It is inevitable companies will embrace software as a service (SaaS) solutions in the age of the cloud. But spend on SaaS only accounts for a relatively small portion of overall software investments.
The market nevertheless is healthy and competitive in the best way possible for vendors and enterprise customers.
The SaaS market is growing 32% year-over-year, and reached $20 billion in quarterly revenues for software vendors, according to Synergy Research Group's Q2 2018 data report. Companies are spending less than 15% of their enterprise software budget on SaaS, notably smaller than spending for on-premise software.
"We are just now entering the Golden Age of SaaS," said Kevin Cochrane, CMO of SAP Customer Experience, in an email to CIO Dive. "Open, integrated, API-first cloud platforms and application services are just now enabling every business to become a digital-first business."
IT agility is beginning to expand beyond software development and to the advancement of end-to-end flexibility. DevOps is needed for this and a key component in making progress in digital advancements. But IT professionals agree that DevOps and agility need to coexist, as neither are as strong individually.
The biggest IT spending priorities of companies this year are security, SaaS, analytics and cloud infrastructure, with spending on the cloud to grow from 18% to 34% in the next three years. So while SaaS solutions are viewed as means to effectively re-invent business models, operations, finance and customer involvement, its adoption has some barriers to overcome.
Organizations are most concerned about the "old, crusty, monolithic, closed stacks of the past [that] were deployed to automate things, like managing sales opportunities, but that never got fully adopted," Cochrane said. Those processes then held data in a silo which offered no advantage to customer experience.
Where vendors are in the market
Some SaaS vendors have a stronger grip on the market than others. Microsoft is the SaaS leader and it has a lot to do with how long its been in the software market in general.
More legacy companies, like Microsoft, SAP and IBM, compared to companies like Workday, have customers still using their on-premise software, making transitioning to their SaaS solutions easier, according to John Dinsdale, a chief analyst at Synergy Research Group, in the report.
Companies today want agility and "silo-busting" SaaS deployment on cloud-based solutions and on-premise ones through "a microservices abstraction layer for developers to rapidly prototype, build, deploy and run" new apps, according to Cochrane.
Why the growth is so fast
SaaS applications enable integration in existing IT infrastructures. Because of this, things like data consumption and mobilizing services can be sped up. According to Cochrane, the rapid growth of the SaaS market can be attributed to three factors:
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The increase in API-first architectures have helped creation of microservice-based enterprise architectures "to enable them to rapidly integrate, consume, and provision new services" to accommodate new business needs.
- CIOs are moving to use emerging data integration and science models to pull insight in real-time and are doing so by using machine learning and artificial intelligence in data lakes.
- The "rise of new UX designs and application development frameworks tied to the proliferation of screens and devices in the home or in the workplace" also need SaaS solutions. C-suite officials are "re-envisioning enterprise applications and building new, tailored experiences individualized to the needs of each employee or customer" and using real-time data to do so.
