What is Happening?

Saugatuck’s just-completed 2012 global survey of SaaS/Cloud business solution adoption and use shows several patterns that indicate how the acquisition, use, and management of SaaS (and other Cloud-based IT services) is changing, based on changed enterprise business goals and priorities.

The 52-page research data analysis report from this survey that identifies the key trends shaping – and re-shaping – software acquisition, use, provision and markets, along with IT and business roles, was published and distributed last week to clients of Saugatuck’s Continuous Research Services (CRS) subscription research and inquiry program. Additional in-depth analysis will be provided to Saugatuck CRS clients through a series of Strategic Research Reports and Strategic Perspectives. An abridged 13-page version of this report is available for downloading to all registered members of Saugatuck’s website, including recipients of our weekly Research Alerts as well as Information Management readers, by clicking here (complimentary – but registration required).

One of the most important themes in the report, based on our survey analysis, is that the acquisition and use of SaaS is shifting quickly from being cost-driven to being a means of enabling more effective and efficient business operations.

This has severe implications for how SaaS (and Cloud in general) are acquired; for the value propositions of SaaS/Cloud providers; and for the mission and roles of IT leaders and organizations.

Why is it Happening?

Our brand-new report investigates and analyzes a deep and broad range of data from more than 220 survey participants, in the context of Saugatuck’s ongoing SaaS/Cloud research programs. Key data points from the report that help paint the picture of not only what is being acquired and used, but why – i.e., the business needs behind IT investments, the business benefits expected from SaaS, and the biggest concerns of SaaS users. The report examines and analyzes the survey data, along with information from user interviews and provider briefings, to identify the patterns in the data and translate those into trends, and into guidance for Saugatuck clients.

The key themes and highlights helping to paint the new picture of business and SaaS, and therefore the new mission and roles of IT, include the following:

It’s about business improvement. Enterprise IT and business executives alike are focused on business goals that emphasize revenue growth built from existing business footprints, combined with improving profitability rather than business expansion.

This emphasis on improving existing operations and market profitability is a critical influence on IT acquisition, use, and management decisions. It suggests that SaaS provider value propositions based on cost savings are becoming less well-received; emphases on how SaaS/Cloud enables business (especially operational) improvement will be much more influential.

Saugatuck sees this as a key driver of more innovative business and IT management, helping to reshape IT mission and roles by continuing to reduce/remove the emphasis on technology, function, and features, and increase IT emphasis on new ways of seeing and doing things.

What we see as “Hybrid” may change faster than we are ready for. Preferences for deploying new on-premises business software decline rapidly over the next two years, as enterprises shift toward hybrid on-premises+Cloud offerings. We’ve seen this coming for at least a few years.

However, our survey participants see much of that hybrid focus shifting toward pure-play SaaS/Cloud within just a few years, suggesting a challenging transitional period for enterprise IT leaders and organizations. Our data certainly suggest that what we currently consider as hybridized environments blending on-premises and Cloud are considered to be somewhat of a transitional phase and that IT and business leaders see Cloud-based solutions as dominating the longer-term future.

The disruptive impact of such a significant short-term change in the structure and approach of enterprise IT – and therefore, on the enterprise’s ability to do business – would be severe. The data suggest a strong and rapid shift toward an approach that requires massive investment in integration, customization, and security, while learning to manage new types of interfaces and providers – within an average period of two years. This would be followed by a similarly-massive shift toward more pure-play Cloud-based solutions and operations, well before most enterprises or SaaS/Cloud providers would be able to support it.

We believe that this view reflects exceptional enthusiasm on the part of both enterprise IT and business leadership – and that these views will change more in favor of hybridized, interwoven IT and business environments as enterprises increasingly experience them through 2014. Upcoming Strategic Perspectives will examine this potential shift, its likelihood, its impact, and how to manage it, in more detail for Saugatuck CRS clients.

Cost savings expectations remain, though fading in import. The data also indicate a string and growing trend that reduces the importance of initial cost savings as a reason for acquiring and using SaaS. While reducing IT and business costs remain top-of-mind when it comes to SaaS/Cloud adoption globally, business flexibility and agility overall rule enterprise SaaS decisions.

The second-tier business benefit expected is obviously improved speed/time to value for IT and business operations, followed closely by a broad and deep tier of expectations regarding faster/better business operational improvements – very much in keeping with our core finding that SaaS (and Cloud in general) is fast becoming much more about making the business work better, and at lower costs.

An extended version of this Research Alert as it was originally published appears at Saugatuck Technology.

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