AS ECONOMY DEFLATES, SAAS DRIVES THE FUTURE OF THE CIO
Editor's Note: Learn more about the future of application servers in the enterprise in ebizQ's upcoming webinar.
As a slowing economy forces a capital spending crunch,
software-as-a-service (SaaS) becomes a more viable solution –
saving time, money and resources. With the proliferation of SaaS at
this time and the growth of on-demand platforms fueled by
ever-more-powerful Web technology, we should expect exciting and
challenging times for the CIO who is willing to roll with the changes
as SaaS gets a larger slice of the application pie previously delivered
by IT in the form of proprietary in-house or vendor packaged software.
New research from Gartner and IDC indicates that the SaaS arena will
grow from $4.0 billion last year to $11.5 billion in 2010, almost
tripling over the next two years. In fact, Gartner predicts that by
2010 SaaS will satisfy 25% of all new application demands. This seismic
shift will significantly alter the role of the traditional IT
department, especially the CIO and his/her relationship with the
business owners. Gartner just published its “Hype Cycle for
Software as a Service,” amazingly it covered 29 SaaS-related
technologies. The stock market has not ignored this massive
IT paradigm shift that is underway, either. The eight public SaaS
companies trade at an average value of almost 8 times their
sales. This would make almost any CFO of a traditional software
company green with envy.
Today, Salesforce.com, Ariba and Taleo are perhaps the best-known
SaaS providers, delivering powerful customer relationship management
(CRM), procurement and HR tools via their application exchange
marketplace - a rich set of extensions ranging from cute to quite
powerful. This comes with virtually zero infrastructure beyond
the network and little or no maintenance burden for IT depending on the
degree of integration with in-house systems. Reducing
infrastructure investments, operational management requirements and
upgrade costs provide SaaS solutions a huge advantage in Total Costs of
Ownership (TCO). A recent example by the Yankee Group showed a
typical 500 seat Salesforce.com installation had almost nine times the
TCO savings vs. a traditional in-house CRM application.
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