When I was trying to understand the potential addressable market for Cledara, I spent quite some time looking at market studies and articles about Software-as-a-Service (SaaS). I want to share what I found here as others may find it useful.
I set out to answer three big questions that were really important for me to understand:
- How big is the SaaS market?
- How many SaaS products do companies use on average?
- How much do companies waste on SaaS?
- How do companies manage SaaS?
How big is the SaaS market?**
According to Gartner, companies will spend $74 billion on SaaS in 2018, growing to $102 billion by 2020. They also expect SaaS to reach 45% of total company application software spending by 2021. The continuous growth of the SaaS market, to the detriment of on-premise software, shows that it has become the preferred delivery model.
The data tells us that SaaS is here to stay. From small to large companies, IT infrastructure will inevitably switch to the cloud and, with it, the need to manage it.
How many SaaS products does a company use on average?**
Based on a survey done by BetterCloud in 2015, they estimated that companies would use an average of 17 SaaS products by 2017.
A more recent BetterCloud survey from 2017 shows that 73% of companies will run almost entirely on SaaS by 2020. 38% of companies have already moved most of their internal software to SaaS, using 34 SaaS products per company. Cledara did a survey this week in which nearly a quarter of the respondents had more than 45 SaaS apps, hinting that the number could be even higher and adoption much faster.
How much do companies waste on SaaS?**
Referencing Gartner again, they estimate that 30% of software license costs are wasted because of insufficient management. While this may not map directly to total SaaS spending, SaaS bring significant management challenges and so wasted software spending isn’t going anyway any time soon unless companies take action to manage it actively.
How do companies manage SaaS?**
100% of the companies Cledara has surveyed have no tool to manage SaaS effectively. The most sophisticated approach we have heard of has been keeping a document with all the SaaS used in the business which is then reconciled periodically with the bank statements. This is a time intensive exercise which will become more time consuming with the growth of the company and its SaaS.
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