Global SaaS Market 2014 – 2018 – Continues to drive growth in Cloud Computing Market

Global Software as Service market is expected US$53 billion by 2018, or 59 per cent of the enterprise public cloud computing market from the current 2013 revenues of US$23.2 billion, according to Juniper Research and also expects the overall enterprise cloud computing market to reach US$90.7 billion by 2018. According to Forrester Research, the total public cloud services market revenues were US$58 billion in 2013, is expected to grow to $72 billion in 2014 and expected to reach US$191 billion by 2020. Software as a Service (SaaS) solutions accounted for $36 billion in revenue in 2013. SaaS market has reached significant maturity levels and well established in several application categories like sales force automation, customer relationship management, human resource management, eProcurement and ePurchasing, replacement of existing licensed software. Cloud platforms, led by Amazon Web Services LLC, with revenues of $4.7 billion in 2013 but traditional IT partners IBM, HP and Microsoft are fast catching up with their own set of offerings and market is becoming highly competitive. The other two segments of cloud computing Platform as a Service (PaaS) and Infrastructure as a Service (IaaS) are also expected to continue growth. But these two segments face certain critical issues in terms of data security, compliance and portability. “Both PaaS and IaaS will experience significant growth over the forecast period as new applications, developed specifically for the cloud to harness workloads such as big data analysis, benefit from the PaaS ‘fast-track’ model,” Juniper says.

According to San Diego-based investment firm Software Equity Group, SaaS software revenues will contribute around 25% of the overall software market in the next five years. Research firm Gartner estimated that global spending on SaaS will reach $22.1 billion by 2015. Some software vendors are converting their software delivery and revenue models to SaaS, while others acquire SaaS companies to gain access to this market. SaaS offerings are predominantly based on subscription models where enterprise customers access the software in the cloud by paying monthly subscriptions which is totally different from the traditional software license and maintenance models where customers have to pay large upfront perpetual license fee. With the emergence and development of networking equipment, platforms and access devices like smartphones and handheld devices, SaaS based on subscription model is picking up and customers can easily access data and applications form anywhere, at any time, on any device. Despite this there are certain concerns for CIOs who are not totally adopting the SaaS model as there are security concerns, switching costs, regulatory concerns and also cloud outages and failures too. Adoption of cloud based models is further expected to grow in the next five years as the technologies mature and more applications and services are offered on the cloud. Companies too need to rethink their IT investment strategy as Cloud Computing offers a significant level of cost savings in terms of IT infrastructure investments.

Global SaaS Market growth will continue & drive software sales growth in 2013

Worldwide Software as a Service (SaaS) Market is expected to continue its growth in 2013 as more and more businesses are adopting SaaS and most of the Independent Software Vendors (ISV) including the big vendors like IBM, Oracle, SAP, Salesforce.com, etc. have increased their product offerings in the SaaS segment. There has also been a spate of acquisitions in the SaaS segment where ISVs acquired specialist small and medium SaaS vendors and product developers and integrated acquired software and product offerings into their core products. The SaaS software market will increase 25 percent in 2013 to $59 billion, a 25 percent increase. In 2014, the market is expected to total $75 billion, according to Forrester Research. Gartner predicts the size of the SaaS market will grow from $16 billion in 2012 to more than $21 billion in 2015. Mark Hurd, President of Oracle has said that cloud computing services will reach $72.5 billion over the next five years from 2010 levels of $21.5 billion and estimates that by 2014 around 14 million more jobs will be created due to cloud computing.

In June and July of 2012, Gartner conducted a survey of 556 organizations across 10 countries and within four regions (North and South America, Europe and Asia/Pacific) which highlighted 71 percent of organizations have been using SaaS for less than three years. According to the survey, investments in SaaS are expected to increase across all regions. Seventy-seven percent of respondents expected to increase spending on SaaS, while 17 percent plan to keep spending the same. More than 80 percent of respondents in Brazil and Asia/Pacific indicated more spending on SaaS applications over the next two years. The U.S. and European countries were not far behind with 73 percent of U.S. respondents and 71 percent of European respondents intending to increase spending on SaaS. Gartner Research vice president Charles Eschinger said despite the fact that adoption of on-demand deployment model by business organizations has begun more than a decade ago, but SaaS popularity has increased significantly within the past five years. This rise in adoption in the past few years is because the development of the SaaS technology and maturity of the SaaS business and computing models that led to diminishing of business concerns related to security, response time and service availability.

Gartner survey also highlighted that customer relationship management (CRM) and enterprise content management (ECM) as the applications most often being newly deployed. Supply chain management (SCM), Web conferencing, teaming platforms and social were the applications picked most as replacements for on-premises solutions. But the business decision to migrate to SaaS depends on business criticality of the application/solution along with other critical factors like geography, business agility, usage scenario and IT architecture and few organizations will completely migrate to SaaS but with a mix of SaaS and traditional on-premises application deployment models, according to Gartner’s Eschinger. Another fact is that integrating SaaS tools to existing IT infrastructure is both costly and complex and IT departments have to work closely with SaaS vendors in terms of planning and migration to SaaS platforms. But overall SaaS adoption by business organization even by large organizations will continue to rise and is one of the key revenue generators for Independent Software Vendors for the next few years.  

Global SaaS Market 2012 – Emerging Markets will drive growth till 2015

Software as a Service also known as on-demand software is a delivery model in which software and its associated data are hosted centrally and are accessed by users using a web browser. After more than a decade of use and vast improvements in the cloud computing technologies and many players like Amazon, Google, Saleforce.com, etc, major software vendors, developers and independent software vendors too invested significant resources both in terms of monetary, human and infrastructure to further develop the cloud computing. Initially IBM kick started the trend towards cloud computing with its On Demand computing initiative in 2003 and later in 2005 Amazon took the market forward with its cloud offerings like the Elastic Cloud 2 (EC2).  Even Indian IT Services Vendors and other small & medium players too are focused on cloud computing and particularly in Software as a Service offerings (SaaS). SaaS growth is an alternative to the on premises software and also Cloud-based licensing is different from traditional on-premises licensing and the market growth is only possible by cannibalizing the traditional software market. SaaS was expected to capture significant market share as its adoption benefits range from significant reduction in costs as buyers need not invest on the IT infrastructure on their premises, pay as you use model, easy to scale and upgrade, tighter IT budgets due to economic volatility in recent years and mobility i.e. access from anywhere and with any device.

According to Gartner, worldwide software-as-a-service (SaaS) revenue is expected to reach US$ 22.1 billion by 2015 as many companies are investing in cloud technology and is expected to grow healthily by 17.9% to reach USD 14.5 billion in 2012 from USD 12.3 billion in 2011. North America revenue is forecast to be US$ 9.1 bn in 2012 compared to US$ 7.8 bn in 2011, Western Europe revenue 2012 forecast US$ 3,2 bn compared to US$ 2.7 bn (2011), Eastern Europe (2012) US$ 169.4 million compared to US$ 135.5 million (2011), Asia Pacific (2012) US$ 934.1 mn compared to US$ 730.9 mn (2011), Japan (2012) US$ 495.2 mn compared to US$ 427 mn (2011) and Latin America (2012) US$ 419.7mn compared to  US$ 331.1 mn (2011). According to IDC, SaaS market revenue which includes cloud applications, application development and deployment, and system infrastructure software sales will rise to $53.6 billion by 2015 at a CAGR of about 26%. IDC also asserts that SaaS will grow faster than traditional software and will comprise 80% of the software delivered by new ISVs. By 2015, nearly $1 of every $6 spent on packaged software, and $1 of every $5 spent on applications, will be consumed via the SaaS model. According to Forrester, the public cloud market for SaaS is the biggest and fastest-growing of all of the cloud markets ($33 billion in 2012, growing to $78 billion by the end of 2015). According to market research firm Global Industry Analysts, the global SaaS market will reach $26.5 billion by 2015, as more companies will seek low-cost enterprise software solutions to accommodate limited IT budget growth, which could slow due to the global economic recession.

SaaS market growth is different in different geographies and compared to mature North America market that contributes 2/3^rd of the total SaaS market revenues is expected to grow by 16.7% and Western Europe the second best market expected to grow by 18.5% YoY, which is less when compared to 28% YoY growth for Asia Pacific excluding Japan, 27% growth for Latin America, 25% growth for Eastern Europe and Japan too is expected too see low YoY growth of 16% like in the other mature markets. Data highlights that SaaS market growth lies in the emerging markets as the countries in those markets are improving their IT infrastructure and looking to adopt SaaS technologies aggressively. Small and Medium Enterprises (SMBs) are driving the growth when compared to large enterprises that find it difficult to migrate to cloud computing from their existing on premise software and hardware systems as they have made significant investments in building these systems for years and due to other concerns like data security integrity, privacy, skilled man power, pricing and contracting issues, regulations, etc.  SaaS has become a common delivery model for most business applications, including accounting like expense management, financials, collaboration, customer relationship management (CRM), management information systems (MIS), enterprise resource planning (ERP), invoicing, human resource management (HRM), content management (CM) and service desk management.

Asia Pacific is high growth market for SaaS and this is driven by increased adoption in India, China driven by adoption of financial applications like accounting. ERP functions like Expense management and Employee Performance management, along with office suites, email and CRM sales are the other applications that are being deployed by companies in this region. Mature economic countries in this region like Australia, New Zealand, Hong Kong, Singapore, South Korea and Taiwan are driving SaaS adoption as they have good IT infrastructure that encourages increased adoption. Emerging countries in this region like Malaysia, Thailand, Indonesia, Philippines, and Vietnam where IT infrastructure is developing fast are also expected to increase SaaS adoption. Japan was affected by the 2011 earthquake and Tsunami but SaaS market is gaining traction as Japanese companies are looking at SaaS as a defense against future power outages and disasters but there are concerns in terms of security, costs, and integration. Despite Japan economic problems and tighter IT budgets the demand for SaaS solutions is increasing due to their lower implementation costs and faster deployment times. SMBs too are driving growth and according to AMI Partners, SMB focused market research firm, forecast that the SaaS market in Asia/Pacific (excluding Japan) will reach $1.5 billion by the end of 2012 and expects the market to more than double by 2015.

Expense management, financials, email and office suites are the business apps deployed through SaaS and Web conferencing is also highly used as most of the American companies have global operations situated across the world but the market is also facing problems in terms of limited flexibility of customization and limited integration to existing systems according to Gartner. Gartner analysts said in Western Europe, the most developed sub region, SaaS Market is rapidly increasing as North America-based SaaS vendors further penetrate the region and the number of local European SaaS vendors increases. In Eastern Europe and the Middle East and Africa, which are small and emerging markets overall, the potential opportunity for SaaS is more in the medium to long term due to ongoing infrastructure challenges that vendors need to overcome if they are to be successful in these regions. In Latin America, SaaS has been deployed in the areas of email, financial management (accounting), sales force automation and customer service, and expense management. While regional adoption will be positive, it is fully expected that Brazil and Mexico will drive a majority of adoption and revenue opportunities.

Global SaaS, PaaS, IaaS and BPaaS Market 2011 and Forecast

Cloud computing includes Software as a Service (SaaS), Platform as a Service (PaaS), Infrastructure as a Service (IaaS) and Business Process as a Service (BPaaS). SaaS is the highest level of the cloud and includes actual cloud applications. SaaS segment is the largest segment in the overall Cloud Computing Market. Customer relationship management (CRM), Content, communications and collaboration (CCC) market and Enterprise resource planning (ERP) revenue are the key sub segments respectively. North America, followed by Europe is the key markets for SaaS. Asia Pacific and Latin America are key growth markets too. Adoption is being driven by availability of on demand software, understanding of the model, increasing interest and pressure on IT managers to reduce costs. Data security concerns, outages, lack of understanding of the cloud and infrastructure, and integration with existing infrastructure are concerns. According to Gartner SaaS market is expected to reach $ 21.5 billion in 2015 from $12.1 billion in 2011. IDC estimates it to reach $ 40.5billion in 2014 from $ 21.8 billion in 2011 and Forrester estimates it to reach $78.4 billion from $21.2 billion in 2011. Google, Citrix, Salesforce.com, NetSuite are key players.

PaaS is the middle level and builds upon the IaaS layer and provides an application development platform for the cloud. Gartner says, PaaS products primarily supported application server capability, but the market has expanded to other middleware capabilities as a service, such as integration, process management, and portal and managed file transfers (MFTs). Gartner analysts said PaaS offerings are likely to expand the application integration and middleware (AIM) market by bringing in a new range of organizations that otherwise would have been packaged application and office software users. Vendors in this space include Windows Azure, Heroku and SalesForce’s Force.com. Salesforce.com has the most mature PaaS. According to Gartner PaaS market is expected to reach $ 1.8 billion in 2015 from $707.4 million in 2011. Forester estimates it to reach $9.8 billion in 2015 from $820 million in 2011.

IaaS is the lowest level of the cloud technology stack. It provides operating system support, storage and processing. Vendors in this sector include Google App Engine and of course Amazon’s (news,site) latest whipping boy AWS EC2. Infrastructure-as-a-service (IaaS) will shift from public clouds to virtual private clouds, Forrester Research projects. While adoption remains high, the size of the market will shrink and public cloud services will cost less in the future because the cost of inputs will continue to decline. According to Gartner IaaS market is expected to reach $ 22 billion in 2015 from $5.6 billion in 2011. IDC estimates it to reach $ 15 billion in 2014 from $ 3.4 billion in 2011 and Forrester estimates it to reach $78.4 billion from $21.2 billion in 2011.

BPaaS is even higher up than SaaS and it includes technology, people, process and smart analytics wrapped in a simple "pay-as-you-go" commercial model. It allows companies to minimize or eliminate substantial upfront costs.  BPO outsourcing providers such as India, China and Latin America will likely make a play in this area. Traditional BPO providers are setting up data centers to offer cloud computing services to their clients and Cloud computing inclusive of BPaaS provides a big opportunity for service providers. According to Gartner BPaaS market is expected to reach $ 133.5 billion in 2015 from $71.7 billion in 2011. Forester estimates it to reach $3 billion in 2015 from $530 million in 2011.