Europeans get hot for software-as-a-service

European organisations are increasingly ready to invest in software as a service (SaaS), according to the findings of a recent end-user survey.

Analyst house IDC surveyed 2,077 IT decision makers in organisations with more than 20 employees in Western Europe. It found that 37 percent of respondents said they would invest in SaaS in the next 24 months to replace or supplement existing enterprise resource planning (ERP) systems.

On the customer relationship management (CRM) side, 35 percent said they would replace or supplement existing systems in 24 months; 32 percent said they would do so for supply chain management (SCM) solutions.

Last month, Forrester revealed that 16 percent of enterprises had adopted SaaS as of 2007 - an increase from 12 percent the previous year.

"A surprisingly large proportion of companies are planning an investment in SaaS for replacing or supplementing the functionality of existing ERP and CRM solutions within the next 24 months - 37 percent and 35 percent respectively," wrote Bo Lykkegaard, research director in IDC's European Enterprise Applications and Services program, in an emailed response to Techworld.

"IDC considers that this result has more to do with intentions than concrete plans with allocated budgets. Also, IDC believes that the indications of SaaS investment mostly reflect plans to supplement rather than completely replace existing ERP applications."

"Another surprise is the higher proportion of respondents planning to invest in SaaS for ERP compared to CRM," wrote Lykkegaard. "IDC considers the SaaS maturity of CRM to be four to five years ahead of the SaaS maturity of ERP. IDC believes that the results are biased by the general adoption of ERP and CRM with ERP being adopted more broadly than CRM."

"The SaaS implementation plans in ERP and CRM are very alike if we compare the results by country, by company size, and by industry. In terms of country, Germany and Spain have the highest proportion of respondents planning to invest in SaaS. In terms of company size, the '500–999 employees' segment shows a higher propensity to invest."

Lykkegaard told Techworld however that the use of SaaS in Western Europe is currently still modest, but there is strong growth potential. "Western Europe lags behind the US," admitted Lykkegaard, "normally between one and three years depending on segment and market."

"Within Western Europe, the UK, Nordics and Benelux are typically first to adopt, closely followed by Germany and France," he wrote. "However the survey shows that all of Western Europe are prepared to adopt and plans to do so."

IDC apparently believes that the software industry has moved beyond the educational phase of software on demand, and companies of all sizes and all industries have recognised the associated benefits of the delivery model.

"We have mostly worked with sizing individual SaaS segments in Europe," said Lykkegaard. "But our preliminary sizing of EMEA (Europe, Middle East and Africa) of which almost all is Western Europe at the moment was 271 million euros (£214 million) in SaaS subscriptions across markets and segments."