• Executives at mid-sized firms indicate greater familiarity with SaaS than executives at other sizes of firms. Firms with between 100 and 499 employees showed by far the greatest familiarity with SaaS (86 percent – “familiar”, “very familiar”, or “extremely familiar”) – 5 percent to 20 percent higher than all other company sizes.
• A greater percentage of mid-sized firms are using or planning to use SaaS. Forty five (45) percent of firms with between 100 and 499 employees are using or expanding their use of SaaS by year-end 2008. The next-closest group, “Large” firms with between 1000 and 4999 employees, showed 43 percent either using, planning to use or expanding their SaaS usage by YE08.  
• While satisfaction with SaaS solutions is very high across all sizes of customer firms, executives at mid-sized firms show higher satisfaction with their current SaaS solutions than do executives at other sized firms. And that high satisfaction includes more areas of SaaS than with either Small or Large firms. Amazingly, 95 percent of executives at firms that we surveyed with 100 to 499 employees (representing almost 25 percent of our sample) indicated they were “satisfied” with their overall SaaS experience – with the average of all firms registering a whopping 84 percent satisfaction rate (see Strategic Perspective SaaS and User Satisfaction: Enterprise Ready or Not?, MKT-463, 09May08).

Why Is It Happening?  Saugatuck sees two keys to understanding this mid-sized SaaS “aggression.” The first is the relative familiarity with SaaS. Greater familiarity suggests greater comfort and willingness to adopt – IF the customer’ experience with SaaS is positive. As noted above, Saugatuck’s survey data indicates that while the majority of user SaaS experiences are very positive, executives with mid-sized firms show even higher levels of satisfaction than their peers at other sizes of firms. In IT, familiarity breeds adoption, and positive experiences fuel that adoption’s growth. Thus we see greater expected adoption of SaaS for new applications and infrastructure among executives with mid-sized firms.

But another key to understanding these trends is understanding how mid-sized firms use SaaS. While they indicate greater levels of satisfaction, greater familiarity, and greater expected growth, executives at mid-sized firms also report relatively focused usage of SaaS solutions. These executives tell Saugatuck they see the greatest use of SaaS for collaboration (internally and with trading partners) and for new business functions. Executives with Large enterprises, by contrast, indicate much broader uses of SaaS, from collaboration to supporting distributed workforces, to supplementing IT infrastructure management, to supplementing legacy applications.

Executives with mid-sized firms also expect somewhat less of SaaS than do their peers with smaller and larger firms.  They expect SaaS usage to reduce their software costs, simplify software management, and speed software implementation – all important and significant business benefits. But executives with both smaller and larger firms indicate not just the same expectations of SaaS, but more – including better focus on core business competencies.

Market Impact:  We must emphasize that the above data and trends are the result of early-stage analysis; much more and deeper analysis will be provided in Saugatuck’s upcoming Strategic Research Report, “Enterprise Ready, or Not – SaaS Enters the Mainstream” (late May / early June), as well as a 2nd follow-on, SMB-focused SaaS Research Report due to be published in July 2008. But the trends are very strong and repeated throughout the survey data, and are supported by our follow-on interviews with business and IT executives.

Saugatuck does not expect that mid-sized firms will always be the most aggressive adopters of SaaS in all areas. Our ongoing research continues to show, in fact, that SaaS usage varies over time by company size and type of solution. But there are clear indications of differences in SaaS familiarity, usage and satisfaction by company size.  These differences should be investigated, understood, and exploited by SaaS providers to determine how demand for SaaS solutions will shift over time.

Note 1:

Classifying Company Sizes

Saugatuck uses standard IT industry categories to segment SMBs and large enterprises, as follows:

• Small: Under 100 employees
• Mid-sized: 100 to 499 employees; and 500 to 999 employees
• Large: 1,000 to 4,999 employees; and 5,000 or more employees