Many organisations see these models as a way to reduce cost of ownership for applications and IT infrastructure, according to Srini Pallia, global head of business technology services at Wipro.
"Buying, installing, customising and maintaining applications is expensive. It is also a distraction. Businesses want to spend time on core business rather than back office IT operations," he said.
Increased speed to market for new products and services is another important driver for adoption of Saas and cloud computing.
"These models enable business to get what it needs to support innovation quickly without huge capital investments in additional infrastructure," he said.
If this trend continues to gather momentum, Pallia predicts it will have a massive impact on the IT services industry in the next three to five years.
Only those service providers that embrace this trend and evolve their business models accordingly to meet market demands will remain competitive, he said.
However, not all businesses are expected to switch to the new models immediately because unwillingness to give up control, security concerns, and fear of the unknown.
Many businesses are only adopting non-critical applications using Saas to gain experience in using the approach while limiting risk. Pallia said many businesses are expected to adopt a hybrid approach rather than making a complete switch to Saas and cloud computing before the business models have matured.