What are the predictions for SaaS market for 2018 and the coming years?

The market of cloud services is constantly evolving. More and more IT services are offered in the cloud. Three traditional segments of cloud computing – Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS) – have shown constant growth in 2017.

According to the latest research by IDC, the public cloud services market grew by 28.6% in the first half of 2017, reaching revenues of USD  63.2 billion. However, the increase was unevenly distributed over SaaS, PaaS and IaaS. There are already thousands of SaaS applications available for both online giants and startups. The SaaS segment has almost 69% of the public market share in the cloud, but its growth rate (22.9% per annum) is the slowest of the three main segments.

The size of the SaaS market

Currently, it is estimated that the traditional software industry generates around USD 300 billion annually. By comparison, the emerging SaaS market, a subset of the general cloud services market, generates USD  48 billion a year and is expected to grow to USD 99 billion by 2020.

On the other hand, it is expected that the use of traditional software will fall because companies experience many SaaS benefits, including a lower relative cost compared to traditional software, continuous and problem-free platform technology updates, and growing confidence in the security protocols offered by cloud providers.

Table 1. Worldwide forecast of public cloud services (in millions of US dollars)

2016 2017 2018 2019 2020
Business Process as a service (BPaaS) 39.6 42.2 45.8 49.5 53.6
Platform as a Service (PaaS) 9.0 11.4 14.2 17.3 20.8
Software as a Service (SaaS) 48.2 58.6 71.2 84.8 99.7
Cloud and security management services 7.1 8.7 10.3 12.0 13.9
Infrastructure as a Service (IaaS) 25.4 34.7 45.8 58.4 72.4
Advertising in cloud 90.3 104.5 118.5 133.6 151.1
Total of cloud services 219.6 260.2 305.8 355.6 411.4

Source: Gartner (October 2017)

Predictions for the SaaS market

  1. It is anticipated that SaaS revenues will increase from USD 58.6 billion in 2017 to USD 99.7 billion in 2020.
  2. Taking into consideration the whole period of the 2016 – 2020 forecast, SaaS is able to achieve a 15.63% increase, which is also ahead of the entire cloud market.
  3. The predicted growth rate by 2020 for SaaS will be 3 times faster than for PaaS and 2 times faster than for IaaS.
  4. 73% of companies plan to operate by SaaS until 2020, and by 2022 the anticipated number of companies operating exclusively on SaaS will increase to 86%.
  5. It is anticipated that by 2021, 28% of all IT costs will be related to infrastructure in the cloud, middleware, applications and business processes.
  6. It is anticipated that 70% of revenues from public cloud services will be dominated by the top 10 service providers in the public cloud by 2021.
  • In the IaaS segment Amazon, Microsoft and Alibaba have the strongest position
  • In the SaaS and PaaS segment Oracle, SAP and Microsoft.
  1. There are no significant differences in the SaaS development rate in the sector of large corporations and small businesses.

All predictions about the SaaS market are compatible – SaaS will soon be everywhere. In fact, there will be no SaaS market as such, because all software will be delivered via the cloud. The greatest threat to today’s innovation is still companies internal policy and organizational culture (resistance to change), although with the development of SaaS, these barriers will disappear over time.