Synergy Research: Microsoft On Salesforce's Heels In White-Hot SaaS Market

Software-As-A-Horse-Race

While SaaS accounts for only 8 percent of all software sales, it's a market that grew by almost 40 percent in 2015, and should more than triple within five years, according to a forecast from Synergy Research Group.

The analyst just released a report looking at the horse race that's emerging among enterprise SaaS providers. (The consumer SaaS market is only a third of the size and is growing much slower.)

Microsoft is making the race for the front spot especially interesting as it chases down Salesforce.com.

"In many ways, SaaS is a more mature market than other cloud markets like IaaS or PaaS," John Dinsdale, Synergy's chief analyst and research director, said in the report.

While software delivered as a cloud service is still in an early phase of adoption, Dinsdale noted that each of the "big three traditional software vendors" -- Microsoft, Oracle and IBM -- is growing its SaaS revenue faster than the overall market, which could have major implications for how the market shapes out in the coming years.

Salesforce

The customer relationship management giant and cloud-software pioneer is the leading vendor of Software-as-a-Service, with almost 15 percent of the overall market.

But San Francisco-based Salesforce isn't growing nearly as fast as some of its rivals, with only 21 percent expansion in 2015. While not shabby, that growth is nowhere near the explosive numbers being put up by Microsoft, SAP and IBM, according to Synergy Research.

Salesforce's market position is rooted in the strength of its flagship products, like Sales Cloud and Service Cloud. But the company continues to extend its portfolio with new products like Health Cloud and Financial Services Cloud, hoping the path to growth involves catering to new markets and targeting unique verticals.

Microsoft

Microsoft, Redmond, Wash., is nipping at the heels of Salesforce, with roughly 13 percent market share -- a couple of points within catching the SaaS leader.

In 2015, Microsoft expanded its share by almost 3 percentage points but couldn't quite get to the top spot. But the company's SaaS sales grew at a whopping 70 percent year over year -- the second-highest rate among the top 10 SaaS vendors, according to Synergy Research.

If that trend holds, it won't be long before Microsoft overtakes the leader.

The largest software company in the world is attacking the cloud market with a new generation of products like the Office 365 productivity suite and Dynamics CRM Online.

Microsoft also happens to have a nifty consumer SaaS business that's also not the leader in that respective market, but putting up growth numbers beyond all its major competitors.

Adobe

Adobe's commitment to translating its product line to the cloud has earned the software vendor from San Jose, Calif., roughly 8 percent share of the SaaS market.

On the strength of products like Creative Cloud and Marketing Cloud, San Jose, Calif.-based Adobe is enjoying 55 percent year-over-year growth across its cloud-based software portfolio, which caters primarily to creative professionals.

SAP

SAP, while a somewhat distant fourth place in the SaaS horse race with roughly 6 percent of the market, is making a charge.

The software giant based in Walldorf, Germany, offers a broad range of cloud services under groups such as Solutions for HR, Solutions for Finance and Solutions for Marketing.

SAP's strength in cloud-based CRM and enterprise resource planning systems contributed to phenomenal annual growth of 73 percent in 2015.

Runners Up

The next six runners-up together held nearly a quarter of the total enterprise SaaS market in 2015, according to Synergy.

Those companies are payroll processing powerhouse ADP; Google, with the popular Apps suite of office-productivity tools; IBM with its broad array of business solutions; small business tax software developer Intuit; Oracle, which has translated its expansive portfolio to SaaS; and human resource and enterprise financial management vendor Workday.

Synergy Research isn't releasing into the public domain the exact market share of those vendors, but analyst Dinsdale told CRN they all fall in the 3 percent to 5 percent range.

In aggregate, those six companies grew their cloud software businesses 29 percent year over year, and all of them did grow at least above 10 percent. IBM and Workday each grew their SaaS revenues at a rate above 50 percent, according to Synergy.