CLOUD, SAAS & ON-DEMAND SYSTEMS
The Battle for Hearts, Minds
(and Wallets) of Small
and Medium-Sized
Businesses Heats Up
SaaS offerings are front and
center in the intensifying battle for share of the small and
medium-sized business marketplace. While traditional
mid-market vendors are feeling the heat, the large enterprise vendors will not necessarily make a lot of headway,
due to the economics of their
entrenched approach to sales,
delivery and support.
—Bill McBeath, chief research officer
at ChainLink Research
wish I had a penny for every time “cloud” was mentioned by the technology media in 2010. As with many overused terms, its meaning is all over
the map. It can refer to Infrastructure-as-a-Service, Software-as-a-Service,
In our 2004 report on the On-Demand phenomena, we predicted when
various sectors would start to see significant sales in the SaaS model, such as
forecasting that 2008-2010 would be the period when SaaS warehouse management systems would start to take off. Most of those predictions have
come true and SaaS has become a powerful force to contend with, not just in
sales force automation, B2B integration and TMS (the segments where the
SaaS phenomena first took hold), but across the board in ERP, sourcing and
procurement, PLM, WMS and almost all software application sectors. This
has caused vendors from Oracle, SAP, Ariba and other best-of-breed vendors
to respond by buying or building or even re-architecting their solutions or
portions of their suites to become true SaaS (i.e., multi-tenant, single
instance) solutions.
One result is that enterprise-class capabilities have become more accessible than ever to small and medium businesses. In fact, the SMB market for
software is a red-hot battle ground right now. Virtually all of the key enterprise software vendors have major pushes into SMB as an area ripe for
growth. However, they will not necessarily find the going easy. The
entrenched SMB vendors have spent years honing their economic, selling
and support strategies to this segment, while the large enterprise vendors are
used to models with much higher cost-of-sales and more customized support. While some of those large enterprise vendors will crack the code, many
will take years to make the changes needed.
I
The Outlook
SaaS solutions will continue to significantly outpace the software market as a
whole. Double-digit growth will be the norm for SaaS companies, with many
experiencing 30-percent growth or more. Traditional licensed vendors will continue their migration to provide more complete SaaS offerings. As a result, SaaS
will gain significant market share year over year for the foreseeable future.
