Perhaps you’ve wondered like us:
How many SaaS companies are there?
We did a bit of legwork to answer this and other important questions to give you an overview of the burgeoning field of Software as a service (SaaS).
The thing is:
From cell phones to remote car and fridge sensors, SaaS products are ever more present in our daily lives, managing data in the public Cloud.
Check out how much has changed in 60 seconds on the Internet in just a year!
Yup, all of this is software as a service industry!
First things first, though: what is a SaaS company?
I’m sure you’ve heard of the Cloud, but what exactly is software as a service?
Here’s the deal:
SaaS provides a subscription-model working environment through the internet. Instead of buying and installing software on a private server, you can subscribe for the same functionalities which are now developed, hosted, supported, and updated by the SaaS providers.
All data and code are stored in an off-site location, the public Cloud. Also called “on-demand-software,” such applications are:
- Scalable and more adaptable – they grow together with your business and its needs
- Shareable – they can be used on more than one device
- Accessible at any time, anywhere in the world – multinational teams can effortlessly reach the same data.
- More economical: there’s no hardware to maintain
- Better for workflow and collaboration
Sounds like a pretty good deal, doesn’t it?
So: how big is the SaaS market?
The global public cloud software as a service (SaaS) topped $100 billion this year.
Check this out:
Only two years ago there were just 400 SaaS companies that reached a revenue of $500 million. That’s not exactly pocket change.
But before we get into more detail, let’s consider the following…
- The SaaS industry is forecast to generate $157 billion by 2022.
- Currently, the Saas market brings $141 billion per year.
- SaaS revenue in 2018 surpassed projections by over 10%.
- At least 100 companies are expected to top $1 billion in ARR in 2019.
- SaaS accounts for about 25% of all software and is set to grow.
- There are almost 7, 000 SaaS companies just in the marketing field.
- 31% of businesses run their operations entirely from the public cloud.
I guess it’s OK to have your head in the clouds these days.
But, to the point:
How many SaaS companies are there?
That’s a tough one to answer. But hopefully, the numbers will give you an idea:
1. At least 100 companies are expected to top $1 billion in ARR in 2019.
The annual recurring revenue in practical terms means this is not a one time deal, but a steady trend. Already in 2018, there were about 170 SaaS acquisitions at an incredible average price of $1.3 billion. That’s over $200 billion that changed hands on the market. Those amazing numbers are sure to inspire stiff competition.
2. There are nearly 7,000 SaaS companies in the marketing space alone.
But, hey there’s still room for your idea:
Some niches will never get saturated, while the market lures more and more investment. In fact, by the end of 2019, spending on SaaS is projected to reach a whopping $170 billion.
Simply put, the need for SaaS products will keep growing as the market and its financing steadily expand.
Who are the top SaaS companies?
The SaaS idea is older than you might think. The concept was there over half a century ago, and the first SaaS app is almost thirty years old now.
US Department of DefenseI bet you recognize some of the big players already – IBM’s Mainframes and microcomputers. At the time, access to remote databases and application suites was dubbed a “time-sharing system.” That gave rise to the World Wide Web, the first SaaS, and whole ecosystems, like NetSuite, Inc., and Salesforce.
Here are the top SaaS companies in 2019:
3. Microsoft registered $41billion in Productivity and Business Processes in annual revenue in Q2 2019.
Today the company’s winning productivity segment comprises Microsoft Office 365 Commercial, Skype for Business and LinkedIn subscriptions (client access licenses or CALs) along with Microsoft Dynamics 365.
The Intelligent Cloud contributed another $39 billion this year.
This segment includes Microsoft Azure’s server products, the SQL server, and GitHub.
The Redmont company took first place in the SaaS category with an impressive 17% market share. Not surprisingly on November 8, their stock (MSFT) skyrocketed to a new record high of $145.96.
4. Salesforce reported $3.74 billion for Q1 2020 already.
Salesforce is a SaaS veteran, celebrating its 20th birthday this year. The company spun off Oracle in 1999 to offer enterprise software from the Cloud.
Here’s the scoop when looking into the question of how many SaaS companies are there:
The Service Cloud alone crossed the $1billion mark for the first time this quarter, and the coming year looks really promising for the San Francisco giant. The company that holds first place in CRM products came second overall with a 12% market share.
However, Salesforce held a 52-week high in share price this year and has been registering a steady 20% revenue increase for the last 10 years. Its shares stand at $161.11 currently.
So much for Microsoft’s record!
5. When it comes to the top SaaS companies by revenue, Adobe stands third, with a 10% market share and $2.74 billion annual recurring revenue in Q2 2019 alone.
Adobe follows close behind Salesforce. It also makes for another company crossing the $10 billion revenue mark this year. Add to that a mind-blowing 25% YoY growth, and you’ll see how stiff competition at the top is.
Check this out:
Adobe transferred all of its popular graphic design products to the SaaS model in one move in 2012 and set a goal of 4 million subscriptions by 2015. Subscriptions for Adobe Creative Cloud stood at three times those in 2017 and are forecast to grow to 19.74 million in 2024.Although part of its loyal customer base originally resisted the transition, Adobe stuck with the decision. And that has certainly paid off – they’ll be closing off 2019 with over $141 billion in market capitalization and nearly $300 per share. Adobe is also among the best SaaS companies to work for.
So, stay tuned because they might be due for a share split soon!
6.SAP reports the highest growth this year (39%), beating Oracle’s (25%).
The rival companies still share equal amounts of the SaaS market, though – 5% each. The same report by Synergy Research records that other top SaaS companies share up to 27% of the market and have registered a 26% average growth.
These include the usual suspects Google, Cisco, IBM, and cloud-born Zendesk and Atlassian among others.
The market continues to be dominated by companies with a considerable on-premises software customer base. At the same time, the report also reveals much higher growth rates for younger SaaS companies located exclusively in the Cloud.
Here’s a Cloud with many silver linings.
Why do SaaS companies fail?
7. There are 6,829 SaaS companies in the marketing space alone.
Technology is growing at an exponential rate, along with our requirements to access data effortlessly. But growing rapidly also means venturing into the unknown while facing many challenges.
While products multiply to accommodate the modern user, some general challenges call for robust solutions that often require a solid hardware base and might be harder for SaaS startups to overcome:
- Stiff competition – the “vertical model” in SaaS makes for a huge number of products in almost any niche.
- Data security – when login data resides on a remote server, that server better be well protected.
According to Forbes research, security and privacy are some of the greatest challenges facing SaaS companies :
8. Two of the greatest data breaches of the last decade took place in 2019.
There seems to be a bit of a cat and mouse game here between hackers and cybersecurity experts, and even big players like Adobe are not immune to data hacks. Facebook also had nearly 600 million records stolen.
9. According to SaaS statistics, Poor security accounts for 1,695,555,350 data breaches in the last 15 years.
Yup. That’s one of the biggest risks of having your data stored off-premises.
But at the current rate, we are creating mind-boggling amounts of data each day. So, the growing number of apps we use to manage this data would make it harder and harder to keep everything neat and organized.
But there’s good news:
The Internet of Things offers a viable solution.
In fact, SaaS already accounts for 25% of all software. To get a piece of the action, even small SaaS companies will have to implement big solutions.
10. An estimated 463 exabytes of data will be created daily worldwide by 2025.
I had to look that one up, too. An exabyte is 1,000⁶ bytes. You get the idea.
So, what makes a company SaaS?
The short answer to this one is:
A unique feature software maintained from the Cloud, a subscription base, and great support.
The winners will be those who can best store, protect and analyze the whopping amounts of data we willingly share through work accounts, personal computers, and mobile devices.
No doubt, we will also need 5G speed to make it all work seamlessly.
11. SaaS startups earn an estimated $58,000 monthly on average before pitching for funding.
What’s more, they tend to register a 50% growth rate. Given that the US counted over 30.2 million small businesses in 2018, there’s absolutely no need to start big.
The contenders for the top SaaS startups list this year are many.
12. Shopify is forecast to earn $1 billion in revenue in 2019.
While the name of the eCommerce management SaaS might be familiar to many already, other startups spring up to tackle the challenges of the industry.
Take, for example, FeatureSpace, which offers an improved fraud-prevention algorithm for payments and has gathered $25 million in funding this year.
And that’s not all:
AktivTrak is another company to keep an eye on – it aims to optimize team workflow by automatically tracking and analyzing workplace processes. It is already reporting $4 million in annual revenue.
These are also among the fastest-growing SaaS companies this year.
How many b2b SaaS companies are there?
13. 31% of businesses run their operations entirely from the public Cloud already.
For comparison, in 2016 only 20% of business happened in the Cloud.
30 might seem like a low number compared to other data we’re used to seeing in the IT field. But given current trends and the numbers behind that 31%, you’ll realize the mind-boggling figures we’re expecting for the other 69%.
Keep in mind that:
14. SaaS revenue in 2018 surpassed projections by over 10%.
SaaS statistics for 2018 predicted much lower figures for this year, too. But, according to a report by Synergy Research, currently, SaaS accounts for only 20% of company software spending. So, yearly SaaS market revenue will probably continue to surpass expectations.It looks like what makes a great SaaS company today is its ability to gauge where the other 80% lie. In fact, the largest SaaS companies invest up to 23% in R&D, so we should expect many new SaaS solutions in the coming year.
And there you have it!
How many SaaS companies are there, and what are the key takeaways for 2019?
The most recent statistics promise steady market growth across all industries.
We’ll continue to monitor SaaS company revenue that matters and what that whispers about the companies themselves. Both the biggest SaaS companies and those just starting up will find their customer
And now it’s your turn:
Is there some service you’re not finding in the Cloud?
Let us know.
Maybe you’re the one we’ll be writing about next time?