Which Software Markets Will SaaS Disrupt?

Software-as-a-service (SaaS) is an important new set of capabilities and engagement models in the IT industry, particularly in the emerging world of cloud computing. We project that SaaS offerings will grow from 7% of total software revenues in 2010 to 17% in 2013. But is SaaS a truly disruptive technology, i.e., one that allows new market entrants to overtake existing vendors? Many SaaS vendors say yes. But our analysis of 123 software market segments shows that SaaS will have little or no effect on many of them. Moreover, some new and emerging software products like blog and wiki platforms began as SaaS products with no disruption of existing vendors. SaaS will only be a disruptive force in software products that make up about 25% of the total global software market, especially in customer relationship management, human resource management, IT management, and security software. Elsewhere, SaaS will be a sustaining technology for incumbent vendors that allows them to offer SaaS products that complement traditional licensed software products — either in niches where licensed products have not been adopted or by addressing unmet needs.