• Network World et al., Wednesday, November 11, 2009 2:06 PM

Software as a service, which has emerged as a key battleground for industry titans like Google and Microsoft, will be a $14 billion industry by 2013, according to new global research from Gartner. This year, SaaS, a.k.a., cloud-computing services, is on pace to grow 17.7% from $6.4 billion in 2008 to $7.5 billion.

"I don't find the numbers too surprising," writes Network World's 'Head in the Cloud" column, "but the success of software-as-a-service is in stark contrast to many other portions of the recession-plagued IT industry."

"Microsoft, for its part, continues to grow its cloud offerings," notes the Seattle Post-Intelligencer's Microsoft Blog. "Office Web Apps, part of the upcoming release of Office 2010, will take on Google Apps ... And Microsoft continues to finalize Windows Azure, a platform for developers who want to create cloud applications."

Yet, while "The cloud is a great place for people to work ... for technology development to progress and meet the needs of businesses a much broader way of thinking must be adopted," writes The Next Web blog. "Businesses will continue to work from the desktop, to be blunt, there is a certain amount of security that having a door which locks and a hard drive which you can (all but) ... When you also consider that internet connections are not guaranteed for 100% of the time, to maximise [sic] productivity there will always need to be a trade off between cloud and local computing."

Those concerns, however, didn't stop the city of Los Angeles from just recently voting to outsource its email system to Google. LA is the largest city in the nation to make the move, which is a major victory for Google in its quest to become a software provider to the world. Over the coming year, the $7.25-million contract will move all 30,000 city employees to Google's so-called "cloud."

"The adoption of SaaS continues to grow and evolve within the enterprise application markets," said Sharon Mertz, research director at Gartner. "Adoption of the on-demand deployment model has continued to grow as on-demand vendors have extended their services through alliances, partner offerings, and more recently, by offering and promoting user application development through platform as a service (PaaS) capabilities."

The content, communications and collaboration (CCC) market and the customer relationship management (CRM) market continue to have the largest amount of SaaS revenue across market segments, with the CCC market generating $2.6 billion in 2009 -- up from $2.14 billion in 2008 -- and the CRM segment generating $2.3 billion in 2009 -- up from $1.9 billion in 2008.

According to Gartner, SaaS has continued to represent a key driver of growth in the CRM market for the past four years, climbing from less than $500 million in 2005 and over 8% of the CRM market to over 20% of the market in 2008, with nearly $1.9 billion in revenue. Gartner expects growth to continue, with SaaS representing almost 24% of the CRM market's total software revenue in 2009.

Read the whole story at Network World et al. »