Just How Far Along Are We In SaaS?

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Includes: ATHN, CRM, LNKD, N, NOW, RP, SAP, TRAK, ULTI, WDAY
by: Tomasz Tunguz

Summary

Public SaaS companies account for 14% of total software revenues generated by public companies.

Over the last ten years, the total amount of revenue generated by software companies has tripled from $53B to $169B.

The growth rate of SaaS revenues follows a geometric growth curve ramping from $1.3B in 2005 to $24B in 2015.

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About 15 years since the creation of the first SaaS companies, public SaaS companies account for 14% of total software revenues generated by public companies, a figure growing at about 17% per year. Over the last ten years, the total amount of revenue generated by software companies has tripled from $53B to $169B, meaning SaaS companies are both taking share and growing the market.

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The growth rate of SaaS revenues follows a geometric growth curve ramping from $1.3B in 2005 to $24B in 2015. However, this revenue growth isn’t a consistent basket. It includes Concur’s revenue from IPO to 2014, when SAP (NYSE:SAP) bought Concur. 2015 figures in this chart don’t include Concur’s revenue data, nor from any other take privates, or the SaaS businesses of traditional software companies like Oracle (NASDAQ:ORCL) or SAP. In addition, this analysis excludes all private SaaS company revenue, both venture-backed and bootstrapped companies.

So the analysis actually underestimates the fraction of SaaS revenue today. Perhaps, SaaS products generated 20-25% of all software revenues, an astoundingly high figure.

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Examining the top 10 contributors to SaaS revenue, we notice a power law. CRM (NYSE:CRM) generates the lion’s share, followed by LinkedIn (NYSE:LNKD), Workday (NYSE:WDAY), ServiceNow (NYSE:NOW) and AthenaHealth (NASDAQ:ATHN).

There’s no doubt SaaS has transformed and grown the software industry. We’re likely entering the middle era of SaaS. We have many platform companies built, significant market share shifting, but still quite a bit of opportunity and revenue to seize.