As modern businesses are re-shaped by the forces of digital transformation, one of the most impactful trends is the adoption of software-as-a-service (SaaS). Perhaps most interesting is how the rise of SaaS is impacting the operations of both small-medium businesses as well as large enterprise. In The SaaSification of Enterprise IT, I discussed how enterprise software vendors are embracing cloud delivery of their offerings en masse. While the notion of Application Service Providers (ASPs) is not new, the field of Enterprise SaaS offerings has been broadening and deepening over the past 10 years. This trend has positively impacted enterprise consumers by forcing software vendors to more rapidly innovate on functionality, user experience, and consumption models to stay competitive.
Enterprise adoption of public cloud services is a key theme closely watched by and prognosticated about by industry analysts and pundits. While innovations from Infrastructure-as-a-Service offerings like AWS and Azure foretell an interesting future, what’s not always understood is that SaaS adoption is far outpacing IaaS adoption in the enterprise. While businesses are moving certain workloads to IaaS, there are sectors of enterprise software where we see wholesale adoption of SaaS versions. IDC estimates that nearly 70% of enterprise spending on public cloud will be for SaaS in 2019.
There are some obvious reasons SaaS adoption is accelerating. For the SMB space, where on-premises hosting of robust enterprise applications is impractical, SaaS offerings provide access to the same functionality historically available only to the large enterprise. For organizations with the enterprise IT capability to manage on premises hosting of enterprise apps, there are still real advantages to SaaS adoption. SaaS adoption removes the need to procure and manage the supporting infrastructure to deliver enterprise apps including servers, networking, and storage. Managing software versions is a non-issue. The conversion of capital to operating cost is often preferable to businesses – particularly when it brings the ability to flexible scale up or down based on actual user counts. And probably most importantly, the added competition pushes software vendors to rapidly innovate on functionality, user experience, and price.
SaaS adoption has been greatest in CRM, Messaging, Unified Communications, Collaboration, and, HR. Core enterprise applications including ERP and Financial Management, will rapidly SaaSify as the large vendors like SAP and Oracle deploy cloud based versions of their platforms.
Beyond software vendors, SaaSification of the Enterprise is having enormous impact on Enterprise IT organizations, IT infrastructure providers, development paradigms, and the underlying data management paradigms that power modern enterprise applications.