Is SaaS the key to cloud revenues?


Cloud services will be a $72.9 billion market by 2015, predicts IDC, driven almost entirely by companies delivering software as a service. This suggests — likely accurately — that SaaS is the key to bridging the gap from cloud computing promise to cloud computing ubiquity.

Specifically, IDC found that SaaS will account for nearly 75 percent of all cloud spending by 2015. SaaS, by IDC’s definition, includes not just applications like, but also application-development tools (presumably Platform as a Service offerings such as those offered by Microsoft, Red Hat, VMware and a whole slew of startups) and systems infrastructure software. Of the “hardware-oriented” cloud spending (i.e., servers and storage) the research firm predicts that SaaS providers building out their infrastructures will comprise the lion’s share there, too.

By this expanded definition of SaaS — which also appears to include the PaaS space — IDC’s predictions in terms of spending trends (if not exact the exact amounts) is likely right on. SaaS as traditionally defined (i.e., applications) is already skyrocketing in popularity, and it’s already expanding organically into systems-level software such as server management thanks to startups like ScaleXtreme and its cloud-based server-management software. By including PaaS, which technically replaces legacy application-platform middleware, in its estimate, it’s easy to see how IDC came up with such an optimistic SaaS prediction.

Assuming the trend toward consuming everything as a service continues and that IT buyers really do prefer the operational efficiencies of delivery models like SaaS and PaaS over managing Infrastructure as a Service, there’s no reason those models shouldn’t flourish. I’ve suggested, for example, that big data analytics as a cloud service will be a major business opportunity, but that’s just one specific area. And, as IDC noted, more organizations buying SaaS and PaaS offerings means more SaaS and PaaS providers paying for resources from the IaaS providers, such as Amazon Web Services (s amzn) and Rackspace (s rax), on which they host their services.

The one factor that IDC might have incorrect, however, is the timing. 2015 is light years away in cloud computing time, but research suggests that SaaS, PaaS and even IaaS still have a long way to go in terms of adoption and maturity. According to a recent Morgan Stanley survey:

Currently, only 28% of IT managers globally report running workloads in any type of public cloud environment. SaaS deployments are most common (18%), with PaaS and IaaS both being used by just under 14% of respondents.

Also, it’s mid-2011 and big-money enterprise applications such as those from SAP are just now able to be realistically hosted on IaaS clouds. It could be a while before they take shape as SaaS offerings or even become suitable for PaaS environments, which might mean big spending on IaaS resources in the meantime.

Image courtesy of Flickr user mypresense.


Nandavarapu Kiran

Hi Derrick,

IDC definition is similar to NIST definitions and SaaS doesn’t include PaaS offerings nor IaaS offerings. SaaS ideally is applications as a service, PaaS is Application development and Deployment as a service and IaaS includes System Infrastructure software, Storage hardware and servers…

But the whole confusion lies here. IDC never provided numbers by SaaS, PaaS, IaaS, but by Applications, Application development and deployment and System infrastructure. In their new report, they said SaaS cover 75% of market. In this case, Software includes development tools, deployment tools, databases, storage software, management software, OS etc..

For our convenience and clarity, we can consider Applications part as SaaS, Application development and deployment as PaaS and System infrastructure software including storage and servers as IaaS.

With these considerations, as per their old predictions, IaaS is bigger than SaaS and PaaS is almost half of SaaS by 2014.

Thomas Oppong

Businesses are gradually accepting what SaaS and PaaS can offer.Data security is still an issue but the confidence in the cloud will continue hence the surge in the usage of cloud apps.Salesforce has done a good job and now all the giant tech companies are joining the cloud service delivery. What companies will require is data security apps to protect their data.

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