No matter which research paper you look at, one thing all of them agree on is that the global SaaS market is booming and will see continued growth for at least another three years. The drivers behind that growth vary depending on your perspective. New research from Siemer says that SaaS is being pushed by “smart computing” and the need for enterprises to push collaboration outside the firewall.
SaaS Globally 2013
Smart computing in this context, Siemer says, includes apps which provide direct access to data used in the enterprise decision making process which dovetail with SaaS offerings currently available from vendors. It also offers mobile workers direct remote access to work-enabling data.
The overlap happens, the report says, because the browser-based access model for SaaS applications is enabling easy, secure contact across the firewall with third-party users. In doing so, it provides business opportunities that wouldn’t be available with behind-the-firewall deployments.
Entitled Summer 2013 SaaS Industry Report from Siemer & Associates -- an investment company that provides advice on funding and raising funds for IT companies -- the 64-page report offers a view of the SaaS market from a financial perspective.
Though the report focuses on financial information, there are also considerable insights into the SaaS space, including an overview of what is happening in different geographies, and what kinds of services enterprises are looking for.
And while the report concludes that the SaaS market is booming and will register global growth of 16.8% between 2012 and the end of 2015, or from US$ 14.3bn in 2012 to US$ 16.7bn in 2013 to US$ 21.3bn in 2015, there are considerable regional differences.
SaaS Regional Growth Variations
Unsurprisingly, North America has the highest growth rate, not just because of its highly developed Internet infrastructure, but also because of the current positive tech growth forecast despite recent poor earnings figures.
Currently, North America accounts for 60.8% of world revenues, with SaaS combined revenues hitting US$ 9.1 billion at the end of last year, up from US$ 7.8 billion in 2011.
In the US, SaaS deployments are commonly used in email, expense management, financial and productivity suites, while web conferencing in North America has broader use than in any other region as a result of widely dispersed enterprise workforces.
The result is that the US will be the principal regional driver for SaaS in North America on the back of strong demand for mobile, cloud and smart technologies, and growth of 6.7% for the entire tech sector in the US in 2014.
There will be little, or no, growth in Europe in the immediate future, but this is because of general economic stagnation rather than a lack of interest in SaaS. In fact in recent weeks some of the major economies have started pointing to a weak, but notable, upturn so predictions here could well change.
Even still, the SaaS market continued to grow and was estimated to have been US$ 3.2 billion in Western Europe in 2012, up from US$ 2.7 billion in 2011. Eastern Europe is also beginning to show signs of growth with revenues of US$ 169.4 million last year, up from US$ 135.5 million
There are signs of high adoption rates in the more developed sub-regions of Europe -- Ireland, the Netherlands -- as a result of the entry of large US vendors into the region and a culturally open attitude to technology innovation. These countries also have a well-developed Internet infrastructure. In developing areas like the Middle East and Africa, SaaS is still a challenge as a result of poor infrastructure.
SaaS in the Asia/ Pacific region is worth US$ 1.4 billion up from US$ 1.2 billion in 2011, with Japan as the biggest player with an estimated US$ 495.2mm in 2012, up from $427.0mm in 2011. That said, the report notes adoption across the region is fragmented with a notable divide between Japan, Australia, New Zealand, Hong Kong, and Singapore and emerging markets like China and India.
Migrating to Mobile
There are a number of factors that are encouraging growth across the market, not least of which is the fact that currently 83% of companies either have, or expect, to adopt SaaS technologies in the immediate future.
Driving this is the fact that sales and marketing departments are developing strategies that are based around their sales force working across a number of channels that require the ability to communicate across the firewall.
Running in parallel to this is the development of PaaS (Platform-as-a-Service) and mobile technologies. With a growing reliance on smartphones and mobile workforces, and increasing use of mobile apps, SaaS is becoming an increasingly attractive proposition.
Mobile apps working off tables and smartphones require compatibility with a number of different systems, which cloud based services offer with greater agility, greater efficiency and greater ease of access.
The result, Siemer says, is that by 2015 mobile application development will exceed PC projects by 4 times, and that the adoption of tablets for enterprise projects will grow by 50% annually in the coming years.
Feeding into this is the development of Bring-Your-Own-Device (BYOD) strategies that will see more and more workers accessing important enterprise data from mobile devices. This year alone Smart Mobile Device (SMD) sales are expected to:
- Grow by 20.0%
- Generate 20.0% of IT sales
- Drive 57.0% of IT market growth
SaaS Applications in Demand
So what kind of applications are enterprises looking for? While there are many across the entire business spectrum, at the moment Siemer identifies three types in particular:
CRM SaaS is by far most requested application across enterprises worldwide. According to Seimer the global CRM market grew by 12.5% between 2011 and 2012, or from US$ 16 billion to US$ 18 billion. This is three times the average growth of other enterprise software categories.
Of all those CRM applications, 40% were sold as SaaS with the communications, media and IT services vendors the biggest spenders on CRM as a result of their growing need for call centers.
Siemer estimate that by next year, the number of mobile CRM applications available for download will have grown from 200 in 2012 to 1200, representing an increase of 500% in just two years. This trend will continue over the coming years so that by 2016 more than 50.0% of total CRM sales will be delivered as SaaS.
Enterprise Resource Planning SaaS
The SaaS Enterprise Resource Planning (ERP) market is dominated by SAP and Oracle, which command 25% and 13% of the market respectively, although there are other vendors operating in the space that will continue to make progress over the coming years.
By next year, ERP SaaS will have reached growth rates of 15.8% per year in an overall SaaS ERP market that will be worth an estimated US$ 32 billion by 2016. The push towards SaaS deployments in this space is driven by the high costs and considerable IT resources needed here for on-premises installations.
Human Resources Management SaaS
Human Resources Management (HRM) SaaS manages all areas of HR activity in a cloud-computing environment in a market that is worth US$ 10 billion at the moment and growing at a rate of between 18% and 22% every year. Adoption rates in the US market for SaaS deployments are as high as 92% with the European marketing trailing at 61 percent.
The market here is changing rapidly with Siemer identifying 30 major acquisitions in the space as IT giants like Oracle and SAP turn their attention towards the market.
Enterprises using an ERP with an HRM SaaS-based talent management approach outperform with as much as 48% greater sales per employee than those choosing a different solution.
These are only some of the main points in a wide ranging report that points to an IT space that is changing rapidly. It also points to the fact that there is still room for considerable growth as the SaaS delivery model is not as well developed in some areas as it might be.
CRM and human capital management, for example lend themselves to this kind of computing as they are rapidly scalable, up or down, and can adopt quickly to changing market conditions. Other areas, like product lifecycle management, where scalability is not really an issue and where workers are, in general these solutions are not a perfect fit. More on this as the market changes.