SaaS Revenue to Grow Five Times Faster Than Traditional Packaged Software Through 2014, IDC Finds

FRAMINGHAM, Mass.--(BUSINESS WIRE)--A recent International Data Corporation (IDC) study shows that the Software as a Service (SaaS) market had worldwide revenues of $13.1 billion in 2009. IDC forecasts the market to reach $40.5 billion by 2014, representing a compound annual growth rate of 25.3%. By 2012, IDC expects that less than 15% of net-new software firms coming to market will ship a packaged product (on CD). By 2014, about 34% of all new business software purchases will be consumed via SaaS, and SaaS delivery will constitute about 14.5% of worldwide software spending across all primary markets.

“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”

"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," said Robert Mahowald, vice president, SaaS and Cloud Services research at IDC. "Enterprise IT plans are rapidly shifting to accommodate the growing choices for sourcing most or all IT software functions, from business applications to software development and testing, to service and desktop management, as SaaS services become available from established vendors and new models for accessing functionality in the cloud creates lower-cost options and more tailored models for consuming IT services."

Additional key findings from IDC's latest SaaS research include the following:

• By 2012, nearly 85% of net-new software firms coming to market will be built around SaaS service composition and delivery; by 2014, about 65% of new products from established ISVs will be delivered as SaaS services.
• SaaS-derived revenue will account for nearly 26% of net new growth in the software market in 2014.
• Traditional packaged software and perpetual license revenue are in decline and IDC predicts that a software industry shift toward subscription models will result in a nearly $7 billion decline in worldwide license revenue in 2010. As a result, a permanent change in software licensing regime will occur.
• SaaS segment mix will shift toward infrastructure and application development and deployment/PaaS, and away from U.S. dominance. IDC expects that by 2014, applications will account for just over half of market revenue. This shift will happen in part as a result of increasing IT cloud spending by enterprise IT groups and commercial cloud services providers (cloud SPs) relative to end-user spending.

This IDC study, Worldwide Software as a Service 2010–2014 Forecast: Software Will Never Be the Same (IDC #223628) presents IDC's first look at worldwide SaaS software performance in 2009 and anticipated performance through 2014.

About IDC

IDC is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. IDC helps IT professionals, business executives, and the investment community to make fact-based decisions on technology purchases and business strategy. More than 1,000 IDC analysts provide global, regional, and local expertise on technology and industry opportunities and trends in over 100 countries. For more than 46 years, IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. You can learn more about IDC by visiting www.idc.com.

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