SaaS adoption on the rise – McKinsey and Sandhill survey

by Editor 11/4/2008 3:55:00 PM
McKinsey and Sandhill conducted a survey of more than 850 enterprise software customers recently and the results confirm that SaaS adoption is on the rise.   

The McKinsey and Sandhill report suggests “good news for the industry, despite the current softness in the U.S. economy. Because the majority of the activity in the software sector occurs in North America, having customers on the lookout for innovative offerings provides some assurance that, despite industry consolidation, there’s growth potential ahead.”

On top of that, the report indicates “accelerated adoption of subscription and on-demand purchasing models by enterprises over the past year.” A similar report last year showed that enterprises expected to spend 21 percent of their software budgets by 2009 on these pricing models.

Recent Forrester surveys show that global software spending leaped from $313 billion in 2007 to $341 billion in 2008. Salesforce.com, a leader in the software-as-a-service market, reported $920 million in revenue already this year.

Frank Connor, chief executive of SaaS vendor F3 Technologies, says: “With the majority of our product development completed, the company will focus the majority of its time and efforts on targeted sales initiatives for our three core products. F3 Technologies sells CRM, project management, human resources and accounting products.

The McKinsey and Sandhill report concludes that, since “there are some large enterprises converting to the models that underpin SaaS offerings, there is a clear opportunity for those that can offer the right product in combination with the right selling strategy.”

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