Microsoft, Salesforce Dominating SaaS Market, Report Finds

Scott Ferguson
3/10/2017

The software-as-a-service (SaaS) market is more mature than other cloud computing services, but it still grew in the fourth quarter of 2016, pulling in $13 billion in global revenue, according to a new report from Synergy Research Group.

While Salesforce has helped define the SaaS market for years with its CRM offerings, it's actually Microsoft that is now dominating the market, with its own combination of collaboration, CRM and enterprise application software, such as Office 365, the March 9 report found.

Other top players in the SaaS market include SAP, Adobe, ADP, IBM, Workday, Intuit and Cisco.

Oracle and Google showed the most growth during the quarter, with Google benefiting from its G Suite apps offering, and the company spent a good deal of time at its Cloud Next '17 conference this week talking up improvements to its suite. (See Google Takes Fight to Amazon, Microsoft & Cisco.)

Overall, the global SaaS market grew 32% from the fourth quarter of 2015 to the fourth quarter of 2016, Synergy found. While that growth is less than the infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS), the report predicts SaaS offerings will double in the next three years. (See Public Cloud Spending Will Hit $122B in 2017 – Report.)

One significant reason for this growth is that businesses of all sizes are no longer in the market for on-premises software and want to buy the applications they need based on subscription. For years, Microsoft and Oracle dominated the enterprise app market with their offerings, but more nimble players such as Salesforce and Workday changed the game, and older software players have been forced to adjust. (See Microsoft, Oracle Layoffs Loom as Companies Pursue Cloud Plans.)

"Traditional enterprise software vendors like SAP, Oracle and IBM are all pushing to convert their huge base of on-premise software customers to a SaaS subscription relationship," John Dinsdale, chief analyst and research director at Synergy, wrote in the report. "Meanwhile relatively new cloud-based vendors like Workday and Zendesk are aggressively targeting the enterprise market and industry giants Microsoft and Google are on a charge to grow their subscriber bases, especially in the collaboration market.

Of the various SaaS offerings in the market, enterprise resource planning (ERP) grew the most during the quarter, about 40% year-over-year, according to the report. That part of the market is dominated by SAP, Oracle and Infor.

Collaboration grew a little more than 30% year-over-year, with Microsoft, Cisco and Google as the top players. CRM grew at a more modest 20% rate, and Salesforce, Microsoft and Zendesk ranked as the top vendors.

— Scott Ferguson, Editor, Enterprise Cloud. Follow him on Twitter @sferguson_LR.


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kq4ym
kq4ym
3/20/2017 | 10:46:17 AM
Re: Microsoft
It does seem that Microsoft and Google will be interesting competitors to watch over the next few years. As "Microsoft and Google are on a charge to grow their subscriber bases, especially in the collaboration market," it will be a challenge for the two companies with past differning business philosophies to move quickly forward in this area of fast moving players.
Joe Stanganelli
Joe Stanganelli
3/15/2017 | 1:52:49 PM
Re: Microsoft
Historically, I think one thing that Microsoft understands is that it fundamentally exists to make money.  (True of most large enterprises -- but, then, a surprising number of enterprises lose sight of this simple fact.)  It has historically been flexible by changing things up with the technology solutions it offers and how it does business, which has allowed it to maintain dominance.  Additionally, similar to, say, Apple, the compatibility inherent to its wide array of offerings allow it a leg up when it enters a new market.
Joe Stanganelli
Joe Stanganelli
3/15/2017 | 1:49:10 PM
Converting to SaaS
I'm not convinced there's a lot to be gained, necessarily/inherently, by straight-up converting on-prem customers to SaaS.  It depends on those particular customers, their spends, and their OPEX/CAPEX needs and budgets.  For some, it will make sense for both customer and vendor to move to a SaaS subscription model.  Where the customer's CAPEX is large and the on-prem entrenchment substantial, however, keeping things on-prem may make more sense for the time being.
maryam@impact
[email protected]
3/15/2017 | 12:53:06 PM
Re: Microsoft
 

The subscription model makes more sense for many companies because it provides a long-term revenue flow and not an end date. It also eliminates the issue with supporting old software to a large extent and combats some of the interest in open source and other free software solutions for businesses. That said, businesses may still have an issue with the long term subscription fees if they rise or start to encompass high support fees. One of the things I do like about my new Microsft subscription is they provide support included in the past the fees were egregious.Bundling makes financial sense for many.
Scott_Ferguson
Scott_Ferguson
3/15/2017 | 8:59:31 AM
Re: Microsoft
@danielcawrey: You're right in the way that Microsoft has managed to enter into a field that is basically the opposite model of how the company had done business up to that point. The one thing about the SaaS market is that it's very fluid, unlike IaaS which is dominated by far by AWS. Look for a lot of changes in the SaaS market over the next three or so years. 
danielcawrey
danielcawrey
3/14/2017 | 6:31:03 PM
Microsoft
In particular I would say the biggest shift has been in how Microsoft has moved over to a subscription model. Even with Office now all the licensing is a subscription - something that is very popular when it comes to SaaS. 
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