Just How Far Along Are We In SaaS?

Apr. 21, 2016 4:05 PM ETCRM, MSFT, WDAY, NOW, ATHN-OLD, TRAK, N, ULTI, RP, SAP1 Comment
Tomasz Tunguz profile picture
Tomasz Tunguz
354 Followers

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.

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.

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 (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 (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.

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

This article was written by

Tomasz Tunguz profile picture
354 Followers
Tomasz Tunguz is a Partner at Redpoint Ventures where he works with Axial, Looker, Electric Imp, Expensify, ThredUp, Quantifind and Erply. He blogs at www.tomtunguz.com Prior to joining Redpoint, Tomasz was the Product Manager for Google's Social Media monetization team, including the Google-MySpace partnership. In addition, he managed the launches of AdSense into six new markets in Europe and Asia. Before Google, Tomasz developed systems for the Department of Homeland Security at Appian Corporation, a provider of Business Process Management solutions. Tomasz also co-founded Perquimans Systems, a provider of bilingual, tri-currency automated time billing and document management systems for top tier law firms in Chile. Tomasz holds a B.A. in Mechanical Engineering, a B.E. in System Identification and Control Systems and Master of Engineering Management from Dartmouth College where he was a George Revitz Fellow. Specialties: Social networking, monetization, enterprise systems architecture, machine learning, business process management, mobile web

Recommended For You

Comments (1)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.