Worldwide software as a service (SaaS) sales will reach $9bn this year, up 15.7% from 2009, according to analyst firm Gartner.
The market is projected for stronger growth in 2011, with sales totalling $10.7bn, a 16.2% increase from this year.
Organisations are now less concerned about the perceived security risks of SaaS, as business models have matured and adoption become more widespread, said Sharon Mertz, research director at Gartner.
"There is increasing involvement from executives in purchasing decisions, as well as greater participation from IT in the purchase process due to larger deals, the expanding footprint of SaaS in the organisation and a higher requirement for integration as SaaS becomes incorporated in the enterprise business process," said Mertz.
Gartner estimates that 75% of the current SaaS delivery revenue could be considered as a cloud service, and that could extend to 90% by 2014.
Because SaaS and cloud are hot concepts in the market, suppliers are rebranding their hosting or application management or application outsourcing capabilities as SaaS, said the company.
But suppliers run the risk of confusing and antagonising buyers if they persist in this approach, it added. "Hosting and application management are not synonymous with SaaS, nor do they necessarily comply with the definition of cloud computing," it said.
Content, communications and collaboration (CCC) leads the enterprise SaaS market worldwide with sales set to reach $2.9bn in 2010, followed by customer relationship management revenue of $2.6bn.