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Forrester: SaaS adoption is rising, but TCO remains a concern

Twenty one percent of companies are piloting software as service applications, up from 18 percent a year ago, according to a recent Forrester research report. However, even as SaaS adoption increases during the current recession worries about total cost of ownership remains among software buyers.

This is a guest post from Larry Dignan of TechRepublic's sister site ZDNet. You can follow Larry on his ZDNet blog Between the Lines (or subscribe to the RSS feed).

Twenty one percent of companies are piloting software as service applications, up from 18 percent a year ago, according to a recent Forrester research report. However, even as SaaS adoption increases during the current recession worries about total cost of ownership remains among software buyers.

Forrester surveyed 239 applications decision makers and found the following worries about SaaS:

  • Total cost of ownership: As SaaS deployments grow and extend to large enterprises TCO matters. What are the deployment costs associated with licensing, staffing and training?
  • Backup and security policies: Vendors need to detail guidelines for security, backup and data recovery based on known standards.
  • Contract guidelines: SaaS contract templates are currently hard to come by and buyers often accept vendor terms because they lack existing contracts.

Overall, those gaps appear to be holding back SaaS adoption a bit. For instance, Forrester found that 21 percent of companies are piloting or using SaaS, up from 18 percent in 2007. However, 26 percent of software buyers said they were interested and considering SaaS in 2008, down from 45 percent in 2007. Meanwhile, 54 percent of companies said they weren't interested in SaaS or didn't know if they planned to adopt it. That tally is up from 37 percent in 2007.

Add it up and it appears a lot of companies have evaluated SaaS and decided it wasn't for them.

This slide highlights buyer worries:

And those that are adopting SaaS are sticking to the familiar commodity applications:

1 comments
EDunigan - TrackVia
EDunigan - TrackVia

As an employee of a SaaS company, I may be biased but I do feel that SaaS will continue to grow. Companies should not just evaluate the TCO of SaaS but they also must try before they buy. I recently created a list of tests businesses should put their SaaS solutions through before buying. For example, total the data and see what sort of back-up exists. Does your SaaS provider receive a five star crash rating? http://www.trackvia.com/blog/2009/03/05/evaluating-saas-free-trial/

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