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SaaS revenue to grow five times faster than traditional packaged software – IDC

28 July 2010 , Written by Dhruv Tanwar
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In a recent study, International Data Corporation (IDC) has said that the Software as a Service (SaaS) market clocked worldwide revenues of $13.1 billion in 2009, and has forecast this to hit the $40.5 billion mark by 2014.

growth1IDC's prediction puts the market's compound annual growth rate (CAGR) at 25.3 percent. The market intelligence and  advisory services provider expects that by 2012, less than 15 percent of net-new software firms coming to market will ship a packaged product (on CD), and by 2014 about 34 percent of all new business software purchases will be consumed via SaaS. SaaS delivery will constitute about 14.5 percent of worldwide software spending across all primary markets.

Just a few days ago, research firm Gartner had said that it expects revenues from SaaS within the enterprise application software market is forecast to surpass $8.5 billion in 2010.

Robert Mahowald, vice president, SaaS and Cloud Services research at IDC says that the SaaS model has become mainstream, and is quickly coming to dominate planning – from R&D, to sales quotas, to partnering, channels and distribution – of all software and services vendors. Other points that IDC makes in its research are:

  • By 2012, nearly 85 percent of net-new software firms coming to market will be built around SaaS service composition and delivery; by 2014, about 65 percent of new products from established ISVs will be delivered as SaaS services.
  • SaaS-derived revenue will account for nearly 26 percent of net new growth in the software market in 2014.
  • Traditional packaged software and perpetual license revenue are in decline and IDC predicts that a software industry shift toward subscription models will result in a nearly $7 billion decline in worldwide license revenue in 2010. As a result, a permanent change in software licensing regime will occur.
  • SaaS segment mix will shift toward infrastructure and application development and deployment/PaaS, and away from U.S. dominance. IDC expects that by 2014, applications will account for just over half of market revenue. This shift will happen in part as a result of increasing IT cloud spending by enterprise IT groups and commercial cloud services providers (cloud SPs) relative to end-user spending.
 

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