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Will Software-As-A-Service Grow Significantly in 2006? If So, What Apps Will Be Hot?
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Tier 1 Research sees SaaS gaining significant traction in 2006 across all sizes of companies as its value proposition resonates with firms who 1) do not want/cannot afford an IT staff; 2) require a rapid ROI (just about every company on the planet); 3) want predictive costs; 4) want to access the functionality any time, anywhere and 5) want to quickly ramp up new business functionality without having to engage consultants/integrators (plus worry free upgrades).

Small companies who never dreamed of using software to manage their business can now sign up online with a credit card and begin using accounting, e-procurement, credit scores, HR, billing or process management functionality in 30 to 60 minutes. The impact to the market is huge! How much does one deadbeat client cost a small company–with eCredit you have credit checking capability at the click of a mouse. SaaS is providing small firms with access to business functionality that did not exist years ago, making their business more effective, profitable, and efficient.

What we expect to see in 2006 are two trends. The first is the continued growth in SaaS adoption by small and mid sized companies (for the reasons noted above). The second is the broadening of functionality by SaaS providers who have established a beachhead in a particular function and strive to broaden their focus.

The year 2006 will be the year of “going horizontal,” where SaaS companies broaden their functionality from a focus on CRM, moving to supply chain, accounting, payroll, billing & payment and scheduling. This trend began in 2005 and we are at the tip of the iceberg - SaaS providers like NetSuite, Unica [UNCA], Salesforce.com and SugarCRM are leading the charge to stretch their capabilities and deliver added functionality to their customers. NetSuite provides an entire suite of functionality from CRM to ERP to e-commerce and Unica through its acquisition of MarketSoft is broadening its marketing management functionality. Salesforce.com rolled out the AppExchange to broaden functionality for its users into ERP, Marketing, etc.., while SugarCRM is hinting at broadening its open source capabilities into ERP.
–Michael Mankowski, Senior Vice President, Tier 1 Research

Absolutely. Small companies and startups have limited budgets, fewer human resources, and typically, have less time to deploy applications due to their resource constraints. Software as a Service provides a lower cost of entry and typically requires less staff to implement because onsite installation and maintenance are nonexistent. Additionally, on-demand solutions take less time to deploy. SaaS is simply cheaper, faster and requires less human capital. I don’t believe SaaS success is application-specific. A solid software company that meets the needs of its customers has the opportunity to succeed by delivering its software as a service. Of course, there were early adopters to the on-demand model and certain applications are better suited for the SaaS model, but the quality of, and the featured offered by, any application will always
–Chris Miranda, Vice President of Sales, eMeta

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