerships among SaaS vendors and also between established SaaS players and more traditional software vendors will likely increase as established vendors ramp up partner programs to take advantage of the industry growth.

While it's impossible to predict the future, one can tell a great deal about what will happen in the Software-as-a-Service market by just taking a look at past trends. 2009 was definitely a difficult business year for just about all industries, however as companies contracted, the market for Software-as-a-Service applications grew. Despite growth in a down year, a noticeable shift in the way that companies now approach IT and software needs, lends itself toward continued demand for SaaS services even in better economic times.

About the Author

Yaron Sinai is the founder and CEO of Elementool Inc, which was established in 2000. Mr. Sinai has a bachelor degree in Accounting and Economics from the Hebrew University of Jerusalem. Prior to founding Elementool, Sinai worked for the Federal Bank of Israel, BDO accounting Firm, and several software startup companies. Sinai was also the founder and CEO of Chart.co.il in 2005, an online advertising company that provided text CPC automatic advertising service on leading media and news websites in Israel. The company was sold to the Israeli branch of Leo Burnett advertising firm in 2007. Mr. Sinai is also the founder and CEO of Raisix Inc. which develops lifestyle iPhone applications.

More by Yaron Sinai

About Elementool

Elementool is the leading provider of web based project management tools including: help desk, issue tracking, test case tracking, time tracking, file sharing, forums and docs. Customers such as Fortune 500 companies, International banks, automotive manufacturers, IT consulting companies and software start-ups, use our project management tools daily, in their project development and testing process.

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