According to the latest numbers by IDC, we may be seeing traditional licensed software wheezing its way to its ultimate demise.
IDC’s report states “that by 2012, almost 85 percent of new vendors will be focused on SaaS services…and some two-thirds of new offerings from established vendors will be sold as SaaS”
Further, IDC predicts that “SaaS revenue numbers will jump up accordingly in the next few years, rising from US$13.1 billion in 2009 to $40.5 billion by 2014…while license revenues for traditional on-premises applications will drop roughly $7 billion this year and are likely in permanent decline.”
Frankly, this comes as no surprise.
The relatively recent recognition by software companies that the small and medium business segment is a growth area, coupled with reliable and ubiquitous broadband has made offering cloud-based applications a smart business move.
According to the US Small Business Administration, businesses with fewer than 500 workers account for half of the nation’s private, nonfarm real gross domestic product and half of all Americans who work in the private sector are employed by a small firm.
While these companies have many of the same software needs as larger enterprises, they lack the money and in-house resources to install, maintain and administer the associated hardware and applications. Consequently, they’ve been largely ignored by the enterprise software companies who traditionally made their money on upfront license fees and hefty annual maintenance contracts.