The software-as-a-service (SaaS) market is set to grow more than 25 per cent annually for the next four years, coming to represent over a third of new business software purchases.
Research from IDC also predicts that the rise of on-demand models will contribute to a $7bn (£4.5bn) decline in global software licensing revenue in 2010. The analyst claims worldwide SaaS revenue stood at $13.1bn last year.
The SaaS market is projected to enjoy compound annual growth of 25.3 per cent until 2014, swelling its worth to more than $40bn. By 2012, IDC forecasts that about 85 per cent of new market entrants will not ship a packaged product.
By 2014, 34 per cent of new business software purchases are projected to be delivered as a service. SaaS provision is forecast to provide 14.5 per cent of total software market revenues in the world's leading markets. The SaaS space as a whole will provide more than a quarter of net new software market growth in 2014, according to IDC.
Robert Mahowald, vice president of SaaS and cloud services research at IDC, said: "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."
"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."
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