SaaS spending reaches $100bn annual run rate

04 July 2019 | Natalie Bannerman

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The first quarter of the Software-as-a-Service (SaaS) market generated over $23 billion and is set to reach $100 billion annual run rate in its current quarter, according to figures from Synergy Research Group.

The market continues to grow at a rate of 30% a year and leading in that space is Microsoft, which currently holds a global market share of 17%. This status continues to be enhanced thanks in part to its dominance in the high-growth collaboration segment.

“The SaaS vendor landscape essentially breaks out into three camps – traditional enterprise software vendors, relatively new born-in-the-cloud players and large IT vendors that are looking to expand more into software markets,” said John Dinsdale, a chief analyst at Synergy Research Group. “In the first camp you have companies like Microsoft, SAP, Oracle and IBM that have a huge base of on premise software customers that they can convert to a SaaS-based consumption model.”

Microsoft’s growth rate is somewhat diminishing due to the large scale it has achieved, over the last four quarters it has averaged 34% comfortably higher than the overall market growth rate. Saleforce comes in second in the overall enterprise SaaS market due to it being the dominant player in CRM. Both leaders are followed by Adobe, SAP and Oracle, with SAP achieving the highest growth rate of the three.

In total, these top five SaaS vendors account for just over half of the total market. The next ten vendors now account for an additional 26% of the market. Of these ten, Google, ServiceNow and Workday have achieved the highest growth rate.

“Born-in-the-cloud vendors include Workday, Zendesk, ServiceNow, Atlassian and Splunk, who tend to have much higher growth rates,” continued Dinsdale. “Meanwhile Google and Cisco are making an impact in the SaaS market, via Google’s G Suite and Cisco’s collaboration apps and multiple software vendor acquisitions. 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.”

Though mature, the enterprise SaaS market now accounts for barely more than 20% of total enterprise software spending and therefore remains small compared to on-premise software, meaning that SaaS growth will remain buoyant for many years to come, noted Synergy Research Group. The SaaS market is substantially bigger than the likes of IaaS and PaaS, and it will remain so until 2023. Synergy predicts strong growth across all SaaS segments and all geographic regions.