www.cio.co.uk CIO uk july 2012

SaaS adOptIOn SPONSORED FEATURE | 1

the trend towards SaaS in organisations of all sizes is now irreversible, a survey says

Service-based software powers ahead

A s CIOs plan to increase mobility in their organisations in order to boost productivity, reduce offi ce space demands, provide fl exible

working and attract the next generation of technology-savvy workers, they will need to modernise the application experience they offer to the workforce. A recent CIO study analysed the responses to the adoption of Software as a Service (SaaS), the cloud-based application delivery model that will enable productive mobile computing. ›

in association with

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SpECIal EdItORIal FEatuRE, In aSSOCIatIOn WItH CIO

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2 | SPONSORED FEATURE SaaS adOptIOn

Four out of five enterprises have either already invested in SaaS or are planning to invest in it, the survey of 82 senior IT leaders conducted for CIO found. Of the organisations surveyed, 28 per cent had already made significant or moderate investment in SaaS, and more than a fifth (23 per cent) planned an investment in the next one-to-three years. It looks as if SaaS is here to stay. But what’s driving adoption – and what are the barriers to its take-up?

SaaS is a cloud-based model for delivering applications over the internet. Of the three cloud services (Software-as-a-Service, Infrastructure-as-a-Service and Platform-as-a-Service), SaaS is likely to be far the biggest in terms of revenue and therefore adoption, according to predictions from both Forrester and IDC analyst houses.

Rather than being installed on individual computers connected to one in-house servers, SaaS applications are hosted off-premise by a third party, are often multi-tenanted (where one instance of the software runs on a server and is used by multiple clients). They are paid for using term-based licensing – that is, the customer pays for usage of the application for a fixed period of time. Compared with traditional large-scale software implementations (which can take a year or longer, particularly for ERP systems), SaaS can be relatively quick and easy to implement.

Return on investment is quicker with SaaS, as there is no need for the organisation to make a large up-front payment to purchase an application. Maintenance is for the most part provided by the third-party supplier, freeing up an organisation’s IT function to focus on innovation. Adopting a SaaS model also means that organisations

automatically get upgraded to the newest version of the software, without having to carry out extra work, and they can switch on the functionality they need when they need it – they no longer need to work to vendors’ schedules. Furthermore, SaaS makes it easier to collaborate with partners, suppliers and customers, as they will all be using the same version of the software.

Growing to scaleSaaS has become increasingly attractive to organisations wanting to limit capital expenditure (capex) costs and improve their ability to scale according to demand. In the final quarter of 2011, analyst Forrester’s Forrsights Software Survey found that 30 per cent of companies were using some kind of SaaS solution.

Forrester analyst Holger Kisker predicted that this proportion would grow to 45 per cent by the end of 2012, and to 60 per cent by the end of 2013. Analyst Gartner is also making confident predictions of growth: it has said that the market for enterprise applications delivered by SaaS will grow at a rate of 17.9 per cent a year, rising to $23bn (£14.8bn) by 2015.

The clear overall trend is that most organisations are moving towards adopting SaaS, though some are doing so at a faster pace than others. A 2011 Gartner survey of 525 organisations found that 95 per cent expected to invest heavily in SaaS. Sharon Merz, a research director at Gartner, said that respondents cited ease and speed of deployment and cost-effectiveness as the top two reasons for adoption.

In the current economic climate, SaaS is an increasingly attractive option because of the potential cost savings it offers. In our survey, about a third of organisations

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The proportion of companies using some kind of SaaS will grow to 45% in 2012 and 60% by the end of 2013hOlGER kiSkER, FORRESTER

Chart 1: how much funding is available for iT initiatives in 2012, compared with previous years?

35%

31%

34%

More funding available

the same funding is available

less funding is available

Chart 2: To what extent is iT considered strategic in your organisation?

55%

36%

9%

Very strategic Somewhat strategic not strategic

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SaaS adOptIOn SPONSORED FEATURE | 3

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(34 per cent) said that there was less funding available for IT initiatives in 2012 than in previous years, while slightly more (35 per cent) said that more funding was available, and slightly fewer (31 per cent) said that funding remained the same (see Chart 1).

Given that we may be entering a double-dip recession, the fact that so many organisations have increased available spend on IT is perhaps a reflection of their growing awareness of its strategic importance. More than half (55 per cent) of those surveyed said that IT was considered very strategic in their organisation, while a hefty 88 per cent said that their organisation was requiring them to become more strategic (see Chart 2). But asked whether their current systems supported innovation, 69 per cent said yes, while 31 per cent said no (Chart 4). So even though organisations require the IT function to become more strategic, in nearly a third of cases, their current IT landscape doesn’t allow them to do this.

Taking a more strategic approach requires CIOs to work more closely with the business,

better understand the business’s short-term and long-term goals and think about how IT investments can be used intelligently to meet those goals. SaaS makes this possible because it provides greater flexibility, instead of spending money on expensive software implementations that can be out of date by the time they are ready for use. The SaaS model enables organisations to provide the appropriate software applications to the right people for the length of time they are needed – and to stop using them when they are no longer required.

Balanced is bestCIOs surveyed agree that SaaS is an important component of future IT strategy: asked about their own personal views, 78 per cent said that they were advocates of SaaS (see Chart 8). Asked about the view of the organisation as a whole, the picture was more mixed, though there was still a large majority in favour of SaaS (see Chart 7): nearly one in four (23 per cent) agreed that “As far as possible, IT services should be hosted”, while more than half (52 per cent) agreed that “A balanced view is best, using SaaS when it makes sense”. A small minority (11 per cent) agreed with the statement “We do as much as possible ourselves”.

It was clear from the survey that SaaS is potentially a valuable tool in allowing CIOs to align IT with business strategy.

Asked about their own personal views, 78% of CiOs said they were advocates of SaaS

Chart 3: Do you feel that your organisation is requiring iT to become more strategic?

88%

12%

yes no

Chart 4: Do you feel you are able to support innovation on your current systems?

69%

31%

yes no

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Respondents were asked what they saw as the key drivers for SaaS adoption (they were asked to pick three out of the eight options provided – see Chart 5). The most popular options were cost reduction and flexibility, both cited by 63 per cent, and scalability (52 per cent). These findings are very much in line with a 2012 report by analyst firm Forrester, Software-as-a-Service adoption in Europe, which found that the two main reasons for adopting SaaS were cost reduction and agility.

A minority (12 per cent) of respondents also cited other drivers not listed in the

questionnaire. Those mentioned included ‘Increased reliability’, ‘Innovation from SaaS providers’, ‘Easy access to latest software versions’ and ‘External expertise’.

However, moving from a client-server model to a SaaS model takes time and effort. Respondents were asked to give the main inhibitors to SaaS adoption (they were asked to pick three options out of six – see Chart 6). The biggest concern, mentioned by 73 per cent, was migration and integration issues with existing systems. This supports the arguments of Ovum analyst Saurabh Sharma, who has written that SaaS

iT management should formulate a strong business case for the funding of integration projectsSAURABh ShARmA, OvUm

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Chart 5: Which of the following would be key drivers for SaaS adoption?

Cost reduction

Business enabler

Releases iT for strategic projects

Reduced iT overhead

Scalability

Flexibility

mobility

Other

0 10 20 30 40 50 60 70 80 90 100

63

51

41

42

52

63

40

12

per cent

Chart 6: Which of the following would be key inhibitors to SaaS adoption?

Budget Restrictions

Security issues

migration and integration issues

with existing systems

Disruption to the business

The organisation isn’t ready for a cloud-based approach

Other

0 10 20 30 40 50 60 70 80 90 100

34

59

73

18

22

7

per cent

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implementations often overrun because organisations have not adequately prepared for the potential challenges in integration: “IT management should investigate and plan for integration requirements as well as formulate a strong business case for the funding of integration projects by aligning the potential outcomes to current and near-term business requirements.”

In a 2010 report entitled As adoption grows, vendor managers can help business users succeed with SaaS deployments, Forrester analyst Liz Herbert writes, “Firms not only face the challenge of integrating SaaS with

on-premise but are increasingly finding that SaaS-to-SaaS integration can be difficult and often expensive.” Often the problem is caused by the need to migrate data, which can be a time-consuming process, Herbert writes, and as a result, many companies are looking to third-party vendors to help with integration.

The next biggest potential inhibitor, cited by 59 per cent, was security. Once again, the findings are in line with the Forrester report, which found that in the UK, the biggest concerns about adopting SaaS were integration and security. Budget restrictions were also mentioned by a third (34 per cent), and seven per cent cited other concerns, including “Bandwidth limitations on a countrywide basis” and “For appropriate SLA and ISO27001 security, SaaS hosted solutions work out very expensive”.

must do betterMany organisations in our survey are in a position where they need to think more about how to create a technology offering that can meet the changing needs of their workforce. Only 13 per cent of those surveyed said that their existing systems were ‘Very well suited’ to the needs of their organisation, while another 44 per cent said they were ‘Well suited’. Although this is encouraging, just over a third (36 per cent) thought their systems could be better, while a minority (7 per cent) felt that their systems needed updating (see Chart 11).

One of the major ways in which the needs of the workforce are changing is that many employees now expect to be able to work out of the office. More and more organisations are looking for ways of introducing mobile working opportunities. Providing staff with the tools that enable them to work out of the office can reduce demands on office

Firms are finding that SaaS-to-SaaS integration can be difficult and often expensiveliz hERBERT, FORRESTER

Chart 8: Are you personally an advocate of SaaS?

78%

22%

yes no

Chart 7: What is the attitude to SaaS within your organisation?

As far as possible, iT services should

be hosted

A balanced view is best, using SaaS

when it makes sense

We prefer in house and only use SaaS

selectively

We do as much as possible

ourselves

0 10 20 30 40 50 60 70 80 90 100

23

52

14

11

per cent

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6 | SPONSORED FEATURE SaaS adOptIOn

space and improve productivity. It is also a good way of attracting younger employees who increasingly expect to be able to access applications from their mobile devices, both for personal and business use. Analyst house IDC has predicted that by 2015 more than 1.3 billion employees (a third of the world’s working population) will be mobile working at least some of the time.

Upwardly mobileFor a mobile workforce, SaaS represents the ideal way of delivering applications. It means that users are no longer tied to a single desk-based computer and instead can access an application over the web from their mobile phone, laptop or tablet device.

For certain enterprise applications, such as CRM or ERP, this provides an immediate boost to productivity. A sales person visiting a customer site can check stock availability and prices and put in an order on the spot instead of having to write down the details and enter them on return to the office. Time that would otherwise be idle (sitting on the train, for example) can be spent completing office tasks. Customers benefit because their needs are responded to more quickly and efficiently. It also makes life simpler for the IT function because it can now offer users access to key applications without having to provide technical support on mobile devices. This represents a particular benefit in organisations with bring your own device (BYOD) policies, where users may be using a variety of different platforms. The arrival of HTML 5, which has simplified cross-platform development, means that we can expect to see an increase in the availability of business mobile applications.

Already enterprises are turning to SaaS as a way to deliver mobile applications: a

For a mobile workforce, SaaS represents the ideal way of delivering applications

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Chart 9: What are the biggest challenges your iT department is facing in 2012 and beyond?

Security

Global

Data integrity

Agility Significant investment

Budget

Operational effectiveness

0 10 20 30 40 50 60 70 80 90 100 0 10 20 30 40 50 60 70 80 90 100

Chart 10: Does your organisation currently have any investment in Software as a Service (SaaS)?

70 10

6818

61

60

30

5523

45 19

per cent per cent

investment planned within the next

1-3 years

No planned investment

moderate investment

Some

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SaaS adOptIOn SPONSORED FEATURE | 7

Our survey

•82peopleresponded.•Nearlyhalf(43percent)

were in organisations of between 1,001 and 5,000 employees.

•29percentwereinorganisations of more than 10,000 employees and 17 per cent in organisations of more than 50,000employees.

•Respondentswerefromavarietyofsectors.the biggest sectors represented were non-It-related manufacturing (11percent),softwaredevelopment(11percent)and government and defence(10percent).

Chart 11: how well are your existing systems suited to the needs of your workforce today?

44%

36%

7% 13%

Very well Well Could be better need updating

Chart 12: Do you currently support a mobile workforce?

41%

53%

6%

Everyone Executives only no

Yankee Group report found that mobile user connectivity was the principal motivation for deploying software as a service (SaaS), cited by 48 per cent of enterprises. Forrester analyst Herbert, also author of a 2011 report entitled Five trends that will change SaaS sourcing, predicts that over the next 10 years, the combination of falling prices, improvements in battery life and mobile coverage will “drive mobility to the forefront”.

Increasingly, organisations will have to look at more flexible and more cost-effective ways of meeting the needs of their mobile workforce (see Chart 12). The vast majority of respondents said that they currently supported a mobile workforce: 41 per cent

said they supported executives only, while 53 per cent said they supported everyone. Only 6 per cent offered no support for mobile working. This finding suggests that organisations are embracing opportunities offered by mobile devices. They may have some way to go before they are able to fulfil the potential offered by mobile, however.

The trend towards SaaS in organisations is now irreversible: the drivers for implementation, including financial savings, scalability, more predictable costs and greater business agility make the case for SaaS a compelling one. Combine this with an unequally unstoppable trend towards mobile- and home-working, and we can add improved productivity and customer service to the benefits. Despite this, the road to SaaS is not a straightforward one. Organisations need to plan for SaaS implementations just as they would plan for any other software implementation, addressing issues such as integration, security, data migration and long-term business alignment. ■

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