UPDATED 21:19 EST / SEPTEMBER 03 2017

CLOUD

Thanks to LinkedIn acquisition, Microsoft now leads enterprise software as a service

Microsoft Corp. has retained its clear lead in the enterprise software as a service market, its business bolstered by the acquisition of the networking site LinkedIn Corp. in late 2016.

Microsoft swooped to buy LinkedIn for $26 billion in June 2016 in what was one of the biggest tech acquisitions of that year. At the time, it was said Microsoft was interested in LinkedIn’s massive repository of business and employee data, which would be used to enrich SaaS offerings such as Office 365 and Dynamics 365.

One year later, and that gamble looks like it’s paying off. Synergy Research Group said in a report published Thursday that the enterprise SaaS market grew by 31 percent year-over-year in the second quarter, hitting almost $15 billion in quarterly revenues.

Microsoft came out on top of the list of providers in the space by some distance, extending its lead over Salesforce.com Inc., which it supplanted from first place last year. Salesforce was followed by Adobe Inc., Oracle Corp. and SAP SE rounding out the top five SaaS companies in terms of revenue. Other leaders include Google LLC, IBM Corp., Workday Inc. and ServiceNow Inc.

“Among the major SaaS vendors, those with the highest overall growth rates are Oracle, Microsoft and Google,” said John Dinsdale, chief analyst and research director at Synergy Research. He added that the SaaS market has now matured to some extent, even though it remains small when compared with the on-premises software market. As such, further growth can be expected for some time to come, the analyst noted.

Indeed, Dinsdale said the SaaS market is likely to double in size over the next three years, with strong growth expected across all segments and geographic regions. In the last quarter, the collaboration segment of the SaaS market saw the fastest growth, followed by customer relationship management and enterprise resource management.

“IaaS [infrastructure as a service] and PaaS [platform as a service] markets tend to get more attention and are indeed growing more rapidly, but the SaaS market is substantially bigger and will remain so for many years,” Dinsdale said.

Image: Synergy Research

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