The success of on-demand, Software as a Service, or Cloud computing has raised expectations beyond the point where enterprises and vendors can deliver, a new study concludes.

A new study from Saugatuck Technology states that users want SaaS throughout the enterprise, whether their enterprises are ready for it or not. And, by extension, SaaS is spreading throughout the enterprise, whether the vendors - or their offerings - are ready to support and deliver what users want.

The study, based on interviews with 400 executives and 30 SaaS solution provider and independent software vendors, finds that while users are increasingly demanding and expecting SaaS versions of everything from email to ERP, they often don’t understand the technological and organizational resource constraints to enterprise-wide SaaS.

Blame the vendors, who are scrambling to catch up with demand coming from within enterprises, according to Mike West, Saugatuck research vide president and leader of the SaaS study. “Unfortunately, not enough SaaS providers see or understand the increasing enterprise scope of user demands and desires. Over time they will face some real challenges when it comes to maintaining high user satisfaction and, ultimately, high rates of renewal or expansion of their services.”

Saugatuck identified four waves of SaaS evolution. While earlier-generation “Wave I” offerings continue to flourish, the broader market has moved on to “Wave II” solutions that integrate with on-premise data and processes.

Some providers are beginning to address key “Wave III” requirements, which support inter- and intra-company collaboration and personalized workflows.

Longer-term, “Wave IV” threatens to sweep IT and business together and forward beyond user and vendor experience. Continuous growth and innovation are core competitive requirements in most SaaS markets -addressing an ever-expanding array of customer and partner desires and requirements for interfaces and function.

The on-demand, cloud model of computing is poised to sweep enterprises — even those using traditional ons-ite software, Saugatuck predicts. With traditional on-premise license revenues stalling, ISVs will adopt SaaS strategies en masse, led by either internal development initiatives, acquisition of synergistic SaaS assets or via virtualization.

But there is no guarantee that many ISVs can and will make successful transitions to SaaS, Saugatuck adds. When asked to identify who the “SaaS Master Brands” of the future are likely to be, 51 percent of users chose either pure-play SaaS solution providers or said that “it was just too early to tell.”

As an enabler of Cloud-based software development, deployment, integration, and management, platform-as-a-service (PaaS) will significantly improve the enterprise-ready capabilities of most SaaS offerings. PaaS therefore becomes a key enabler of enterprise-ready SaaS, and of SaaS-ready enterprises.

Saugatuck predicts that “Cloud Computing” will evolve into “Cloud Business” — a natural progression of SaaS, the IT utility concept, and business process outsourcing and transformation.