Microsoft Nipping at Salesforce's Heels in Enterprise SaaS Market

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Microsoft’s post-PC, “cloud-first” approach is paying off, according to a new report from IT research firm Strategy Analytics.

In terms of revenues, the Redmond, Wash. tech titan’s software-as-a-service (SaaS) portfolio grew 70 percent in 2015. Comparatively, the current market leader, Salesforce, saw its sales rise by a still-healthy 21 percent.

SAP’s cloud is also growing rapidly. The German software maker’s SaaS business achieved a 73 percent growth rate in 2015. Adobe, too, saw a big increase of 55 percent. Rounding out the rest of the top ten are ADP, Google, IBM, Intuit, Oracle and Workday.

Overall, the enterprise SaaS market grew 40 percent last year. And there’s plenty of room for further expansion, according to John Dinsdale, chief analyst and research director at Synergy Research.

For many vendors, traditional software sales generate the bulk of their income. “The top ten is a mixture of traditional software vendors and more focused applications specialists, but it is notable that the big three software vendors currently generate less than 8 percent of their software revenues from SaaS, ensuring that high growth rates will persist for many more years,” noted Dinsdale, in a research note sent to Datamation.

Synergy predicts that over the next five years, the market will triple in size, explaining why so many IT heavyweights are following Salesforce and Microsoft’s lead and doubling down on the cloud.

enterprise SaaS

Consumers are also flocking to SaaS, Synergy’s data suggest. “It is also notable that Microsoft is on a charge in the consumer SaaS market too, thanks to rapid growth in Office 365 Home and Personal subscriptions,” said Dinsdale.

In January, Gartner forecast that the worldwide SaaS market would grow 20.3 percent in 2016, reaching a total of $37.7 billion in sales and helping to lift public cloud revenues across the board. “The market for public cloud services is continuing to demonstrate high rates of growth across all markets and Gartner expects this to continue through 2017,” remarked Gartner research director Sid Nag in a statement.

This year, public cloud revenues (BPaaS, IaaS, PaaS, cloud management and cloud advertising) are poised to reach $203.9 billion, a 13.7 percent increase over 2015’s haul of 175 billion, predicted Gartner. “This strong growth continues reflect a shift away from legacy IT services to cloud-based services, due to increased trend of organizations pursuing a digital business strategy,” said Nag.

Pedro Hernandez is a contributing editor at Datamation. Follow him on Twitter @ecoINSITE.