“Software will never be the same” — that’s the subtitle of a new report from IDC research that describes rapid changes that are occurring around software licensing and delivery because of SaaS . IDC estimates that worldwide revenues for SaaS were $13.1 billion in 2009 and that within the next five years revenues will more than triple, reaching $40.5 billion by 2014. That’s a compound annual growth rate of 25.3 percent. Not bad.
Times definitely have changed. Over the next year only 15 percent of new software being produced is being packaged and shipped on CDs and DVDs. By 2012, IDC predicts that 85 percent of software vendors will be developing SaaS versions of their software. As a result, packaged software and perpetual license revenue will decline over the next five years as the preferred model changes to one based on subscriptions. In 2010 alone, IDC expects to see a $7 billion decline in worldwide software license revenue. And in five years, about a third of all new business software purchases will be delivered via a SaaS subscription model.
Robert Mahowald, Vice President, SaaS and Cloud Computing Services, IDC said that “The SaaS model has become mainstream, and is quickly coming to dominate the planning – from R&D, to sales quotas, to partnering, channels and distribution – of all software and services vendors.”
While today the majority of vendors in the SaaS market are selling application software, by 2014 only half of the SaaS spending will be on applications. Infrastructure, software development and Platform-as-a-Service offerings will account for the other half.
Mahowald said that “Figuring out how to find and capitalize on the enormous cloud services transition is the number one strategic goal of most IT product vendors. The Cloud represents both a tremendous challenge and potentially an opportunity to align with partners, create new capabilities, move into new markets, and define new leaders.”