I remain deeply sceptical of some analyst predictions for emerging markets. Those with long memories will remember that according to the combined brainpower of the market analyst industry, we would all be dipping into multi-billion pound object oriented database market.

But predictions there are and predictions there will always be. So, this week’s SaaS numbers come from Gartner which predicts a compound annual growth rate of 22.1 per cent through 2011 for the aggregate enterprise application software markets, more than double the nine per cent CAGR expected in the market as a whole.

The firm goes on to add that, “by 2011, 63 per cent of products in the software infrastructure market and 56 percent in the software application market will support web services and web 2.0 technologies."

“We limited the forecast to the enterprise application software market because [SaaS] is a very hot topic in the application markets and in some markets, it’s an absolutely common way to deploy software,” says Sharon Mertz, research director of customer relationship management at Gartner.

“SaaS is more of an option now,” she says. “People are considering it more often when they’re looking at different application solutions. [They’re] looking at it as their overall sourcing strategy – ‘is this right for me, or not?’ It’s just a much more important element in the market as time goes on. A lot of the processes [in a SaaS application] are more streamlined. It’s more repeatable, [and the] software isn’t really specific to any one company’s business.”

That said, rates vary according to the sector. For example, enterprise content management (ECM) has only around one to two per cent of the market to e-learning where SaaS is said to be as high as 70 per cent market penetration. SaaS as growing well within the CRM market with revenues from SaaS of between seven and 18.5 percent. “The mix [of SaaS revenue generation] varies depending on the application market,” Mertz says. “SaaS adoption is highest in applications that support simplified, common business processes or large, distributed virtual workforce teams. Ease of use, rapid deployment, limited upfront investment in capital and staffing, plus a reduction in software management responsibility all make SaaS a desirable alternative to many on-premises solutions, and they will continue to act as drivers of growth.”

The competitive landscape is also changing. Mertz warns hat Microsoft will be a serious challenger with CRM Live, despite the protestations of the existing pureplay market leaders.

But there are still inhibitors to SaaS take-up. “Major on-premises software vendors are re-architecting their application stacks to service oriented architectures. Their customers will invest in migration for those processes that are complex or proprietary, but they also have an opportunity at this juncture to evaluate whether SaaS is an appropriate alternative for other aspects of their business,” says Mertz. “Small and midsize businesses that have insufficient resources to convert their applications will also find SaaS an attractive 21st-century solution to their legacy systems.”