Adoption of hosted applications jumped last year among large companies, but many CIOs and IT managers will not consider these software-as-a-service (SAAS) products because of concerns about security, cost and integration.

In a 2007 survey of just over 1,000 IT decision makers, 16 percent told Forrester Research that their companies were either already using or piloting SAAS products, a 33 percent increase from 2006.

Those who said they were either interested in or planning to pilot hosted applications remained the same at 46 percent, while those who aren't interested dropped from 41 percent to 37 percent, Forrester said in the report.

Respondents who were favourable towards SAAS products cited shorter implementation, lower up-front costs and pay-as-you-go pricing as reasons, wrote Liz Herbert, the report's author.

However, interest in SAAS wasn't consistent across application categories. Popular applications included those for human resources, collaboration and customer relationship management. SAAS was less used for enterprise resource planning, supply chain management and web 2.0 tools like wikis, blogs and RSS.

Respondents who weren't considering SAAS products cited limitations in the ability for hosted applications to be integrated with software they have installed in-house and to be customised.

These IT executives also believed that hosted applications leased and paid for under a subscription model cost more in the long run than software bought and installed on the company's servers.

They also had various security concerns, including fear about having the software and data hosted in a third party's datacentre and concerns about application performance and availability.

Last week more than 1,100 users temporarily lost their connection to major US online backup service, Carbonite, just as the company completed work on a massive datacentre upgrade. In February, Amazon's S3 online storage service also experienced an outage.