Software-as-a-Service (SaaS) is not just about cutting costs anymore, it’s about getting a competitive edge. While slashing capital expenditure on software is still a primary reason for taking the SaaS route, recent research from IBM shows that leading companies are using it to give them an edge over the competition.

SaaS in 2013

While a majority of companies are now aware of the advantages of SaaS as a cost saver, only one in two sees it as a way of achieving the more significant goal of market leadership. Only one in five are actively making the decision to invest in SaaS for business reasons, rather than Total Cost of Ownership (TCO).

The findings, which are contained in a study called Champions of Software as a Service is the result of a survey carried out by IBM in late 2013 on the heels of earlier research conducted to find out how organizations are using cloud computing.

The SaaS research was the result of a survey of 879 decision makers in companies that had SaaS deployments. Of those respondents, 12 percent are C-level line-of-business executives and 10 percent are C-level IT executives. The remainder was comprised of Vice Presidents, directors and managers, and was split evenly between IT and business functions.

While cloud computing is a core element of IBM’s businesses, little research has been done to find out exactly how businesses are using SaaS and what they are hoping to get out of it.

However, what is known is that the use of SaaS has increased dramatically over the past few years, and its growth is unlikely to stop anytime soon. According to the Gartner Forecast: Public Cloud Services, Worldwide 2011-2017, the market will grow from $18.2 billion at the end of 2012 to $45.6 billion at the end of 2017.

On top of this end-user spending on public cloud services is expected to grow 18 percent in 2013 to $132 billion and almost $250 billion by 2017, including cloud advertising.

Reducing costs is still a primary reason companies turn to Software as a Service, but those at the front of the pack, like cloud leaders in general, are discovering how SaaS can help them achieve a much broader and more strategic goal – unlocking competitive advantage.

IBM SaaS Collaboration figures.jpg
IBM SaaS Collaboration figures

IBM carried out the research to find what is driving this demand. Generally speaking, while TCO was cited as the top reason, 41 percent have already achieved this to a high degree, with 47 percent now citing competitive advantage as one of the driving forces. A small group invested in SaaS with TCO as the principal goal.

According to IBM, this conforms to earlier research which found that top organizations are outperforming their peers by the strategic use of cloud computing. These companies are also remarkable by the different approach they are taking to cloud computing.

Digging into SaaS

For the sake of the study, IBM broke the respondents into three different groups. They include:

  • Pacesetters: Those that have the highest level of SaaS adoption and are gaining competitive advantage through their broad efforts
  • Challengers: Those that have adopted SaaS from a narrower, financial perspective, but who are still getting a competitive edge
  • Chasers: Those that have been slower to adopt and are still trying to find their way.

The difference between Pacesetters and the rest, IBM found, is the reasons that they turned to SaaS in the first place. While Chasers and Challengers are driven primarily by TCO, Pacesetters have understood the possibilities of SaaS and are using it to improve collaboration, both inside the enterprises and across their wide ecosystem.

Research further suggests that Pacesetters have adopted SaaS for customer-centric reasons, and hope to achieve a competitive advantage through the use of cloud computing. It could be argued, however, that these companies are leading precisely because they have better customer experiences rather than because of a highly developed IT strategy.

One other consideration that needs to be taken into account is the belief current in many enterprises that IT has little involvement with SaaS once the initial deployment has been made.