SaaS is expected to become the new industry standard

Software as a Service (SaaS) has known a spectacular rise to prominence. With the numerous advantages that SaaS brings to the table, more development is expected to boost its growth. Experts predict that it might soon become an industry standard.


The growth of the SaaS over the recent months is quite impressive

Software as a Service – abbreviated as SaaS – has become a capital aspect of business. This particular strain of the global software distribution has accordingly demonstrated a growth of 31% during the past few years, eventually grossing to an enterprise worth US$ 15 billion of revenue in the second quarter of 2017. Collaboration has been established as the highest grossing sector within the same period, according to Synergy Research.

Tech giant Microsoft would presently be at the top of the list of the most successful SaaS providers, while Salesforce, which had to forfeit its leading position in 2016, took place as the runner-up of the competition. A big part of Bill Gates’ multinational successfully overtaking its opponents was the purchase of LinkedIn, which has proven to significantly bolster the company’s SaaS services and operations. “Across its whole business, Microsoft has a good cloud-oriented vision in place and is executing strongly,” remarked John Dinsdale, Chief Analyst at Synergy Research.

While Salesforce came second in terms of revenue, followed by Adobe, Oracle, and SAP respectively, Oracle, Microsoft, and Google were the SaaS providers to experience the highest overall growth.

Synergy’s rankings took in consideration programs like Office 365, Yammer, LinkedIn, and Skype in their evaluation. However, most people would have excluded those in evaluating the SaaS market share. A traditional approach to enterprise software rankings would likely pin Salesforce to the first position, followed by Oracle, SAP, Microsoft, ADP, Workday, and Service Now.

Each software provider tends to focus on a specific aspect of SaaS

Even though SaaS is a microcosm of the larger sector that is software distribution, it is indeed complex enough to comprise a variety of sub-categories. Different SaaS providers tend to focus on different SaaS categories, therefore, each provider leads the market in its own way.

  • Microsoft, Cisco and Google are first in the collaboration market.
  • Salesforce, Microsoft and Zendesk are ahead of the race in the customer relationship management market.
  • Oracle, SAP and Infor lead the enterprise resource planning market.
  • ADP, Workday, and Ultimate Software lead the human resources/human capital management market.
  • Adobe, Intuit and Microsoft lead in other enterprise apps.
  • IBM, Oracle and SAP head the system infrastructure SaaS.

“While it’s a fragmented market, we’ll continue to see new market entrants offering innovations,” noted Rebecca Wettemann, research director at Nucleus Research.

SaaS is a brilliant alternative to on-premises software

Given the emerging prominence of the SaaS sector, it would be wise to pay attention to what this particular field of IT entails exactly. Software as a Service, as the name implies, revolves around the concept of businesses running their operations via software that a third party – the software provider – makes available to them through the internet. SaaS is actually one of the three main categories of cloud computing, the other two being Infrastructure as a Service – commonly referred to as IaaS – and Platform as a Service – commonly referred to as PaaS.

SaaS comes in as an alternative to on-premises software – also known as “shrinkwrap”. When using the latter, individuals or organisations are required to have the appropriate hardware on site. With SaaS, which is technically “off-premises software”, users do not need to posses all of the infrastructure necessary to run the software, as the software provider will run everything from its own hardware. This eliminates hardware costs for businesses or individuals, as well as software licensing, installation, and support. Furthermore, rather than purchasing SaaS-based program suites, those subscribed to this particular type of service usually pay through a pay-as-you-go model. If ever an organisation wants to terminate its subscription, it can therefore do so knowing that the losses will be minimised, given the low degree of initial investment that SaaS implies.

Other advantages of SaaS

  • Cloud services such as SaaS come with great flexibility and scalability. This allows potential customers to choose only the options and features that they need out of thousands, adapting them to their idiosyncratic business needs
  • .The need for an in-house IT-staff is minimised. SaaS providers often run automatic updates and patch maintenance themselves.
  • Since SaaS applications are delivered over the Internet, users can access them from any Internet-enabled device and location.

The growth of SaaS has only just started

Given the numerous advantages of SaaS, the field is predicted to grow even more in the near future, according to Synergy Research. “The SaaS market will double in size over the next three years, showing strong growth across all segments and all geographic regions,” the firm predicted.

Traditional enterprise providers such as Microsoft, IBM, SAP, and Oracle have a huge base of on-premises customers that they are pushing aggressively to convert to SaaS. Meanwhile, cloud-based software vendors like Zendesk, Workday, and ServiceNow also are gearing enterprise spending towards SaaS.

Microsoft will remain a key player in the expansion of SaaS, suggested John Dinsdale of Synergy Research. “Given the huge base of on-premises customers Microsoft has under its belt, it can hardly fail to continue aggressively growing its SaaS business years into the future as it moves those customers onto a subscription business model,” he said.

Many software vendors are buying into SaaS

More and more software vendors are converging towards SaaS to diversify their revenue. Enterprise spending on hosting and cloud services is predicted to overtake overall spending on IT, according to 451 Research. Therefore, joining the race implies running towards a very lucrative finish line for the many software providers scattered around the globe.

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