UPDATED 21:31 EDT / JUNE 27 2019


Software-as-a-service spending poised to hit $100B annually

Analyst firm Synergy Research Group today provided an update on the state of the enterprise software-as-a-service market, saying that it’s on track to hit a $100 billion annual run rate in the current quarter.

Synergy’s data shows the market grew by more than 30% in the last year, driving more than $23 billion in revenue for the companies involved.

Software as a service is a software distribution model in which a provider hosts applications and makes them available to customers over the internet. SaaS is considered to be one of the three main categories of cloud computing, alongside infrastructure-as-a-service and platform-as-a-service. SaaS applications exist for all of the most fundamental business technologies, including email, sales management, customer relationship management, financial management, human resource management, billing and collaboration.

In terms of market share, Microsoft Corp. leads the way, seeing revenue growth of 34%, which is higher than the overall market growth rate. Salesforce.com Inc. came in second thanks to its dominance of the CRM software segment, though Synergy said its position could be threatened in future by “relatively low growth” in that sector compared with other parts of the SaaS market.

Three companies that are threatening to overhaul Salesforce in terms of SaaS revenue include Adobe Inc., SAP SE and Oracle Corp., which all saw much faster growth rates. Of those, SAP grew the fastest, but Adobe seems to be the most promising contender since it now commands almost 10% of the entire SaaS market thanks to the popularity of its creative cloud software. However, the likes of Google LLC, ServiceNow Inc. and Workday Inc. grew faster still and are also looking to shake things up.

“It’s notable that the market remains quite fragmented, with different vendors leading each of the main market segments,” Synergy said.

Synergy described the software-as-a-service as “mature,” but despite this it still surprisingly accounts for less than 20% of overall enterprise software spending. Most of the money still goes on on-premises software, but that’s good news for SaaS players as it means the market will likely remain “buoyant” for many years to come, Synergy said. The SaaS market is also substantially larger than the other main cloud markets – IaaS and PaaS – and will remain so until 2023 at least, it said.

John Dinsdale, chief analyst at Synergy, said the main players in the SaaS market can be divided into three camps. These include the traditional enterprise software firms such as Microsoft, Oracle and IBM Corp., smaller “born-in-the-cloud” companies such as Workday, ServiceNow, Atlassian Corp. and Splunk Inc., and also larger information technology companies such as Google and Cisco Systems Inc. that are looking to expand into software services.

“There will be consolidation, with the impending Salesforce acquisition of Tableau Software being a prime example, but there will remain many opportunities for new market entrants to make an impact,” Dinsdale said.

Image: Synergy Research Group

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