The global Software as a Service (SaaS) market size was valued at USD 215.10 billion in 2021 and is projected to grow from USD 251.17 billion in 2022 to USD 883.34 billion by 2029, exhibiting a CAGR of 19.7% during the forecast period. Based on our analysis, the global market exhibited an average growth of 12% in 2020 as compared to 2019.

In our market study, we have considered various Software as a Service solutions offered by the market players such as Alphabet’s Google Cloud Marketplace, Google Workspace, Amazon Elastic Compute Cloud by Amazon Inc., Microsoft’s Microsoft Cloud, Cloud SaaS Applications, Cloud Consulting Services, IBM Cloud Integration by IBM Corporation, and others.

The Software as a Service (SaaS) market growth can be attributed to several factors, such as the rise in adoption of public and hybrid cloud-based solutions, integration with other tools, and centralized data-driven analytics. In addition, creating business strategies through partnership and collaboration by key players for business development create ample market growth opportunities. For instance,

• In May 2022, IBM collaborated with Amazon Web Services, Inc. (AWS), with the aim to provide a wide range of its software series as SaaS on AWS.

COVID-19 IMPACT

Emergence of the COVID-19 Pandemic Increased Demand and Adoption of Cloud-based Services

The spread of COVID-19 has severely impacted the global economy as lockdown measures are put in place to control the spread of the virus. People were confined to their homes to minimize human contact. The rapid spread of the pandemic led IT companies to adopt remote work policies, increasing the need for various SaaS-related services. For instance, the increasing use of Microsoft Office 365 over the COVID-19 time propelled the growth of the market.

Organizations are focused on accelerating their SaaS-driven digital transformation to accommodate the exponential growth in remote employees to adapt rapidly changing market conditions. They are deploying cloud-based solutions to ensure business continuity during the crisis. Businesses are facing a significant drop in market revenue, leading to budget cuts. Companies limit their investment in technology hardware, providing an edge to drive the market growth.

Such increase in the adoption of the IoT and cloud services for the digitalization amid COVID-19 pandemic increased software as a service demand substantially.

LATEST TRENDS

Integration of AI and ML over Software as a Service (SaaS) Solutions is a Key Trend

The rapid change in the Software as a Service process of businesses has been astounding as the integration of technologies, such as Machine Learning (ML) and Artificial Intelligence (AI), for improving operation proficiency and intelligence continues to surge in the businesses.

Enterprises in various industries leverage autonomous innovations to enhance services, products, and content customization to understand users' needs with data-driven analysis. Machine learning empowers SaaS solutions to improve operation proficiency and intelligence. Hence, by becoming a crucial part of AI-based solutions, enterprises will demand better software training control.

Adoption of AI/ML will likely change the software as a service industry in many ways, especially in improving essential features of several software solutions. Customizing and automating solutions, augmenting security, and enhancing human capacity are all possible by incorporating SaaS and AIML abilities. For instance

In September 2022, Nokia stated that it is strengthening its SaaS software solution portfolio by offering more compelling solutions to Communication Service Providers (CSPs) and businesses. The new structure would help simplify stored and used data, reduce the time for data organization, and carry out repetitive tasks

Thus, the aforementioned factors are expected to be a trend in the forecast period.

DRIVING FACTORS

Adoption of Public and Hybrid Cloud-based Tools by Enterprises to Enhance Market Growth

The rise in adoption of public and hybrid cloud-based solutions in organization increases system reliability and advances new realities obliged by the pandemic. Additionally, more enterprises are shifting to hybrid cloud that practices on-premises solutions in accordance with public cloud solutions. Several big firms are supporting and motivating the adoption of cloud-based solutions for future market growth. For instance,

• November 2022: Microsoft Azure hosted its first Marketplace Summit, which would support Independent Software Vendors (ISV) and software as a service providers to maximize marketplace opportunity. The simplified way helps ISVs to build through the Microsoft Cloud, including Microsoft Teams, Azure, Power Platform, Dynamics 365, and end-to-end security.

Thus, aforementioned factors act as driving forces for the growth of the market.

RESTRAINING FACTORS

Lack of Security for Sensitive Data to Hamper Market Growth

Professionals have their business-sensitive and personal data on SaaS-based platforms. Hence, security has always been a significant concern for security professionals. Several enterprises in the industry have identified SaaS misconfiguration as the major challenge.

Further, configuration of internal application setup is becoming as a major challenge for the security teams. The misconfigurations result in the loss of sensitive data and apprehensive application programming interfaces, resulting in unauthorized admission of sensitive data. For instance,

• April 2022: According to Cloud Security Alliance (CSA), SaaS misconfigurations can be responsible for up to 63% of security incidents. At least 43% of firms have reported dealing with one or more security incidents due to misconfiguration. The primary cause for misconfigurations is the lack of clarity on changes in the security settings and several departments with admission to SaaS security settings.

Thus, lack of security of data restricts the market growth.

SEGMENTATION

By Deployment Type Analysis

Hybrid Deployment to Gain Traction in the Market

As per deployment type, the market is trifurcated into public, private, and hybrid.

The hybrid segment is expected to significantly expand during the forecast period. The growth is attributed due to rising adoption of hybrid cloud across governments, public sector organizations, banking and financial institutions, and others. Additionally, cloud policies are evolving around the globe due to increased demand in the services. For instance,

• Cloud First policy is replaced by “Cloud Smart3” in many regional and national governments due to increased demand for flexibility, visibility, speed, advanced security, and control across different environments.

According to the survey conducted by Microsoft in January 2022, 86% of the U.S.-based respondents are planning to increase their investment in hybrid cloud and multi cloud.

These factors are expected to be an opportunity for the market.

By Application Analysis

Content, Collaboration, & Communication Segment to Accelerate the Growth of the Market

The market is segmented into various applications such as Customer Relationship Management (CRM), ERP, content, collaboration & communication, BI & analytics, human capital management, and others (HRM, operation management). Content, collaboration & communication segment is estimated to grow with a CAGR of 21.8% during the forecast period.

Deploying software as a service in content collaboration tools will improve streamlining of the data flow for content creation, collaborative processes, modification, versioning, and sharing activities of the organizations. According to a study by Forbes, around 73.0% of companies plan on increasing collaboration, considering it as an essential part to project success.

Thus, aforementioned factors act as opportunities for the growth of the market.

By Industry Analysis

Adoption of Software as a Service in Healthcare to Grow Market Share

Various industries, such as IT & telecom, BFSI, retail & consumer goods, healthcare, education, manufacturing, and others, are adopting SaaS for improving their business. Among these, the healthcare segment recorded the highest CAGR during the projection period.

Healthcare professionals are migrating their application and storage to the cloud to enable hybrid and remote working. Cloud services help to gain real-time health data insights and minimize the complexities within IT with storage solutions. Rapid advancement in telemedicine technologies, such as video/audio conferencing, telesurgery, and teleradiology, drives the adoption of cloud services. For instance,

• May 2021 - HCA Healthcare, an American healthcare company, partnered with Google Cloud. Through this partnership, the companies aim to build an advanced analytics platform and develop machine learning models for workflow improvements and science-informed decision support.

Thus, the rise in adoption of cloud, digital technology, and smart solutions in healthcare fuels the market.

REGIONAL INSIGHTS

Regionally, the Software as a Service (SaaS) market is fragmented into Asia Pacific, Europe, North America, South America, and the Middle East & Africa.

As per the analysis, North America held major software as a service market share due to the presence of key players in the region owing to early adoption of technologies such as AI, IoT, robotics, and cloud. The presence of key SaaS platform providers, such as IBM Corporation, Oracle Corporation, and Microsoft Corporation, contributes to the region’s SaaS-based application adoption.

The market is integrated with artificial intelligence and machine learning is transforming customer services in North America. The region is expected to grow further by focusing on innovations in the market. The U.S. accounts for approximately 17,000 SaaS companies and Canada accounts for approximately 2,000 companies. Thus, the U.S. holds the major market share during the forecast period.

Europe is expected to gain a prominent share of the market due to advancements of the solutions by key players across the region and active investments by private and government corporations to increase the cloud adoption across countries. For instance,

• February 2022 - Germany-based software company, SAP SE, introduced a cloud platform for data processing domestically.


• August 2021 - Google Cloud invested USD 1.2 billion in its German cloud computing program. The investment aimed to expand Germany's cloud infrastructure by adding a data center in the Berlin region.

These factors are expected to foster the market growth across the region.

Asia Pacific is projected to show exponential growth owing to the demand for increased resilience and agility across businesses that are likely to foster cloud adoption across Asia Pacific. Developing economies such as China, Japan and India have made significant contributions in facilitating the region's adoption of cloud-driven technologies. For instance,

• June 2020 - Google Cloud launched Google Cloud Platform (GCP) in Southeast Asia, bringing GCP closer to customers and users. This helped customers meet their specific regulatory and compliance requirements and offer additional disaster recovery solutions for customer access in Asia Pacific.

The Middle East & Africa region is likely to show moderate growth in the coming years due to increased investment from cloud providers. Government investment during the pandemic in large-scale smart city and public management projects and the availability of a wide range of data center and managed service alternatives to support the diverse adoption of new technologies are driving cloud computing in the Middle East.

South America is expected to show rapid growth of the market due to internet usage and mobile technology, and governments in the region are encouraging foreign companies to open new businesses so that they can rapidly expand in the region. Additionally, entrepreneurs are focusing on deployment of cloud services for business growth, thus helping to surge the demand for software as a service solution.

KEY INDUSTRY PLAYERS

Market Players Announce Merger & Acquisition Strategies to Expand Reach

Prominent players operating in the global market focus on expanding their market share and global presence through merger & acquisition strategies. These companies focus on acquiring small and local firms to expand their business presence.

List of Key Companies Profiled:

• Alphabet Inc. (U.S.)


• Amazon.com, Inc. (U.S.)


• Microsoft Corporation (U.S.)


• IBM Corporation (U.S.)


• Salesforce Inc. (U.S.)


• SAP SE (Germany)


• Oracle Corporation (U.S.)


• Cisco Systems, Inc. (U.S.)


• Hewlett Packard Enterprise Company (U.S.)


• ServiceNow, Inc. (U.S.)

KEY INDUSTRY DEVELOPMENTS:

• November 2022: IBM Corporation launched New Cloud Modernization Center and IBM Z to accelerate their hybrid cloud portfolio. This will help IBM Z clients to modernize their applications, processes and data in an open hybrid cloud architecture.


• June 2022: Hewlett Packard Enterprise announced platform developments and new cloud services to its flagship product, HPE GreenLake. This helps enterprises to enhance their data and applications. This includes a redesigned modern private cloud that provides a cloud-native experience to drive the organization's hybrid strategy.


• May 2022: Google Cloud collaborated with TD Tawandang, a retail technology company, to help micro-retailers across the country. Google Cloud delivered a high-tech retail-as-a-service solution to help traditional mom-and-pop stores renovate their business operations and overcome challenges.


• May 2022: Google Cloud and SAP SE expanded their partnership. They launched a new integration between Google Workspace and SAP S/4HANA Cloud that enables consumers to incorporate capabilities of Google Docs and Google Sheets from within their SAP workflows.


• April 2022: Microsoft Corporation introduced Microsoft Purview, a cloud-based data governance solution, to enable enterprises of all sizes to manage their SaaS, multi-cloud, and on-premise data. Microsoft Purview combines Azure Purview and Microsoft 365 Compliance range under one brand providing a unified platform. 

REPORT COVERAGE

The research report provides a detailed market analysis. It focuses on key aspects such as leading companies, software types, and leading software and services applications. Besides, the report offers insights into the market trends and highlights key industry developments. In addition to the aforementioned factors, the report encompasses several factors that have contributed to the growth of the market in recent years.

REPORT SCOPE & SEGMENTATION

ATTRIBUTE	DETAILS
Study Period	2018-2029
Base Year	2021
Estimated Year	2022
Forecast Period	2022-2029
Historical Period	2018-2020
Unit	Value (USD Billion)
Segmentation	By Deployment Type, Application, Industry, and Region
By Deployment Type	Public Private Hybrid
By Application	Customer Relationship Management (CRM) Enterprise Resource Planning (ERP) Content, Collaboration & Communication BI & Analytics Human Capital Management Others (HRM, Operation Management)
By Industry	IT & Telecom BFSI Retail & Consumer Goods Healthcare Education Manufacturing Others (Travel & Hospitality)
By Region	North America (Deployment Type, Application, Industry, Country) U.S. Canada Mexico Europe (Deployment Type, Application, Industry, Country) U.K. Germany Italy France Russia Spain Benelux Nordics Rest of Europe Asia Pacific (Deployment Type, Application, Industry, Country) China Japan India South Korea ASEAN Oceania Rest of Asia Pacific Middle East & Africa (Deployment Type, Application, Industry, Country) Turkey GCC Israel North Africa South Africa Rest of Middle East & Africa South America (Deployment Type, Application, Industry, Country) Brazil Argentina Rest of South America