SaaS revenues hit $20 billion last quarter as Microsoft extends market lead

Salesforce recorded the slowest growth among its rivals despite dominating CRM market

Microsoft extended its lead in the software-as-a-service (SaaS) market during the last quarter - as all companies' collective revenues reached $20 billion.

The Azure developer's annual growth hit 45% during the last quarter, the highest among its rivals, while the firm boasted an overall market share of 17%. The $20 billion in quarterly revenues generated across all software providers, meanwhile, has grown by 32%, according to Synergy Research Group.

Although Salesforce, which saw the second-largest market share, remains the most dominant player for CRM products - this segment of the market showed relatively low growth compared with other SaaS segments.

Oracle, which has little more than 5% market share, recorded the second-largest increase in revenues during the last quarter after Microsoft, with 43%, followed by SAP, and Adobe. Salesforce showed the slowest growth among the major players, at 25%.

The remainder of the market, comprising a host of firms including Cisco, Google, IBM, ServiceNow and Workday among others, grew by 28% year-on-year.

The top five companies now enjoy just over half of the market share, with Synergy finding it was significant that the market remains fragmented, with different companies leading each of the main segments; collaboration, CRM, ERP and HCM.

"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," said John Dinsdale, a chief analyst with Synergy.

"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."

Synergy's analysts found that while the market is "now mature", SaaS still accounts for less than 15% of total corporate software spending - relatively minor when compared with on-premise software spending.

They suggested, therefore, overall SaaS revenue growth - while slow compared with the infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) markets - will remain strong, with all segments forecast to grow in the next five years.

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