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  1. Hardware
June 28, 2019

SaaS Spending to Hit $100B This Year: Still Just 20% of Enterprise Software Market

Top five SaaS vendors now account for over half of the total market

By CBR Staff Writer

New data from Synergy Research Group shows that in Q1 the enterprise SaaS market (Software-as-a-Service) generated over $23 billion of revenue for software vendors – yet remains less than a quarter of enterprise software spending.

The SaaS market will hit a $100 billion annual run rate (projected future revenue for the year, based on monthly revenue in the current quarter) this year.

The market continues to grow at almost 30 percent per year, with Microsoft continuing to dominate the market with a worldwide market share of 17 percent. Salesforce, Adobe, SAP and Oracle follow as the next four leading SaaS vendors.

SaaS Market Breaks into Three Camps

“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. Born-in-the-cloud vendors include Workday, Zendesk, ServiceNow, Atlassian and Splunk, who tend to have much higher growth rates.”

“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.”

He added: “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.”

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While Microsoft’s growth rate is diminishing due the massive scale it has achieved, over the last four quarters it has averaged 34 percent, comfortably higher than the overall market growth rate, the research house notes. Salesforce is the second ranked vendor in the overall enterprise SaaS market thanks to being the dominant player in CRM, though this segment has relatively low growth compared to other SaaS segments.

The two are followed by Adobe, SAP and Oracle, with SAP growing fastest.

The top five SaaS vendors now account for over half of the total market.

The next ten vendors account for another 26 percent of the market, Synergy said. Among the ten, those with the highest growth rates are Google, ServiceNow and Workday.

It added in a report published today: “While in many ways the enterprise SaaS market is now mature, it still accounts for barely more than 20 percent 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.”

While SaaS growth rate isn’t as high as IaaS and PaaS, the SaaS market is substantially bigger and it will remain so until 2023.”



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