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Microsoft dominates SaaS thanks to collaboration software

Microsoft’s software-as-a-service business is growing at 45% a year, well ahead of the rest of the market, reports Synergy Research Group

Microsoft continues to dominate the software-as-a-service (SaaS) market, ahead of Salesforce, according to research from analyst Synergy which shows that the software giant has a worldwide market share of more than 17%.

Synergy said Microsoft’s dominance of the large collaboration segment has helped it to distance itself further from the chasing pack of SaaS providers. “Thanks primarily to its leadership in the collaboration segment, Microsoft’s annual revenue growth is running at 45%, far surpassing overall market growth,” the analyst noted.

Along with Google, ServiceNow and Oracle, Microsoft is the fastest-growing SaaS provider. Synergy said Salesforce is the second-largest SaaS provider and remains the dominant player in customer relationship management (CRM), but this segment is relatively low growth compared to other SaaS segments, enabling Microsoft to pull ahead in the overall market.

The third-biggest SaaS provider is Adobe, followed by Oracle and SAP, Synergy reported.

The analyst forecast that collaboration, CRM, enterprise resource planning (ERP) and human capital management (HCM) will continue to grow strongly over the next five years.

John Dinsdale, a chief analyst at Synergy Research Group, said: “There is a fascinating battle for SaaS playing out, with traditional enterprise software vendors slugging it out with born-in-the-cloud vendors like Workday, Zendesk, ServiceNow and Dropbox.

“The latter group are helping to rapidly transform the market, but the more traditional players like Microsoft, SAP, Oracle and IBM still have a huge base of on-premise software customers that they can convert to a SaaS-based consumption model.

“Meanwhile, Cisco and Google too are making ever-bigger inroads into the SaaS market, via Cisco’s collaboration apps and software vendor acquisitions and Google’s G Suite.”

Read more about SaaS in the enterprise

Synergy’s research found that SaaS is far smaller than the overall enterprise IT market, accounting for less than 15% of total enterprise software spending. It therefore remains small compared to on-premise software, which means SaaS growth will remain buoyant for many years to come, Synergy reported.

Although the SaaS growth rate is not as high as infrastructure as a service (IaaS) and platform as a service (PaaS), the SaaS market is substantially bigger and will remain so for the foreseeable future, said Synergy. Quarterly SaaS spending is now $20bn and growing at 32% a year, it added.

Read more on Microsoft Windows software

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