from Computer Economics, “Larger Companies Lead SaaS Adoption” overview

industry leader in IT spend metrics,
September, 2013

Contrary to popular wisdom, the greatest adoption of software as a service is not in small companies. In fact, the opposite is true: the larger the organization, the more likely it is to have SaaS technology in place.

As shown in Figure 7 from our study, SaaS Adoption Trends and Customer Experience, 50% of large organizations have adopted SaaS technology, compared with 32% of midsize organizations and 34% of small organizations.

Likewise, the larger the organization, the more likely it is to be making new investments in SaaS. Again, in Figure 7 we see that 39% of large companies are investing in SaaS technology over the next 18 months, compared with 23% of midsize organizations, and 17% of small companies.

Why do we see SaaS as more popular in larger companies? When small companies are considering new systems, they may find SaaS an attractive deployment option. However, many small companies—especially those in slow-growth mode—already have their systems in place, such as their accounting, purchasing, and customer ordering systems. If a small company is satisfied with its application portfolio, it is not likely to consider moving parts to the cloud just for the sake of cloud deployment.

On the other extreme, large companies have many more systems than smaller companies do, and at any point in time may be actively investigating options for new systems. In addition, resource constraints may encourage individual business units to go out and shop for new systems that they can deploy without involving the central IT organization—and SaaS often meets that criterion. Therefore, there are simply more opportunities for SaaS in larger companies.

In this study, we define organization size by revenue. Small organizations in the study have from $50 million in annual revenue to less than $350 million. Midsize organizations range from $350 million to nearly $1 billion, and large organizations have at least $1 billion in annual revenue.

The software-as-a-service model of application deployment is picking up momentum with organizations of all sizes and in all regions of the world. In the full study, we quantify the current adoption and investment trends for SaaS as well as the benefits driving companies to expand their use of SaaS as a deployment option. We assess these trends by organization size and geography. The study also measures the customer experience with return-on-investment (ROI) and total-cost-of-ownership (TCO). We conclude with practical advice for those considering investing in SaaS.

Focused on TBM, Technology Business Management ("run IT like a business"). - 30+ years of experience, in providing IT strategy, process, application, RAMP, hardware, software, network, internet and cloud solutions to financial services, MRD and high technology companies from startup to F500. - 20+ published articles on the intersection of business and technology. - Startup advisor and mentor to a dozen startups, four of which were acquired and one of which is newly-launched (ITconnecter, a Crosswaves Ventures LLC company). - Specialties: IT Technology Business Management (TBM, aka "run IT like a business"), strategic partnerships, technology innovation, solutioning and program/project management (onshore, nearshore, offshore). Technology consulting focused on innovation, built around process, data and integration (cloud, social networking). We use I/TBM financial management best practices to help mid-size and large enterprises ensure they are meeting the needs of their business effectively and efficiently.

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