Businesses have come to the realization that it doesn’t make sense to manage IT the way they did 25 years ago. Matt Steiger, Strategy and Business Development, Epson Cloud, points out that businesses wanted tools in-house to control their applications and data, but “as time went by, the overhead to manage in-house IT became overwhelming and business needed more agility to respond to changing customer demands.”
Software as a Service (SaaS)—and as a Service business, in general—have emerged over the last decade to give B2B and B2C companies a solution to the challenges of on-premises IT.
Gartner predicts global IT spending will grow 5.1 percent year over year to reach $4.5 trillion in 2022. Much of that growth will come from increased spending on enterprise software. Spending in 2021 totaled $604,946 million, and it’s set to rise to $671,732 million in 2022. Gartner also predicts enterprise software spending to grow by 11.9 percent in 2023 to reach $751,937 million.
Reasons for Increases in Cloud Spending
Steiger points to several factors driving cloud growth:
- Lower barrier to entry: Businesses can find an application created specifically for their business needs and easily adopt it. “The ERP of the past has been replaced by targeted solutions that address specific problems in a market,” Steiger says.
- Mobility: Many SaaS applications are easily accessible by mobile or remote employees.
- Trading a CAPEX for an OPEX: With SaaS, it’s not necessary to make a large, upfront investment. Instead, IT becomes an operating expense.
- Less risk: There’s a lower threshold of commitment with SaaS. “It follows the principle of ‘if you’re going to fail, fail fast,’” Steiger says. Businesses can use freemium or light versions as a trial, and if a SaaS solution doesn’t meet their needs, it’s easier to change than with an on-premises solution.
- Faster ROI: Return is measured in days or weeks rather than months or years.
Steiger comments that a greater awareness SaaS and the benefits it offers are also a factor in adoption. “Businesses used to commit massive resources to buy software in a box,” he says. “They are aware that they don’t have to operate and go through life the way they used to.”
New Business Opportunities and New Revenue Streams
SaaS and other cloud applications and services are creating opportunities and providing additional value that no one predicted years ago. IDC’s Salesforce Economic Impact report, for example, states that businesses and enterprises will implement cloud technologies as a part of their digital transformation strategies, increasing spending on these solutions by 37 percent through 2026. IDC also predicts Salesforce’s economic impact will total $1.6 trillion in that same timeframe, a number 3.5 times higher than it was in 2020.
Established businesses can also find new revenue streams through connected, cloud environments. Steiger says Epson, an enterprise with a 50-year history, has leveraged cloud to create new applications and services, such as its ReadyInk ink replenishment program. Printers connected to the internet notify the user when ink is low and can automatically order replacement cartridges. “It’s connectivity supporting a business need,” says Steiger.
With New Opportunity Comes New Challenges
As more businesses rely on the cloud to access their applications and store their data, security and privacy issues are raising concerns.
“Data privacy is something SaaS providers and users are being forced to address,” says Steiger, requiring compliance with regulations such as the EU’s General Data Protection Regulation (GDPR) and the California Privacy Rights Act. “Those trends are not going to go away,” Steiger says. “Solutions providers need to build those standards into their offerings.”
Businesses will also need guidance for complying with those standards. “It’s not something that enables them to just flip a switch and say they’re compliant,” Steiger comments. “It’s a process—and something that everyone will have to deal with.”
He says solution providers need to be aware that the regulatory climate is changing faster and “be nimble enough to adapt before your business becomes obsolete.”