IDC Report: “SaaS Momentum Skyrocketing.” SaaS Based LIMS Subscriptions Supports this Finding

Revenues for the software as a service (SaaS) market on the whole are projected to grow from $13.1 billion in 2009 to more than $40 billion in 2014.

Today, I read an interesting article at Infoworld “IDC: SaaS momentum skyrocketing.”

Interest in the SaaS delivery model is growing to the point that by 2012, almost 85 percent of new vendors will be focused on SaaS services, according to new research from analyst firm IDC.

Also by 2012, some two-thirds of new offerings from established vendors will be sold as SaaS, IDC said.

At LabLynx, our SaaS/cloud-based LIMS offering, webLIMS.com has exploded the growth of our company.  We introduced the new cloud-based version of our LIMS in 2008, and by 2009, our revenues had doubled. In 2010, our revenues have already exceeded by 25% all of our revenues for 2009 and we are only half way through the year.  The reason for this explosive growth is SaaS/cloud computing, and our wide variety of product offerings for laboratory, scientific and health informatics that are offered exclusively as cloud applications.  In fact, our traditional license sales are down 10%, while the SaaS (webLIMS) sales have almost triple digit growth.

The IDC report supports this observation saying, “License revenues for traditional on-premises applications will drop roughly $7 billion this year and are likely in permanent decline, since SaaS is generally sold via subscription.”

The large, legacy software companies that depend on licensed software sales will have challenges in moving to SaaS/cloud-based applications.  The simple reason is that they will be losing the bulk of their revenues (license fees) as they start offering SaaS alternatives.  Some of those legacy software companies have started to rethink their move into cloud computing because of the negative revenue impacts.  Read “Why some vendors regret becoming cloud providers.” The larger issue here is that large enterprise software companies that move into cloud computing could find themselves cannibalizing their existing market. Thus, they might end up selling cloud services to replace their more lucrative software solutions.

I think it is safe to say that SaaS/cloud computing is here to stay, and the growth for these technologies and business models in the area of LIMS and Laboratory Informatics is going to continue to grow rapidly.  I think we can expect a fundamental market shift in the software market as a result.  While providing a cloud service will indeed conflict with the license revenue requirements of legacy software vendors and reduce margins in many instances, not providing a cloud service could cause vendors to lose their market altogether to another provider. Thus, it makes much better sense for vendors to focus on providing the most innovative solutions, including the use of lower-cost and lower-margin cloud computing solutions, rather than offering no solutions at all.