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SaaS market bounces back from pandemic slump

SaaS market bounces back from pandemic slump

Enterprises worldwide continue to migrate from proprietary, licensed software to SaaS subscriptions.

Bill Huber (ISG)

Bill Huber (ISG)

Credit: ISG

Global demand is surging for vertical software-as-a-service (SaaS) solutions aimed at specific industries, according to new research, bringing the SaaS market back from a pandemic slump and positioning it for rampant and continued growth in the coming months.  

It’s hard to believe that the global SaaS market weathered a slowdown during the worst of the COVID-19 pandemic, given how many organisations switched to cloud-based solutions to stay in touch amid the rush to remote work, but it did, new data from technology research and advisory firm Information Services Group (ISG) suggests.  

However, enterprises worldwide continue to migrate from proprietary, licensed software to SaaS subscriptions as they seek innovation, better user experience and lower cost, according to ISG.

The research firm’s 2021 ISG Provider Lens Enterprise Application-as-a-Service Platforms report on the global market suggests that combined SaaS and infrastructure-as-a-service (IaaS) annual contract value is expected to grow by 21 per cent in 2021.  

Indeed, ISG expects organisations to increase their spending on core enterprise applications such as enterprise resource planning (ERP), human capital management and customer relationship management, which increasingly are being delivered and billed as SaaS subscriptions.  

It is precisely these types of applications that can help -- and have helped -- enterprises continue to operate during disruptions such as the COVID-19 pandemic, ISG noted.  

Looking ahead, enterprises are expected to launch major projects over the coming 12 to 18 months aimed at business continuity, centralisation, cost optimisation and greater collaboration and visibility.  

Moreover, organisations are expected to adopt SaaS solutions for an even broader range of applications.

“Enterprises in all industries are adapting their systems to take full advantage of digital capabilities,” said Bill Huber, ISG partner, digital platforms and solutions. “SaaS has been gaining traction for several years as companies use it as the launchpad for new digital initiatives, and we believe demand will keep growing this year as a solution for both back-end and front-end applications."

Against this backdrop, vendors are focusing on developing pre-built integrations for specific sectors and meeting each industry’s key performance indicators (KPIs), ISG claimed, with the pandemic sparking particularly strong demand for vertical SaaS solutions for supply chain management and ERP.

According to ISG, one major driver of SaaS growth is the availability of modern application programming interfaces (APIs) for easy integration.

“APIs enable channel partners and integrators to easily combine sets of applications to meet the needs of specific customers. This shortens the time to market for new offerings, allowing providers to focus on their core capabilities and develop functions that set them apart,” ISG said in a statement.  

Meanwhile, mobile app personalisation is shaping up to be a key trend for SaaS providers looking to offer superior user experience, with integrated machine learning and artificial intelligence set to deliver greater insights via mobile dashboards, according to the research firm.  

But although the SaaS market has a growing number of players, including small niche providers, industry consolidation aimed at increasing scale is expected to continue, ISG claimed.  

“Nearly all companies covered in the report have acquired smaller vendors in the last three years. When considering SaaS providers, customers should consider the chances of the company being acquired and be mindful of support options,” the firm said.  

Earlier this year, ISG revealed that the managed services market in the Asia Pacific (APAC) region surged in the second calendar quarter of 2021, marking the best quarter in two years.

The APAC managed services market enjoyed a year-on-year increase in annual contract value (ACV) of 87 per cent during the three months ending 30 June, to a record US$929 million, ISG said in July.

Also in July, the firm noted that enterprises were increasingly turning to cloud outsourcing providers to manage their private and hybrid cloud infrastructure as they faced progressively complex IT environments.

Indeed, although many companies froze their outsourcing efforts at the start of the pandemic, others are now planning to use outsourcing services for the first time in 2021, the firm suggested.

“Enterprises worldwide have realised that outsourcing their cloud infrastructure management is a great way to realign their IT systems with business objectives in the most cost-effective manner,” Jan Erik Aase, partner and global leader, ISG Provider Lens Researc, said at the time.


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