The enterprise software-as-a-service (SaaS) market has grown by more than 30 percent in the past year. According to analyst firm Synergy Research Group, the market is heading for an annual run rate of 100 billion dollars in the current quarter.

Synergy‘s data shows that SaaS companies collectively achieved $23 billion in sales in the quarter.

SaaS is a software distribution model, in which a provider hosts applications and makes them available to customers via the Internet. In addition to infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS), it is one of the three main categories of cloud computing. Today, the most basic business technologies include SaaS applications, including email, sales management and customer relationship management. In addition, numerous SaaS applications are also available for financial management, personnel management, invoicing and collaboration.

Microsoft frontrunner

Microsoft has the largest SaaS market share. Last year, the software giant showed sales growth of 34 percent, which is higher than the overall market growth. Salesforce takes second place thanks to the dominance of the CRM software segment. However, Synergy believes that a relatively low growth rate in this specific sector will soon put the CRM provider in second place. This given the existence of more common SaaS applications in other parts of the market.

SaaS_Q119

The analyst firm therefore believes that parties such as Adobe, SAP and Oracle will pose a threat to the market share that Salesforce is claiming for the time being. These companies are showing much faster growth rates than the CRM specialist.

This is how SAP grows fastest, but Adobe seems to be the most promising competitor, as it now controls nearly 10 percent of the entire SaaS market. The popularity of Adobe’s creative cloud software would be the reason for this. In addition, other parties such as Google, ServiceNow and Workday are now also showing rapid growth in the SaaS market. It is noteworthy that the market remains relatively fragmented with several suppliers, each of which manages the main market segments, Synergy said.

On-premises

Although the SaaS market is now mature, it still accounts for less than 20 percent of total enterprise software spending. Companies still invest the most in on-premises software. Something that is a positive fact for SaaS players, given the large number of potential customers. The SaaS market is still considerably larger than the IaaS and PaaS markets and will remain so until at least 2023.

Three camps

According to John Dinsdale, chief analyst at Synergy, the main players in the SaaS market can be divided into three camps. The traditional enterprise software companies, such as Microsoft, Oracle and IBM. Secondly, the smaller born-in-the-cloud companies, such as Workday, ServiceNow, Atlassian and Splunk. Larger information technology companies that want to expand into software services, such as Google and Cisco, form the third camp.

Consolidation will take place, of which the upcoming Salesforce acquisition of Tableau Software is a good example. There will be many more opportunities for new market entrants to have an impact, according to Dinsdale.

Related: What Tableau and Salesforce can do for each other

This news article was automatically translated from Dutch to give Techzine.eu a head start. All news articles after September 1, 2019 are written in native English and NOT translated. All our background stories are written in native English as well. For more information read our launch article.