SaaS market predicted to double in size over next two years

The fact that the likes of Microsoft, SAP, Oracle and IBM still have a huge base of on-prem customers to migrate to the cloud will keep the SaaS market afloat for years to come, says analyst

Software-as-a-service (SaaS) will remain a growth hotspot for the likes of Microsoft, SAP and Oracle for "many years", with the market set to double in size by 2020, according to analyst Synergy Research.

SaaS sales hit $15bn in Q3, a 31 per cent hike year on year, with collaboration being the highest growth segment, Synergy said.

Those with the highest overall growth rate include Microsoft, Google and Oracle, the latter of which is hell-bent on coaxing its customers and partners into the cloud.

Synergy forecast that SaaS sales will double in size over the next three years, emphasising that SaaS spending remains relatively small compared with on-premise software.

"IaaS and PaaS markets tend to get more attention and are indeed growing more rapidly, but the SaaS market is substantially bigger and will remains so for many years," said Synergy chief analyst John Dinsdale.

"Traditional enterprise software vendors like Microsoft, SAP, Oracle and IBM still have a huge base of on-premise software customers and they are all now pushing to aggressively convert those customers to a SaaS-based consumption model. At the same time, born-in-the-cloud software vendors like Workday, Zendesk and ServiceNow continue to light a fire under the market and help to propel enterprise spending on SaaS."

Microsoft displaced Salesforce as the largest SaaS vendor a year ago, and has extended its lead in the overall market thanks to its acquisition of LinkedIn, Synergy said. Salesforce, Adobe, Oracle and SAP round out the top five.