Gartner expects enterprise software-as-a-service revenue (SaaS) to more than double by 2012. There has been a 27 percent increase in SaaS revenue this year, up to $6.4 billion.  "The popularity of the on-demand deployment model has increased significantly within the last four years. Initial concerns over security, response time, and service availability have diminished for many organizations as SaaS business and computing models have matured and adoption has become pervasive," said Sharon Mertz, research director at Gartner. The advantages of SaaS are IT affordability, shorter implementation cycle, reduction of IT costs, and scalability.

Gartner expects worldwide software markets to grow 10% to 2012, and predicts that by 2012, 9 percent of total software sales will be SaaS and freeware like Google Apps, Adobe Buzzword, ThinkFree, and Zoho. The fastest growing SaaS markets are office suites and digital content creation (DCC).

Content, communications and collaboration (CCR) products are the most successful SaaS applications, with $2.1 billion in 2008 and an expected increase to $4.7 billion by 2012. Gartner defines CCR products as “software for e-mail, e-learning, instant messaging, search, team collaboration, Web conferencing and enterprise content management.”

Customer relation management (CRM) applications are the second largest category, with $1.7 billion in 2008 revenue and an expected $3.2 billion by 2012. The big applications in this category are, SugarCRM and NetSuite.

By Mark Alvarez