Microsoft dominates Software as a Service

Microsoft may not have had much luck when it comes to smartphone sales, but as a software company, it has always been at the top. Now it has also moved to the top of the Software as a Service space. According to new Q2 data from Synergy Research Group, the worldwide SaaS market grew 33 percent year-on-year and has reached well over $11 billion in quarterly revenues. Synergy Research noted that Microsoft passed Salesforce to become the overall enterprise SaaS market leader, “though the market remains somewhat fragmented with each major segment featuring a different leader.”

Enterprise SaaS growth and market leaders, Q2 2016The segment that experienced the most rapid growth, albeit not the biggest segment, is the Enterprise Resource Planning (ERP), up 49 percent year-on-year. As for the largest segment, Collaboration, it grew by 37 percent. The Customer Relationship Management (CRM) market lagged behind at about 23 percent share. Microsoft, which offers collaboration tools, dominates its segment, while Salesforce still dominates the CRM segment despite having the smallest market share.

SaaS future looks bright

Microsoft is pushing the SaaS model hard. It recently announced a Windows 10 subscription model for the enterprise, following in the footsteps of already established Office 365 and Azure subscription models. Other leading SaaS providers include SAP, Oracle, Adobe, ADP, IBM, Workday, Intuit, and Cisco. Among the top 10 companies, Oracle achieved the highest growth rate followed by Microsoft. Synergy Research predicts the SaaS market will triple in size over the next five years, showing strong growth across all segments and all geographic regions. As for the consumer SaaS market, it is not expected to see as strong growth as the enterprise SaaS, but Microsoft is seen as a company that can also benefit from any growth in the consumer SaaS space.

“In SaaS a big battle is playing out between the traditional broad-based software vendors and companies that are focused on a specific application area or industry sector, many of which are entirely cloud based,” said John Dinsdale, a chief analyst and research director at Synergy Research Group. “It might be tempting to assume that the latter camp are leading the charge, but in fact the traditional software vendors are growing their SaaS revenues more rapidly, helped by their huge base of on-premise software customers that can be aggressively targeted for conversion to a SaaS consumption model.”

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