SaaS predictions for 2008 and beyond

Now that 2008 has arrived, along with the New Year’s resolutions and the ever-present pundit predictions, I thought it was the perfect timing to dive into what Saugatuck Technology just reported as being their Software-as-a-Service (SaaS) predictions, highlighting five key trends for 2008 and beyond:

SaaS platforms and marketplaces will begin to proliferate, becoming a significant channel opportunity for vendors, as well as a key means by which users will gain access to SaaS solution capabilities.

SaaS is becoming an international phenomenon, driven by both local demand as well as large multi-nationals who are adopting SaaS business solutions on a global basis. While US SaaS adoption is clearly going “mainstream”, Europe and Asia are only now beginning to experience the steep adoption ramp that the US has witnessed over the past two years. Whereas average US market growth rates will likely slow into the 35-40 percent range in 2008, European market growth rates should exceed 60-70 percent next year.

SaaS merger & acquisition activity will explode. No doubt a serious feeding frenzy is about to unfold and it could be anticipated that a large number of venture-backed start-ups and emerging SaaS companies would be acquired by either SaaS pure-plays, ISVs hungry to enter the SaaS fray or on-shore & off-shore IT services and BPO providers who are eager to leverage a SaaS model.

Traditional on-premise application ISVs will earnestly begin to fight back. Approximately 15-20 percent of ISVs have already either begun new initiatives or gained access to SaaS assets and development experience through M&A activity. However, over the next 12-24 months, this number is anticipated to rise dramatically, as a tougher economic climate will only exacerbate an already challenged on-premise and traditional perpetual license model.

SaaS development platforms will evolve and 2008 will see explosive growth in the adoption and use of SaaS-based software development platforms and services. Wide availability of open, standardised tools and technologies in subscription-based, on-demand environments will help streamline and reduce the costs of software development and customisation.

Other key insights and Strategic Planning Positions provided by Saugatuck include the following predictions …