Given the likelihood of reduced discretionary spending in 2009 and perhaps 2010, Gartner expects that these driving forces will foster greater demand for SaaS solutions rather than budgets directed at enhancing -- or furthering investment for -- on-premises solutions.

"Use of SaaS has been evolving during the past decade and the SaaS model has become increasingly popular over the past three or four years," said Sharon Mertz, research director at Gartner. "Our survey indicates that more than 40 per cent of organizations have used SaaS for more than three years, implying a growing fluency with the model within the end-user base.

Early contract re-negotiation

"Users are demanding higher levels of functionality, sometimes prompting organizations to renegotiate their contracts early to opt for more feature-rich solutions, or to add more users as the organizational footprint expands."

Replacement of on-premises solutions and net-new implementations were cited as major drivers of future SaaS deployments. Globally, more than one-third of respondents indicated plans to transition from on-premises to SaaS. The key drivers cited included total cost of ownership (TCO), and unmet performance expectations with on-premises solutions, in addition to changes in sourcing strategy.