Spending on Software as a Service Exceeds Expectations and Will Continue to Grow Through 2009, IDC Finds

FRAMINGHAM, Mass., May 4, 2005 – Worldwide spending on software as a service (SaaS) reached $4.2 billion in 2004, an increase of 39% over 2003 according to a recent IDC study. IDC believes worldwide spending on SaaS will continue to increase over the next five years at a 21% compound annual growth rate (CAGR), reaching $10.7 billion in 2009.

“There is no doubt that software as a service has become a driving force within the software industry,” said Erin Traudt, research analyst, Software as a Service research at IDC. “Indications are that customer adoption will continue over the next five years and spending will remain on the rise.”

IDC believes software as a service adoption will be driven by customer need to improve business processes, an increased understanding of and interest in the software as a service delivery model, growth in the number of software as a service offerings, and the creation of enablement programs to help independent software vendors (ISVs) take advantage of the software as a service opportunity. Buyers from small and medium-sized businesses and divisions of larger companies are leading the charge as the most frequent customers of software as a service.

“The software industry must adopt a new frame of reference for value creation,” added Traudt. “Software as a service delivery is at the forefront of this trend, and adoption will grow as more customers experience software as a service and the offerings mature, becoming more readily accepted and available in the market.”

The IDC study, Worldwide and U.S. Software as a Service 2005-2009 Forecast and Analysis: Adoption for the Alternative Delivery Model Continues (IDC #33120), analyzes the key supplier trends and events impacting software as a service. The study also includes future outlooks on industry developments, such as anticipated impacts of customer behavior, supplier actions, and the competitive environment.