Global SaaS Market Recovering from Pandemic Slump as Enterprises Renew Digital Initiatives

ISG Provider Lens™ report says a growing number of companies are embracing SaaS above and beyond core applications that sustained them during lockdowns

Enterprises worldwide continue to migrate from proprietary, licensed software to software-as-a-service (SaaS) subscriptions as they seek innovation, better user experience and lower cost, according to a new report published today by Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.

The 2021 ISG Provider Lens™ Enterprise Application-as-a-Service Platforms report on the global market finds enterprise SaaS demand rebounding from a slowdown caused by the COVID-19 crisis. ISG currently is forecasting 21 percent growth in combined SaaS and infrastructure-as-a-service (IaaS) annual contract value in 2021.

“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.”

Companies are expected 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, the report says. These types of applications help enterprises keep operating during disruptions such as the COVID-19 pandemic. Over the next 12 to 18 months, enterprises are expected to launch major projects aimed at business continuity, centralization, cost optimization and greater collaboration and visibility. They are expected to adopt SaaS solutions for an even broader range of applications.

Demand is surging for vertical SaaS solutions aimed at specific industries, ISG says. Providers are focusing on developing pre-built integrations for specific sectors and meeting each industry’s key performance indicators (KPIs). The pandemic has sparked especially strong demand for vertical SaaS solutions for supply chain management and ERP, the report says.

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

The report also sees mobile app personalization as a key trend for SaaS providers looking to offer superior user experience, with integrated machine learning and artificial intelligence to deliver greater insights via mobile dashboards.

While the SaaS market has a growing number of players, including small niche providers, industry consolidation to increase scale is expected to continue, the report says. 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, ISG says.

The 2021 ISG Provider Lens™ Enterprise Application-as-a-Service Platforms report for the global market evaluates the capabilities of 33 providers across three quadrants: Human Capital Management, Enterprise Resource Planning and Customer Relationship Management.

The report names Microsoft Dynamics 365 and Workday as Leaders in two quadrants each. It names Infor, Oracle CX Suite, Oracle ERP Cloud, Oracle HCM Cloud, Salesforce, SAP Customer Experience, SAP S/4HANA, SAP SuccessFactors, Ultimate Kronos Group (UKG) and Zendesk as Leaders in one quadrant each.

In addition, Unit4 is named as a Rising Star—a company with a “promising portfolio” and “high future potential” by ISG’s definition—in two quadrants, while Zoho is named a Rising Star in one quadrant.

The 2021 ISG Provider Lens™ Enterprise Application-as-a-Service Platforms report for the global market is available to subscribers or for one-time purchase on this webpage.

About ISG Provider Lens™ Research

The ISG Provider Lens™ Quadrant research series is the only service provider evaluation of its kind to combine empirical, data-driven research and market analysis with the real-world experience and observations of ISG's global advisory team. Enterprises will find a wealth of detailed data and market analysis to help guide their selection of appropriate sourcing partners, while ISG advisors use the reports to validate their own market knowledge and make recommendations to ISG's enterprise clients. The research currently covers providers offering their services globally, across Europe, as well as in the U.S., Germany, Switzerland, the U.K., France, the Nordics, Brazil and Australia/New Zealand, with additional markets to be added in the future. For more information about ISG Provider Lens research, please visit this webpage.

A companion research series, the ISG Provider Lens Archetype reports, offer a first-of-its-kind evaluation of providers from the perspective of specific buyer types.

About ISG

ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 700 clients, including more than 75 of the world’s top 100 enterprises, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,300 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data. For more information, visit www.isg-one.com.

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