As SaaS Matures, It Is Slowing Down Just Like the Rest of Us

September, 2020

It is time to stop thinking of software as a service (SaaS) as a new technology and think of it as a mature incumbent. As such, we would expect a few things to begin to happen—investment to slow, ROI to be slightly harder to achieve, and customer satisfaction to drop. 

And, in fact, all three are happening. While we still rate satisfaction as high, it is declining, and investment and ROI, while strong, also are dropping. This is not to say SaaS is dead or on the decline. Rather, this is to say that enough companies have adopted SaaS throughout enough of their portfolios that we would expect a natural cooling. The low-hanging fruit has mostly been picked: the applications with the strongest business case for SaaS have mostly been implemented.  

Figure from our full report, SaaS Adoption Trends and Customer Experience, shows how SaaS compares with other technology initiatives in our most recent Technology Trends study on five metrics: adoption rate, investment rate, ROI success rate, TCO success rate, and customer satisfaction. Satisfaction still rates high compared to other technologies in the study, but it is on a slight decline as IT organizations expand their SaaS portfolios. Investment and ROI are also declining but still rate as moderate in our study. Investors include organizations that plan new implementations or enhancements to existing systems within the next 18 months. Investment is expected to continue to rise as SaaS offerings become more diverse and mature, just at a slower rate. 

Fig1SaasAdoption 1030x687 - As SaaS Matures, It Is Slowing Down Just Like the Rest of Us

We are now entering the consolidation phase for SaaS where companies are slowly replacing the last on-premises stalwarts in their portfolio. These often consist of the most complex business systems where hidden expenses, complications due to data integration, and unforeseen business process issues arise.   

SaaS is not ideal for every application. Despite the fact that SaaS providers have addressed many security and privacy issues, some organizations may not be ready to entrust critically sensitive data to the cloud. This is especially the case where there are regulatory and compliance issues around storing data in the cloud. Data privacy rules in various parts of the world, such as data residency regulations in certain European Union countries, can be difficult if the cloud provider does not have data centers local to those geographies. Finally, although our research shows cloud systems are cost-effective when organizations migrate most of their systems to the cloud, on a system-by-system basis SaaS can cost more in the long run than legacy systems that have been in place for many years.

“It is important not to overstate this,” said David Wagner, senior director of research for Computer Economics, a service of Avasant Research, based in Los Angeles. “SaaS will continue to be the preferred primary deployment option for most applications. But we do expect that IT organizations will take their time transitioning their remaining systems to SaaS as each new undertaking becomes more complex and the ROI is less obvious.”

Because customers do not always distinguish between various types of SaaS architecture, our definition of SaaS, for the purposes of this report, is broad. It includes “cloud-only” providers such as Salesforce, SAP Concur, and Oracle NetSuite, which developed their systems from the ground up as SaaS applications. It also includes hosted versions of on-premises systems, where a service provider takes responsibility for all hosting and maintenance of the system and offers it on a subscription basis. Most companies that were giants in on-premises software are now offering hosted versions of their software, if not true cloud-based apps. 

Our full report quantifies the current investment trends for SaaS and identifies the benefits driving companies to expand their implementations. It also identifies which of a wide variety of SaaS applications are driving adoption and assesses adoption and investment trends by organization size. Finally, we examine the ROI and TCO experience of adopters and conclude with practical advice for those considering deployment of SaaS solutions 

This Research Byte is a brief overview of our report on this subjectSaaS Adoption Trends and Customer Experience. The full report is available at no charge for Avasant Research subscribers, or it may be purchased by non-subscribers directly from our website (click for pricing).