Microsoft Replaces Salesforce as Overall SaaS Market Leader

In Q2, Microsoft had a 15 percent share of worldwide enterprise SaaS revenues and Salesforce 14 percent. In Q1 they were tied at 14 percent.

Whenever Microsoft comes out with a new product, it's invariably late to the party. However, because of the company's ubiquitous presence, it always elbows its way into a portion of the market anyway.

Like a lot of large companies, Microsoft was late to the cloud services market several years ago, but it has apparently caught up to the leaders and surpassed them. New data reported Sept. 1 from Reno, Nev.-based Synergy Research Group indicates that Microsoft has edged out in the second quarter of 2016 to become the world's new No. 1 enterprise software-as-a-service (SaaS) provider.

In Q2, Microsoft had a 15 percent share of worldwide enterprise SaaS revenues and Salesforce 14 percent. In Q1, they were tied at 14 percent; previously, Salesforce had always occupied the top spot.

Salesforce Still Dominates CRM

While Salesforce still owns the dominant position in customer relationship management (CRM), Microsoft is No. 1 in collaboration tools, second in CRM and third in other enterprise SaaS products. Salesforce doesn't rank in the top three of the other categories. (See graphic; to view it at a larger size, right-click on it and select "View Image.")

Also of note, the worldwide enterprise SaaS market grew a solid 33 percent year over year to surpass $11 billion in quarterly revenues. The SaaS market overall is on track to be worth $44 billion to $48 billion in calendar 2016.

Microsoft's strongest products are in the collaboration segment (represented by SharePoint and the continued high growth rate of Office 365) of the highly fragmented SaaS market. Those plus other SaaS products were enough to outpace Salesforce, which still leads the SaaS customer relationship management segment.

While not the largest segment, enterprise resource planning (ERP) grew the most rapidly, showing 49 percent growth, while the largest segment, collaboration, grew by 37 percent.

Fastest Growing SaaS Provider? Oracle

Other leading SaaS providers include SAP, Oracle, Adobe, ADP, IBM, Workday, Intuit and Cisco. Among the top 10 companies, Oracle achieved the highest growth rate in Q2 2016, followed by Microsoft.

The enterprise SaaS market is relatively mature compared with other cloud markets, such as infrastructure as a service (IaaS) and platform as a service (PaaS). Nonetheless, Synergy projects that it will more than triple in size over the next five years, with strong growth across all segments and all geographic regions, Chief Analyst and Research Director John Dinsdale said in a media advisory.

Meanwhile the consumer SaaS market is much smaller than the enterprise market and is not growing as strongly. However, in this segment there is huge growth for Microsoft, which has more than doubled its revenues on a rolling annualized basis.

"In SaaS, a big battle is playing out between the traditional broad-based software vendors and companies that are focused on a specific application area or industry sector, many of which are entirely cloud-based," Dinsdale said.

"It might be tempting to assume that the latter camp are leading the charge, but in fact the traditional software vendors are growing their SaaS revenues more rapidly, helped by their huge base of on-premise software customers that can be aggressively targeted for conversion to a SaaS consumption model."

About Synergy Research Group

Synergy provides quarterly market sizing and segmentation data on cloud and related markets, including company revenues by segment and by region. Synergy Research Group helps marketing and strategic decision makers around the world via its unique insights and in-depth analytics.

Chris Preimesberger

Chris J. Preimesberger

Chris J. Preimesberger is Editor-in-Chief of eWEEK and responsible for all the publication's coverage. In his 15 years and more than 4,000 articles at eWEEK, he has distinguished himself in reporting...