SaaS vs On-Premise Market Update

Not surprisingly, a new report from Saugatuck Research of Q109 Actuals and FY 2009 Forecasts is showing SaaS growth continues to outpace On-Premise solutions.

SaaS Market Basket:


On-Premise Market Basket:
Of course, since the On-Premise market is so much larger than SaaS, it's expected that growth rates would be smaller, (the SaaS market is measured in millions vs On-Premise in billions).


Some of the other key points from the report include new info on how the current depressed economy is impacting customers buying SaaS solutions, these include:

Pushing out any/all new expenditures:
“the easiest thing for me to do right now is nothing. We’ll eventually take
action on our new SaaS CRM/Financial system – and probably in the 2nd half
of this year – but right now we’ve put in place very tight financial controls, and
that won’t change until we get a clearer sense of where the economy is
going.”

This is probably not too good, putting competitive pricing pressure through 2009 and driving down the very high SaaS industry gross margins. This can be continually countered however as SaaS is generally still a much lower cost solution than On-Premise.

Reducing number of seats:
"we are learning real-time that declining employment can have a direct negative impact on customer retention and the number of seats deployed per customer, as SaaS’ flexible business framework is a two-sided blade."

This is justifiable, as just discussed by a Gartner webinar, with one of the SaaS advantages being able to place expenditures under operation budget vs. capital budget.