Adoption

Drivers

A traditional rationale for outsourcing IT systems involves applying economies of scale to application operation, i.e., an outside service provider can offer better, cheaper, more reliable applications. SaaS-based application use has grown dramatically. A Gartner survey in July 2009 found that customers are "somewhat satisfied". Several important changes to the way people work have facilitated this rapid acceptance:
Fast, low-cost broadband is available.
Computers have become widespread—most information workers have at least basic computer skills.
Computing has become a commodity. In the past, corporate mainframes were jealously guarded as strategic advantages. More recently, applications were viewed as strategic. Today, people know it’s the business processes and the data itself (customer records, workflows, pricing information) that matters. Computing and application licenses are cost centers, and as such, they’re suitable for cost reduction and outsourcing. The adoption of SaaS could also drive Internet-scale to become a commodity.
Insourcing IT systems requires expensive overhead including salaries, health care, liability, and physical building space.
Applications have tended to standardize. With notable, industry-specific exceptions, most people spend most of their time using standardized applications.[citation needed] An expense-reporting page, an applicant screening tool, a spreadsheet, or an e-mail system are all sufficiently ubiquitous and well understood that most users can switch from one system to another easily. This is evident from the number of web-based calendaring, spreadsheet, and e-mail systems that have emerged in recent years.
Parametric applications are usable. In older applications, one could often only change a workflow by modifying the code. In more recent applications, particularly web-based ones, significantly new applications can be created from parameters and macros. This allows organizations to create different kinds of business logic on a common application platform. Many SaaS providers allow a wide range of customization within a basic set of functions.
A specialized software provider can target global markets. A company that made software for human resource management at boutique hotels might once have had a hard time finding enough of a market to sell its applications. But a hosted application can instantly reach the entire market, making specialization within a vertical market not only possible, but preferable. This in turn means SaaS providers can often deliver products that meet specific market needs better than traditional "shrinkwrap" applications.
Web systems demonstrate reliability. Despite sporadic outages and slow-downs, most people are willing to use the public Internet, the Hypertext Transfer Protocol and the TCP/IP stack to deliver business functions to end users.
Security is sufficiently well trusted and transparent. With the broad adoption of SSL, organizations have a way of reaching their applications without the complexity and burden of end-user configurations or VPNs.
Enablement technology (tools, libraries, etc,) is available. According to IDC, organizations developing enablement technology that allow other vendors to quickly build SaaS applications will play an important role in driving the adoption of SaaS. Because of SaaS' relative infancy, many companies have either built enablement tools or platforms or are in the process of engineering enablement tools or platforms. A Saugatuck study shows the industry will most likely converge to three or four enablers that will act as SaaS Integration Platforms (SIPs).
Wide-area network bandwidth has grown drastically, following Moore's Law (more than 100% increase each 24 months), and is about to reach slow local networks bandwidths. Added to network quality improvement, this has driven people and companies to trustfully access remote locations and applications with low latencies and acceptable speeds.
SaaS has "democratized" software, allowing small and medium businesses to access functionality formerly the domain of large enterprises. Many analytical software tools have been released as SaaS applications on a monthly subscription basis.
SaaS facilitates data aggregation. Instead of collecting data from multiple data sources with different database schemas, all data for all customers is stored in a single database schema (i.e., multi-tenant). This simplifies running queries across customers, mining data, and looking for trends.
The rise of third-party SaaS data escrow services has reduced some security concerns by allowing application data to be held with an independent third party.