The enterprise software-as-a-service (SaaS) market is now generating US$20 billion in quarterly revenues, creating growth rates in excess of 32 per cent per year.
“There is a fascinating battle for SaaS playing out, with traditional enterprise software vendors slugging it out with born-in-the-cloud vendors like Workday, Zendesk, ServiceNow and Dropbox,” said John Dinsdale, a chief analyst at Synergy Research Group.
“The latter group are helping to rapidly transform the market, but the more traditional players like Microsoft, SAP, Oracle and IBM still have a huge base of on-premise software customers that they can convert to a SaaS-based consumption model.
“Meanwhile Cisco and Google too are making ever-bigger inroads into the SaaS market, via Cisco’s collaboration apps and software vendor acquisitions and Google’s G Suite.”
According to second quarter data from Synergy Research Group, Microsoft has a worldwide market share of over 17 per cent, becoming the leading SaaS vendor “by some distance”.
Redmond surpassed Salesforce nine quarters’ ago.
“Thanks primarily to its leadership in the high-growth collaboration segment, Microsoft's annual revenue growth is running at 45 per cent, far surpassing overall market growth,” Dinsdale explained.
Meanwhile, Salesforce remains the “dominant player” in CRM, but this segment is relatively low growth compared to other SaaS segments, enabling Microsoft to pull ahead in the overall SaaS market.
According to findings, the two leaders are followed by Adobe, Oracle and SAP, with Oracle achieving the highest growth rate among these three.
“In aggregate these top five SaaS vendors now account for just over half of the market,” Dinsdale added.
Delving deeper, the next ten vendors account for another 26 per cent of the market. Among these ten, the vendors with the highest growth rates are ServiceNow, Google, ADP and Workday.
“It’s notable that the market remains quite fragmented, with different vendors leading each of the main market segments,” Dinsdale observed.
For Dinsdale, “in many ways”, the enterprise SaaS market is now mature but still accounts for less than 15 per cent of total enterprise software spending.
Therefore, Dinsdale said this remains small compared to on-premise software, meaning that SaaS growth will remain buoyant for many years to come.
“While SaaS growth rate isn’t as high as IaaS and PaaS, the SaaS market is substantially bigger and it will remain so for the foreseeable future,” Dinsdale added. “Synergy forecasts strong growth across all SaaS segments and all geographic regions.”