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Microsoft leads the enterprise SaaS industry, grows quickly

One might think the pace of growth is inversely proportional to the size of the company. Well, in most cases, yes. But when it comes to the world’s largest public company, Microsoft (NASDAQ: MSFT), market cap is just a number. The case to present is Microsoft’s enterprise SAAS business.

The company has a huge Intelligent Cloud business that generated revenues of $9.7 billion in the latest reported quarter. Interestingly, this segment, comprising server products and enterprise services, showed the highest growth among its three units of 22%.

Annual SaaS revenue growth of top 5 vendors

A recent report reinstates Microsoft’s dominating presence in this market. According to Synergy Research Group, the Satya Nadella-led firm has the highest market share of 17% in the enterprise software-as-a-service (SaaS) market. Microsoft is followed by Salesforce (NYSE: CRM), Adobe (NASDAQ: ADBE), SAP (NYSE: SAP) and Oracle (NYSE: ORCL).  

These five companies together held more than half of the enterprise SaaS market share, according to the report.

Cisco (NASDAQ: CSCO), Alphabet (NASDAQ: GOOGL), IBM (NYSE: IBM), ServiceNow (NYSE: NOW) and Workday (NASDAQ: WDAY) make up the bottom five of the top 10.  The top 10 vendors account for over three-fourths of the market.

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Microsoft excels when it comes to annual growth rate also. The company boasts of 34% growth rate, trailing only SAP, which has reported a commendable 39% growth. All the others in the top five have annual growth in the twenties.  

The report also adds that the enterprise SaaS market has abundant growth opportunities as it currently accounts for just about 20% of total enterprise software spending. It adds that the market is going to witness a lot of action, including new entrants and consolidations.  

Microsoft reports third quarter 2019 earnings results

Chief Analyst at Synergy Research Group John Dinsdale said, “There will be consolidation, with the impending Salesforce acquisition of Tableau Software being a prime example, but there will remain many opportunities for new market entrants to make an impact.”

In spite of all that, Microsoft holds a strong ground, thanks to its huge base of on-premise software customers. All it needs to do is move these clients into the SaaS model.

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