By Raju Chellam

IF you thought cloud-based services are only confined to mundane applications such as e-mail and sales and customer management, think again.

Even core functions like production scheduling, order processing, integrated accounting, materials and portfolio management are rapidly moving to the cloud for deliveries via a SaaS (Software as a Service) model.

That view comes from two of the biggest research firms, Gartner Inc and International Data Corp (IDC).

In its latest report, Gartner says worldwide SaaS revenue within the enterprise application software market will exceed US$8.5 billion this year, up 14.1 per cent over 2009 revenues of US$7.5 billion.

And IDC says the enterprise applications software market in the Asia-Pacific region outside of Japan (APEJ) will grow by a robust 15.4 per cent in 2010.

As for Singapore, the Infocomm Development Authority of Singapore (IDA) says the city-state's cloud services market would be worth US$42 million this year and US$177 million by 2014, based on IDC's estimates.

'Beyond 2012, Saugatuck (a US-based market strategy consulting company) has predicted that less than 40 per cent of business software would be sold under the traditional licensing scheme,' IDA's chief executive Ronnie Tay noted in his speech at CloudAsia in May.

'With these projections, industry analysts such as IDC and Gartner have identified cloud computing as a disruptive technology over the next three to five years.'

Enterprise application software is defined as those that perform business functions such as order processing, procurement, production scheduling, customer information management, accounting, etc.

These are typically hosted on secure corporate servers because of the sensitivity of information.

A slew of vendors offer enterprise application software, including IBM, Fujitsu, Oracle, SAP, Microsoft, HP, Red Hat, Adobe and Computer Associates.

'Tighter capital budgets are demanding leaner alternatives in organisations worldwide,' said Sharon Mertz, a Gartner research director.

'The popularity of SaaS has increased significantly within the past five years. Initial concerns about security, response time and service availability have diminished for many organisations.'

Moreover, SaaS business and computing models have matured and adoption is becoming more widespread.

The industry buzz surrounding SaaS and other off-premises models has shifted to cloud computing, of which SaaS is only one variation.

'We estimate that 75 per cent of the current SaaS delivery revenue could be considered as a cloud service,' Ms Mertz said.

'This could exceed 90 per cent by 2014 as the SaaS model matures and converges with cloud services models.'

Research house IDC says the recent global economic crisis has brought about a transformation in application adoption and delivery models, as organisations look at ways to lower costs.

'Cloud computing will be a key focus area in 2010 in the Asia-Pacific region,' said IDC's regional research manager of enterprise application software, Praveen Sengar.

Countries like Singapore, Indonesia, Thailand and Malaysia will see a strong recovery in enterprise application software uptake this year. The largest markets in the region are Australia, India and China.

'Manufacturing was the largest adopter of enterprise applications, followed by banking, financial services and telecoms, as well as niche verticals like mining, food and beverage,' Mr Sengar said. 'The contribution from the government sector will also increase as a result of e-governance initiatives.'

As for applications, IDC says basic ERM (enterprise resource management) modules like procurement, financial accounting, and enterprise asset management are in demand.

In the CRM (customer relationship management) space, modules like sales and customer services are seeing traction due to pressure on customer retention and sales.

And in the SCM (supply chain management) market, a recovery is expected in APEJ in 2010.

This article was first published in The Business Times.