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What’s driving the SaaS market’s exponential growth?

Cloud-based deployment is now the software deployment method of choice as more companies become cognisant of the tangible benefits of software without servers.
Read time 4min 50sec

Prior to the coronavirus invasion, the growth in software-as-a-service (SaaS) markets was driven by digital transformation and ever-changing global business dynamics.

Research house Gartner forecasts worldwide public cloud revenue will grow by 17% in 2020, with SaaS remaining the largest market segment, which is predicted to grow to $116 billion this year.

These estimates are staggering, and of course, pre-COVID-19 disruption.

Organisations around the world have scrambled to attain business continuity while moving their workforce to the work from home model. With this has come completely unexpected and unbudgeted for costs, coupled with revenue losses due to disruption and lost trade.

This scenario has put cost management and containment front and centre of survival for all businesses.

Pre-COVID-19 state of SaaS

The Global Market Report on SaaS highlights the enormous benefits the market has reaped from the rapid changes in business dynamics and growth in demand for cloud-based solutions to support commercial operations.

Robust market conditions include economic uncertainty, competitive rivalry, and the increasing adoption of mobile, changing regulations, Internet usage and applications.

These conditions, along with the increasing number of infrastructures and established networks, have forced organisations to pursue scalable and flexible solutions such as SaaS and other cloud-enabled services to run and supervise their operations in a cost-effective and efficient way.

New tools capable of identifying, analysing and optimising spending on SaaS are needed, with the ultimate focus being on reducing and optimising expenditure.

These factors have also compelled companies to outsource applications with a preference for cloud computing services like SaaS to reduce their cost burden on infrastructure.

Companies seeking services from third-party vendors are said to be more likely to get better performance, compliance and customer satisfaction at a low cost.

Factoring COVID-19 into the picture

MarketsandMarkets research on the global impact of COVID-19 on cloud market size predicts growth from $233 billion in 2019 to $295 billion by 2021, at a compound annual growth rate of 12.5% during the forecast period.

The report cites the major factors driving this include enterprises' need to support remote workforces to induce investment in IT infrastructure for hyperscalers, cloud service providers, Internet service providers and managed hosting providers, to name just some.

The rise in demand for cloud-based business continuity tools and services, and the suitability of the public cloud environment is also reported to be best suited for the current unprecedented scenario. The report also confirms the SaaS solution segment will hold the largest portion of the cloud market during the forecast period.

So, it is a valid statement to note that due to the global economic meltdown caused by the COVID-19 pandemic, that at no other time in the history of business has cost containment been more important.

But where are these additional costs coming from?

Subscription software is dominating the market not only on a macro level but for various reasons it has also steadily increased at individual business and organisation levels.

SaaS has overtaken on-premises deployments. All the major software vendors, such as Microsoft, Oracle, SAP and Adobe, have all moved their products into cloud-first or cloud-only deployments. This has led to an increase in SaaS spending.

Managing SaaS costs

This is now, more than ever, a strategic imperative. New tools capable of identifying, analysing and optimising spending on SaaS are needed, with the ultimate focus being on reducing and optimising expenditure.

To do this it is necessary to identify all costs associated with SaaS applications, right-sizing licences and entitlements for optimal value, reduce unplanned expenses due to automatic subscription renewals, and leverage corporate buying power.

With or without the COVID-19 effect, cloud-based deployment is now the software deployment method of choice as more companies become cognisant of the tangible benefits of software without servers and the convenience of subscription licences.

But the unprecedented exponential growth of SaaS has many business leaders unprepared for a consequential growth in costs, which can often be obscured by unmanaged employee acquisition of software applications and their expenses − also known as shadow IT.

It is estimated that on average, about one in three employees will purchase a SaaS application using a credit card or expense reimbursement. Discovering, mitigating and optimising these transactions − as well as all other purchases of subscription software − is an essential aspect of SaaS cost management.

It is now crucial to deploy technology that can identify all costs associated with SaaS applications, right-size licences and entitlements for optimal value, reduce unplanned expenses due to automatic subscription renewals, and leverage corporate buying power across an organisation.

This means tracking every spend, measuring utilisation, managing applications in a central system of record, and documentation of renewal dates and additional contract line-item content.

Application monitoring, measurement of adoption and utilisation, and renewal management are now mandatory requirements for C-suite execs responsible for cost containment in businesses.

They need visibility, at a granular level, into their technology environments. Leaders need the crucial ability to provide their organisation with monitoring, management and complete control of their SaaS licences.

Shadow IT creeps in as remote working becomes the norm and with it, increased costs and further lack of visibility/control around SaaS applications. The challenge for business owners always, but particularly now, is to bring it all back together and centralise visibility across decentralised remote working environments and offer company-wide visibility − a valuable commodity at any time.

Neil Buckley

MD, Apex BI.

Buckley completed his studies in software support and PC engineering in 1999. He later went on to enhance his knowledge and skill through courses at the Harvard School of Business plus other institutions in the US. He has two decades of experience in an ICT career that has seen him appointed to senior management positions across various functional lines of business, including enterprise, SME, partner and retail channels. In 2007, he founded Apex BI. In the 12 years since inception, the company has attracted market share and has become a major player in the technology expense management sector. Apex BI is the only African company to be a member of the Enterprise Technology Management Association.

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