Study finds SaaS gaining traction at midsize firms

The growing market for on-demand services drives security firms to jump into Software as a Service (SaaS).

A growing number of security vendors are jumping on the Software as a Service (SaaS) bandwagon, and a recent survey by Enterprise Strategy Group Inc. shows why: SaaS is becoming an attractive option for a lot of businesses.

"This is attractive to them because they get the same best-of-breed technology in the cloud but with a lower TCO."
Charlotte Dunlap, Senior Analyst, Enterprise Strategy Group

The Milford, MA-based analyst firm polled 544 IT decision makers at midsize organizations with 100 to 999 employees, and in a companion survey, polled 234 North American IT channel partners. More than one-third of the respondents said they're making some production use of SaaS offerings. Another 28% of participants said they aren't currently using hosted services but are likely to implement them in the next 24 months.

The increasing interest in SaaS is driving security vendors, particularly those in the secure messaging market, to offer on-demand services, said Charlotte Dunlap, information security senior analyst at Enterprise Strategy Group.

For example, antispyware company Webroot Software Inc. entered the SaaS market with its acquisition late last year of a UK-based email security provider, Email Systems. Google bought secure messaging provider Postini Inc. about a year ago, and Proofpoint Inc. offers a hosted service as a deployment option for its secure messaging technology. In June, Proofpoint acquired Fortiva Inc., a provider of on-demand email archival services.

The trend is a result of a lack of internal expertise -- especially among small and midsize businesses (SMBs) -- and expenses associated with setting up and managing messaging systems in-house, Dunlap said. While SMBs generally have been the target market for hosted secure messaging services, vendors are moving up market and finding interest among cost-sensitive enterprises, she said.

"This is attractive to them because they get the same best-of-breed technology in the cloud but with a lower TCO," Dunlap said.

The Enterprise Strategy Group survey follows a report issued by Gartner Inc. last month that predicted the demand for hosted services will jump over the next five years. The research firm said cloud-based services this year account for 20% of revenue in the messaging security market, such as antimalware and antispam services for email and instant messaging, but will jump to 60% by 2013.

The SaaS model is also gaining traction in the Web security space with companies like ScanSafe Ltd., AT&T and MessageLabs Inc. offering hosted alternatives to the appliance model. Zscaler Inc. and Purewire Inc. are new entries into that market.

Other security companies offering on-demand services include vulnerability assessment provider Qualys Inc. and application security testing firm Veracode Inc. In June, Trend Micro Inc. announced Smart Protection Network, which combines cloud-based technologies with a lightweight client for malware protection.

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