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Wednesday, March 19, 2008

SaaS Driving U.S. Managed Services Growth

The growth of hosted applications, or SaaS (software as a service), as well as other related services provisioned by a third-party provider, are driving steady U.S. managed services revenue growth, according to the latest market study by In-Stat.

As most business functions are still performed in-house by a majority of firms, out-tasking the management of the network and related infrastructure may still be considered a trend. The hosted application model, however, is closing in on becoming a paradigm, the high-tech market research firm says.

"Though business decision-makers have indicated that they plan to out-task major business functions like security, storage, phone system management at a moderate pace, adoption of third-party application hosting is the fastest growing area in managed services," says Jeff Jernigan, In-Stat analyst.

"The on-demand hosted application model has seen acceptance in the small-to-medium business market, and now demand is rising among enterprise-sized firms. The on-demand model will also hasten adoption of utility computing services."

The research report covers the U.S. market for managed services. A forecast of total US managed services spending through 2012 is presented and broken down by size of business sub-segments; SOHO (1- to 4-employee firms), small business (5- to 99-employee firms), mid-sized business (100- to 999-employee firms), and enterprise (1,000+-employee firms).

The research also gives an overall view of what the managed services landscape could look like by early 2009 with regard to adoption of a number of specific managed business functions; security, storage, WAN/LAN.

Key differences between sizes of business and vertical markets are also highlighted. This information will be helpful to providers of pure-play managed solutions as well as to larger providers who deliver in more than one of these functional areas. Survey data that focuses on interest for utility computing services is also presented and segmented by size of business and vertical market.

In-Stat's market study found the following:

- They forecast a 7 percent compound annual growth rate (CAGR), overall, for managed services through 2012.

- While a majority of business functions are still performed in-house, In-Stat research shows that convergence and complexity will aid in steady, yearly, managed services revenue growth.

- Adoption of managed services varies by business functions, size of business, and vertical market. Providers will need to tailor their managed services offerings accordingly.