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'Fascinating' vendor cloud battle ongoing in healthy SaaS market

22 Aug 18

It hasn’t been around for long, but Synergy Research Group says the enterprise software-as-a-service (SaaS) can now be considered mature.

New Q2 data from the Synergy purports the enterprise SaaS market to be generating US$20 billion in quarterly revenue for software vendors. Furthermore, this figure is rapidly growing by 32 percent each year.

In terms of the market share, Microsoft has a stranglehold on the biggest piece of the pie with 17 percent after overtaking Salesforce nine quarters’ prior.

Synergy says Microsoft’s annual revenue growth is running at a whopping 45 percent, significantly more than the overall market growth. The research company puts this down to Microsoft’s advances in the high-growth collaboration segment.

Behind Microsoft and Salesforce are Adobe, Oracle, and SAP, with Oracle posting the strongest growth among these three. The top five vendors now account for just over half of the market.

Hot on the heels of the big five are ten more vendors that account for 26 percent of the total market, including the likes of ServiceNow, Google, ADP, and Workday. Synergy notes that the market continues to be quite fragmented with several different vendors leading each of the main market segments.

"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,” says Synergy Research Group chief analyst John Dinsdale.

“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.”

While Synergy did state the SaaS market now mature in many ways, there are still various factors that point to sustained growth in years to come – like the fact that SaaS still only accounts for less than 15 percent of total enterprise software spending and thus remains quite small when compared to on-premise software.

The IaaS and PaaS markets are both seeing more healthy growth than the SaaS market, but the latter is significantly larger Synergy asserts it will remain so for the foreseeable future with strong growth across all segments and geographic regions.