Joyce Boland, Vice President of Applications Global Marketing at Oracle, wrote about Oracle CEO Mark Hurd’s thoughts on the consolidation of the Software as a Service (SaaS) market.
Over the past several years, IT has seen a major shift from on-premises data centers to Cloud-based SaaS applications. Many businesses realize that when shifting to the Cloud, the biggest advantage is the opportunity to fully optimize their operations for growth. Enterprise SaaS platforms offer a unified experience across all applications, which simplifies interdepartmental communications.
Cloud-based security also secures internal and external data, as opposed to having to manage many individual application security procedures.
Consolidation of the SaaS Market
As more companies make the shift, smaller SaaS companies will struggle to compete. Hurd explained that the consolidation of the SaaS market may be a long tail, but many of the companies will go away.
Hurd estimated that the current B2B applications market was valued at $125 million. Of the $125 billion, back-office applications (finance, supply chain, and HR) represented 70 percent, and front-office applications (sales, marketing, and customer service) represented 30 percent. According to Hurd, the majority of companies in this market segment still manage those applications on-premises rather than shifting them to Cloud providers.
Cloud suites from trusted and experienced providers offer the full benefits of Cloud services with full integration across all products – from human capital management (HCM) to enterprise resource planning (ERP) in both front and back-office operations. The ability to access data from a range of applications allows businesses to make more informed decisions, and those businesses that do not invest in suites exhaust time and funds on integration – hindering their ability to pull data across platforms for more informed decision making.
“It isn’t good enough to have a best-of-breed application. You have to have a suite. The front office, the eCommerce system, has to talk to the supply chain system.”
—Mark Hurd, Oracle CEO
Businesses who do not have the funding to invest in more modern capabilities will not be able to keep pace as enterprise platforms gain momentum. Such organizations will likely be absorbed by their larger competitors, which will create an industry-wide consolidation. Hurd believes that there will only be a few SaaS suite providers by the time the industry fully transitions to the Cloud. Many SaaS buyers are looking to reduce their number of vendors and are in search of an all-encompassing solution, meaning a significantly reduced number of data centers and fewer segmented applications.
According to a report by the U.S. government, 6,250 data centers in the United States alone were closed as of August 2018. There is a total of 1,200 scheduled to close by 2023. With that being the case, many of those businesses will be turning to enterprise SaaS platforms. As more businesses are turning to SaaS, the larger companies will acquire smaller competition in multiple business areas.
“The SaaS market absorbs hardware, absorbs database, absorbs middleware. So, that market actually grows exponentially by just simply having the nature of it being a very inclusive market.”
—Mark Hurd, Oracle CEO
With smaller competitors unable to keep up, this opens a door for large enterprises to grow and take over the smaller providers. Hurd thinks that larger enterprises have the opportunity here to simplify while they transform, and he thinks that they will take advantage of that opportunity.
To learn more about the SaaS market, check out the additional Oracle and Quest resources attached below.
Additional Resources
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