So how big is Saas in terms of revenue and business potential? Is it even worth pursuing?
Sam Law at The Damaged Pixel Blog mentioned this story from The Economist: http://www.economist.com/business/displaystory.cfm?story_id=10431816

Here’s a summary of what it says:

• Investors keep throwing money at SaaS companies, such as NetSuite, which saw a 37% rise in its IPO price on the first day of trading. This seems to be a hot market indeed.
• Skeptics always said that data privacy and reliability would never make this business model feasible; however, NetSuite, Salesforce.com and a myriad of others are proving them wrong.
• As an example Salesforce.com, the market leader, serves more than 38,000 firms and recently signed up its millionth paying user. According to Gartner, the market for web-based applications reached $5.1 billion in 2007 and will grow to $11.5 billion by 2011—by which time it will account for over one-quarter of software sold to companies.
• However it is still not very clear where the profits are to be made. NetSuite offers a variety of on demand applications, while Salesforce.com is the leader in on-demand CRM. Oracle, Microsoft, and SAP have also jumped on the bandwagon.
• Nevertheless, profits are minimal. NetSuite has never posted a profit, while Salesforce is barely profitable and has an astonishing price-to-earnings ratio of 660!
• Other worries that arise are also how each on demand company will compete and stay alive. Salesforce.com is offering a platform for on demand applications called Force.com, but as CEO Marc Benioff points out: thousands of applications have already been written for the platform, but it is too early to say whether the idea will work.

Here’s the fancy graph that shows the $billions that this industry is capable of producing:
So Gartner says that the on demand industry will grow from $5billion currently to around $12billion. Each sector seems to be predicted at growing at about the same rate. Collaboration seems to be the most wanted sector, followed by CRM.

Good read!