IDC’s Software as a Service Predictions for 2006: Partnering Activity and Ecosystem Development Will Help Expand the SaaS Footprint

FRAMINGHAM, MA – March 21, 2006 – According to a newly published IDC study, the acceptance of Software as a Service (SaaS) delivery models, which includes software on demand and hosted application management (hosted AM), continued gathering momentum and customer mindshare in 2005 which is expected to further increase in 2006. IDC believes that SaaS providers will pay particular attention to developing and increasing partnerships in order to expand revenue streams and customer adoption in the upcoming year.

"The role of SaaS delivery in the software industry continues to grow. Traditional software players have recognized the importance of SaaS and numerous SaaS-focused companies are entering the marketplace," said Erin Traudt, research analyst for IDC's Software as a Service program. "IDC believes that these types of disruptive business models will ripple throughout a variety of software markets in 2006."

IDC's top ten predictions for SaaS in 2006 are:

— Large ISVs Will Spin Off On-Demand Versions of Products

— Small and Medium Enterprises (SMEs) Remain a "Tough Nut to Crack"

— Microsoft Strengthens SaaS Resolve

— Software on Demand Providers Focus on Partnering

— Mini-Ecosystems Emerge to Extend the Reach of Software on Demand

— SaaS Enablers Continue to Aid Availability of On-Demand Offerings

— Merger and Acquisition Activity Continues

— SaaS Providers Concentrate on Improving Offerings and Customer Experience

— Hosted AM Becomes a Stepping Stone Towards On-Demand Delivery

— SaaS Will Help Drive a Software Industry Transition to Subscription Licensing

"Current SaaS adoption is just the tip of the iceberg, leaving plenty of opportunity for providers and partners," Traudt added. "Customer demand will play an integral role in fueling the development of SaaS solutions and ecosystems."

The study, Top 10 Predictions for 2006: Software as a Service (IDC #34872), presents IDC's top 10 predictions for SaaS in 2006. The trends and challenges presented in this study are primarily U.S.-based, and are likely to affect SaaS providers and their offerings throughout 2006. SaaS trends are evaluated in the context of all functional software markets and focus specifically on the organizational, software, services, and partnering strategies of SaaS providers.

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