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SaaS Usage Growing Even as Contract Terms Come Under Scrutiny

Although more than 95 percent of organizations expect to maintain or grow their use of software as a service (SaaS), 30 percent of enterprises using SaaS have renegotiated their terms before the end of the initial contract period. Also, 16 percent of SaaS customers said they're transitioning from SaaS to on-premises solutions.

Those are some of the results from a survey by Gartner conducted in December 2009 and January 2010. The research firm surveyed 270 IT and business management professionals from multiple industries in North America, Europe, and Asia/Pacific who were personally involved in enterprise SaaS implementations in their organizations. Half of those surveyed said their businesses have run SaaS applications for at least three years.

The most popular applications for SaaS usage, according to the results, are e-mail, financial management and accounting, sales force automation, customer service, and expense management. More than 30 percent of organizations reported the use of these types of applications.

Yet the research firm reported that only 39 percent of organizations have policies in place to govern the evaluation and use of SaaS, up a single percent from 2008 results.

Gartner said that some enterprises have found SaaS solutions less than optimal. No particular reason dominated responses, though key concerns include a rising total cost of ownership and integration issues, as well as a shift in sourcing strategy.

"These issues aside, organizations are becoming more savvy when it comes to renegotiating their SaaS contracts," said Sharon Mertz, research director at Gartner. "A key survey finding was that more enterprises are renegotiating contracts for greater functionality, additional users, and improved financial terms."

Additional information from the survey is available in Gartner's report, "User Survey Analysis: Software as a Service, Enterprise Application Markets, Worldwide, 2010," which is for sale for $1,295.

About the Author

Denise Harrison is a freelance writer and editor specializing in technology, specifically in audiovisual and presentation. She also works as a consultant for Second Life projects and is involved with nonprofits and education within the 3D realm. She can be reached here.

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