Software as a service is forecast to have a compound annual growth rate of 22.1% through 2011 for the aggregate enterprise application software markets, more than double the growth rate for total enterprise software. Adoption varies widely between and within markets and subsegments.

Market Inhibitors

Certain factors can work to impede the adoption of SaaS, including the following:

• Concerns about data security and critical customer information continue to encourage on-premises applications for many.
• Initial investment costs required to create an on-demand infrastructure environment can restrict new market entrants.
• Investments in applications, capital and organizational expertise limit growth.
• Complex process requirements constrain adoption of simplified, standardized solutions.
• Regulations governing data privacy and protection vary by country and may restrict adoption of some vendors’ solutions in certain areas.
• An inability for vendors to shift to a service-based model for either architectural or cultural reasons restricts SaaS availability.

Source: Dataquest Insight: SaaS Demand Set to Outpace Enterprise Application Software Market Growth
Gartner RAS Core Research Note G00150222, Sharon A. Mertz, Chad Eschinger, Tom Eid, Ben Pring, 3 August 2007