Cautious optimism shapes new year

By , Network World |  Hardware

Tools such as videoconferencing and unified communications remained popular, since they help employees get work done. Business intelligence and analytics projects also held up well. "Companies wanted to get a better understanding of their costs, their business metrics, what was going on," Bartels says. "It made sense to invest in business intelligence because there was going to be payoff."

The desire to conserve cash had a clear influence on the software market, in particular. Licensed software revenue fell, while subscription revenues for SaaS applications continued to grow. Gartner estimates SaaS revenues hit $7.5 billion in 2009 -- an increase of nearly 18% over 2008.

While interest in SaaS was growing even before the downturn, adoption accelerated in 2009 as IT leaders looked for ways to avoid capital investment and make their IT costs more flexible.

"SaaS has benefited from the globally depressed economy," says Chuck Schaeffer, CEO of on-demand CRM and ERP provider Aplicor. "SaaS demand continues to increase and new customer acquisitions continue to increase."

Sales cycles have lengthened due to the need for more stringent ROI justifications and increased due diligence, Schaeffer says, but in general enterprises are drawn to SaaS for the same reasons: Lower upfront costs, shorter implementation time, reduced demand on IT staff, and fewer implementation risks than on-premises software.

"IT departments are challenged now, but most are expecting the economy will return to better days," Schaeffer says. "When that happens, SaaS will provide them on-demand scalability. Computing resources can be dynamically provisioned and scaled when needed, and companies don't have to procure, implement, manage and upgrade incremental servers and hardware just in case the company grows."

Server consolidation and virtualization projects also remained a priority in 2009, since they're associated with clear cost savings. By eliminating and consolidating hardware that's underutilized or inefficient, companies have been able to cut the number of servers deployed by 5% to 20%, Gartner reports.

At the same time, virtualization has allowed enterprises to eliminate entire server farms, slashing operating costs and raising asset utilization rates from the 10% to 30% range to the 70% to 90% range. Removing a single x86 server from a data center can result in savings of more than $400 a year in energy costs alone, Gartner says.

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