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SaaS: Leading Software Innovation?
Software Innovation? You haven’t seen anything yet! That’s the conclusion of a joint report by McKinsey and Company and the Sand Hill Company. After interviewing 857 enterprise software customers they found that 62 percent felt that while there’s been good innovation in the last few years, we’re about to reach a period of major innovation. Only 5 percent felt that software had reached a plateau with no future for innovation.
But where will the innovation come from? The general consensus is that SOA and SaaS are driving software innovation — the two technologies cited by the report as today’s most important trends. Interestingly, only 8 percent saw Open Source as an important trend and that number is lower than it was a couple of years ago.
While consolidaton has been at the center of news over the last few years. McKinsey speculates that consolidation in the software industry may be past its peak.
The report finds that SaaS and software sold via a subscription model are exceeding predictions. Enterprise spending for SaaS and subscription models had been predicted to be at 21 percent by 2009, but by most estimates, it is already close to that level.
The report finds that SMEs are the leading adopters of SaaS, but large enterprises are experimenting with the SaaS model too. The report suggests that both large and small companies are receptive to the SaaS model, and that vendor with a good product and good sales story will be able to be successful in both markets, although larger customers will have more complex requirements. In particular, large customers will be most concerned with how to migrate or interact with their existing systems, many of which are large and highly customized.
The report says that the growth of SaaS has led to different flavors and approaches to on-Demand software. It identifies three types of SaaS platforms that are gaining traction. They include:
- Managed hosting via cloud computing. On-Demand vendors like Amazon EC2/S3, Google, Microsoft’s Live Mesh, and OpSource.
- SaaS Integrated Development Environment (IDE). Think Coghead and Bungee Labs
- Application-led platforms like Salesforce.com, WebEx and NetSuite
