KPMG: Why is the SaaS cloud market expanding rapidly?

A new report from consultants KPMG has shown that software as a service (SaaS) is expanding rapidly, and the threat of a double dip recession is purportedly driving cloud adoption.

It’s a reasonable enough assumption – companies moving to the cloud often do so in the hope of reducing cost, after all – and it appears SaaS is the best model with which to achieve that aim, although there are still some worries for CIOs to consider.

The key factors that are driving growth in the global SaaS market according to the report were:

  • Cost cutting – “post recession the opportunity to save costs is attracting companies”
  • Ease of speed and deployment, resulting in more evident value from software purchases
  • Increasing demand from SMEs, with the pay-as-you-use SaaS model hitting home

The figures of SaaS adoption were intriguing, particularly given a previous KPMG survey, 2011’s Embracing the Cloud, revealed that nearly half of the 900 IT executives surveyed (46%) foresaw their biggest investments to be in cloud-delivered SaaS.

2011 showed North America as holding 63.4% of global SaaS, with revenue hitting $7.8 billion (£4.98bn) last year. Europe had an overall SaaS market growth to $2.86bn (£1.83bn), whilst Asia’s figures finished at $730.9m (£466.2m).

The report noted that the latter figure is liable to increase swiftly, with Australia, South Korea and Singapore noted as “some of the key SaaS markets that offer growth opportunities for service providers”.

But it’s not all good news. The report specifically noted four difficulties yet to be addressed with SaaS:

  • Security
  • Network instability
  • Longer than anticipated implementation cycles
  • Limited integration with existing systems

Unsurprisingly, security remains a key issue. The report cited the outage last year of – who is currently embroiled in a trademark argument over the term ‘social enterprise’ – as a reason for concern over SaaS security but then again, when isn’t an aspect of cloud security scrutinised?

Similarly, customised SaaS installations often take an inordinate amount of time, and a lack of well-established, stable networks lead to inefficiency and inconsistency.

KPMG concluded by calling the growth of SaaS “robust”, and added: “In order to explore this growth opportunity, service providers need to form partnerships and collaborate with multiple vendors to introduce new solutions”.

But what do you think? Is SaaS the best option in tough economic times?

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16 Aug 2012, 2:48 p.m.

Will security continue to put a padlock on the cloud’s silver lining?

Yes I agree with most of this although there is nothing new here apart from the fact that not much has changed in terms of the key factors for driving and the key challenges yet to be addressed.

I don’t think that cloud integration with existing systems should be a stepping stone rather than a stopping stone. Investment now in phasing out existing systems that are not cloud compatible would a far more prudent option to reinvesting in upgrades to sustain legacy systems.

Regardless of the tough economic times cloud solutions are the way forward and best of breed vendors will continue to drive change in new and more efficient ways of working that are costs affective. It is up to the SI’s and consulting firms to lead the way in obtaining in-house talent with the knowledge required to advise their clients on the most cost effective, reliable and scalable solutions. Which to my knowledge has not happened to date; the rapid adoption of cloud solutions took the traditional IT Enterprise vendors by surprise before it took the SI and consulting community surprise.

In summary SaaS is the best option in the current economic climate but it’s the SI’s and consulting firms that need to increase their knowledgebase and acquire the talent to deliver enterprise level solutions that match the wide scope of the best of breed cloud solutions available.

John Paul Tointon


16 Aug 2012, 3:47 p.m.

Appologies my response should read...

I do think that cloud integration with existing systems should be a stepping stone rather than a stopping stone.


John Paul Tointon