SaaS drives cloud business
The number of corporate applications offered in the Software as a Service model is growing at an exponential rate. There are many indications that digital transformation and the hybrid work model will sustain the momentum of this growth.
Companies are slowly starting to move away from software sold in boxes to SaaS. According to Gartner’s forecast, this year’s global public cloud revenue will reach $497.4 billion, up 20.4 percent year-on-year. SaaS remains the largest segment of this market, and according to analysts, end-user spending in this case will reach $176.6 billion in 2022, while next year it is already expected to reach $208 billion.
Also, the authors of the “State of SaaSOps 2021” report believe that as enterprises continue and accelerate digital transformation projects, SaaS marketing will maintain its high growth rate. In 2021, the average company used 110 such applications, 30 more than the year before. Compared to 2017, there was a 7-fold increase and nearly 14-fold from 2015. Analysts from McKinsey & Company are very optimistic about this market segment, predicting that the global SaaS market will grow at an annual rate of 40 percent. However, some experts point to factors that could slow the growth of this type of service.
– A major challenge for companies remains backward compatibility and ensuring access to previous systems and interfaces, maintaining legacy solutions or migrating to new versions. One also has to reckon with rising costs resulting from the implementation of additional tools,” says Marek Drob, director in the Cloud and Engineering team at Deloitte.
From CRM to niche applications
More than three decades ago, traditional ERP software vendors such as Oracle and SAP were making fortunes selling their solutions and their local implementations. The major vendors were able to tie customers to them, though not necessarily in a positive sense. Many times migration to another system involved high costs, and as a result most users remained loyal to one vendor for many years. However, as time passed, the model of one-time delivery and local deployment became less and less compatible with the expectations of corporate customers. Meanwhile, newcomers emerged with alternative solutions.
Chris Benioff left Oracle in 1999 and founded Salesforce, which quickly became a SaaS pioneer. As is well known, Salesforce has consistently relied on CRM software from the very beginning. Anyway, to this day, it is still the most popular type of software delivered in a cloud model. According to Fortune Business Insights, about a quarter of the global revenue generated in this market segment comes from CRM sales. High on the list are ERP systems, hosting, and eCommerce and wide-area communication and collaboration tools. However, when it comes to vendors, the leaders are: Microsoft, Adobe, Oracle, IBM, Salesforce and Amazon.
While in the case of CRMs or collaboration and communication systems, migration to SaaS seems to be a smooth process, moving ERPs to the cloud poses a challenge of sorts. As it turns out, however, companies are tackling the task quite well. According to Hubspot, in 2020 as many as 8 out of 10 ERPs in use worldwide were located in a cloud environment. However, domestic specialists note that in Poland the process of ERP adaptation to the SaaS model is slower than the global average.
– In Poland, this is still a developing market segment. Local companies are often afraid of entirely cloud-based solutions, which is why hybrid systems will dominate in the coming years in Poland. Although, exactly in the case of ERP, traditional infrastructure has its serious limitations, which make it difficult to regularly remove and add modules, licenses and computing power. Not to mention the cost of making such changes each time,” explains Sebastian Bryczkowski, Business Development Manager at S&T.
Deloitte’s analysis shows that Polish entrepreneurs show the greatest interest in the SaaS model with regard to the area related to customer service (CRM, Service Management, ITSM, Customer Support), as well as group work support and project management and low-code platforms. Software in the service model are also finding increasing use in the HR industry, in processes such as talent management, e-learning and the introduction of new employees to the company.
In the not-too-distant future, both in Poland and globally, the role of the vertical SaaS model should grow. Unlike the horizontal one, it is more personalized and focused on customers in one area or industry. A classic example is Brightwheel’s software for child care providers. It used to be that customers had to pay corporations providing ERP systems crores to develop a tool tailored to their individual requirements. Today, for about $50 a month, one can get access to such solutions offered in a SaaS model. Analysts agree that companies developing niche applications, also often referred to as Micro-SaaS, have the potential for very rapid growth.