Gartner study: Australia catching up to early SaaS adopters

Survey of 258 global organisations finds nearly 90 per cent intend to maintain or grow their SaaS usage

Nearly 90 per cent of 258 organisations worldwide intend to maintain or grow their software-as-a-service (SaaS) usage, a Gartner survey has found.

The analyst firm also predicted Australia will catch up with the world's early SaaS adopters over the coming years with ease and speed of deployment, along with cost-effectiveness cited as primary motivators for adoption.

Research Director at Gartner, Denise Ganley, said that while Australians weren’t strong early adopters, she expected them to catch up with North America and Europe.

“We’re probably amongst the earliest adopters [within Asia-Pacific] because our IT costs tend to be fairly high and we tend to have very limited resources that we can throw at this. So where we can look at things like spending operational budget rather than capital budget, that is a very attractive proposition,” she said.

“Some of the changes in tax laws that we have had here this year had a direct impact on on-premise software, it made SaaS offerings more attractive.”

Gartner’s June/July survey questioned individuals directly involved with implementation, planning and budget allocation for enterprise application software in eight major countries worldwide.

The SaaS model has become increasingly popular with more than 40 per cent of organisations using SaaS for more than three years, showing a growing fluency with the model within the user base.

But in both Europe and North America, 15 per cent of respondents expect new SaaS investments to increase significantly, compared to just 5 per cent in Asia-Pacific.

However, 50 per cent of Asia-Pacific respondents were transitioning from a current on-premises solution to a SaaS solution, compared to a 37 per cent average worldwide, indicating the region is beginning to catch up with the early adopters, especially in Australia.

“We are [catching up]. Part of it is the SaaS providers actually getting the infrastructure out here – the datacentres and the communications and all of that – to adequately provide for us and we’re seeing that happen. And also actually starting to change the mindset of the buyers from ‘it has to be on-premise’ to ‘it can be out in the cloud’. That certainly is helping,” Ganley said.

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One hurdle to SaaS adoption is concerns over security, but Ganley sees these concerns eroding as cost pressures increase in the current economic climate.

“But security does tend to be the big driver of ‘oh I can't do that, because how secure is my data, how secure are my processes?’ and those sorts of things,” she said.

Excessive total cost of ownership was a key driver of the move from onsite solutions to SaaS, and Gartner expects this motivating factor to continue to drive SaaS adoption in 2009 as organisations look to do more with less.

“I think because of the lower price points for SaaS offerings they are going to be more attractive than some of the on-premise stuff that you have to go and get a capital expenditure for. If you are belt tightening you are unlikely to get that capital expenditure,” Ganley said, adding that Gartner has a research note in preparation that predicts Asia-Pacific will not be as badly affected by the economic downturn as Europe and North America.

“If you look at China alone they can look to their domestic market which will keep them growing fairly strongly for the next couple of years, and that will help Australia because we provide so many raw materials. But I do think we will see a bit of a downturn here – the question is how big.”

Replacement of on-premises solutions and net-new implementations were also cited as major drivers of future SaaS deployments. More than a third of respondents indicated plans to move from on-premises to SaaS, largely due to a lack of on-site solutions meeting performance expectations and lower total cost of ownership.

In October, Gartner predicted SaaS enterprise apps will top $US14.8 billion by 2012.

On the local SaaS front, Telstra recently launched its T-Suite SaaS platform, including partnerships with Microsoft and JamCracker, while IBM has also jumped into SaaS.