Microsoft In The Lead As Cloud Software Market Hits $100bn

Enteprise cloud software revenues are set to hit a $100 billion (£79bn) annual rate this quarter, after rising to $23bn in the first quarter of 2019, with growth continuing at almost 30 percent per year, according to market research firm Synergy.

Microsoft continued to lead the market with 17 percent, after surpassing Salesforce in 2016, and has averaged 34 percent growth over the past four quarters, Synergy said.

The software giant’s cloud software revenues derive mostly from its dominance of the cloud collaboration market, with tools including Office 365, the Dynamics line and LinkedIn, which it bought for $26.2bn in 2016.

Salesforce, in the no. 2 spot at 12 percent, continued to dominate CRM sales, an area that Synergy

said showed relatively low growth compared to other cloud software segments.

Fragmentation

Adobe, with its Creative Cloud and Document Cloud, followed with 10 percent of the market, followed by SAP and Oracle.

Synergy said SAP showed the strongest growth of those three, with the top five players accounting for over half of the total cloud software market.

The following ten vendors accounted for a further 26 percent market share, with vendors Google, ServiceNow and Workday showing the strongest growth.

Synergy noted that no single vendor has emerged to dominate cloud software services, with different vendors leading each of the main segments.

In spite of its rapid growth, the cloud software market only accounts for just over 20 percent of total enterprise software spending, meaning growth is likely to remain “buoyant” in the coming years, Synergy said.

Growth

Cloud software is growing more slowly than infrastructure and platform services, but its market is “substantially” larger and is set to remain so until 2023.

Synergy chief analyst John Dinsdale noted that the top five cloud software vendors are dominated by conventional software companies that have converted their users to new services, with Salesforce remaining the only one in the top five that is cloud-native.

Other cloud-native firms including Workday, Zendesk, ServiceNow, Atlassian and Splunk tend to show much higher growth rates, however.

Disdale said the cloud software market remains dynamic, with new companies able to establish themselves.

“There will be consolidation, with the impending Salesforce acquisition of Tableau Software being a prime example, but there will remain many opportunities for new market entrants to make an impact,” he said.