The drawback of having Salesforce.com as such a dominant figure in the SaaS industry is that many casual observers form the erroneous impression that SaaS is just a handful of companies, largely confined to the CRM sector. Nothing could be further from the truth. To see the full extent of the industry you have to look beyond CRM and Salesforce.com.
CRM is just one out of several SaaS sectors, each of which is worth $1 billion (or close to it)Add these figures together and you get about $7 billion in annual revenues. Over the next few days I'm going to be attending the SaaScon conference in San Francisco and I hope to do several posts a day while it's on as there's quite a lot happening that I want to reflect on (Disclosure: I am also on the SaaScon advisory board. See my disclosure page). But I thought it would be a good idea to kick off with a posting that reveals the full extent of the SaaS industry's biggest sectors.
Web conferencing/collaboration: Add together the reported revenues of several of the leaders in web conferencing and you already reach a tidy sum: $344 million in the most recent 12 months for WebEx, $122 million for Citrix Online, and then let's add an estimated $300 million for Microsoft Live Meeting and Raindance put together. Then add in many smaller companies in the collaboration space, including IM specialist Convoq, project collaboration providers like Projectplace and online chat providers such as LivePerson. This is easily a billion-dollar sector.
Human resources/payroll: The acquisition this summer of Employease by ADP really put the spotlight on this often neglected SaaS sector. There are a huge number of players offering a variety of HR-related software services. Taleo reported trailing twelve months revenue of $87 million in its most recent quarter, Workstream $28 million. Successfactors is privately held but has 1.8 million users and a significant revenue stream. Then there's Employease itself, which I estimate in the $60-100 million range, without counting the SaaS element of ADP's existing offerings or its rival Paychex. This is easily the next biggest SaaS sector, if not the biggest.
CRM: Salesforce.com's most recent trailing twelve months revenue figure is $397 million. RightNow's is $99 million. Oracle/Siebel division CRM OnDemand doesn't break out its figures but must be $100 million plus. So that's $600 million already, without adding in the smaller players such as entellium (in which I have an investment, see disclosures), Salesboom, hosted versions of SugarCRM and the various hosted offerings from conventional vendors including SAP, Microsoft and Sage. This is another billion-dollar sector.
Supply chain and spend management: Listed expense and travel management vendor Concur is on track to come close to $100 million this financial year. Most players remain privately held, including well-funded ventures such as Ketera and Rearden Commerce (a client, see disclosure). Then there are hosted supply chain vendors such as Mitrix, Emptoris and SAP acquisition Frictionless Commerce. Plus B2B trading services such as GXS. Maybe not a billion dollar sector yet but certainly in excess of a half billion.
Web content management/Ecommerce/Email and email marketing: These three may each total a billion dollars on their own, but there are so many players, and so many of them are either privately held or part of larger organizations that it's hard to break out the figures. Maybe when I have more time I'll analyze these sectors in more detail. For now, just take it from me, they're all big.
Financials and business admin: The leader here is NetSuite, but don't discount secondary players such as Intacct or regional players such as UK-based WinWeb or Netherlands-based Twinfield. Don't forget, either, that Intuit has a hosted version of QuickBooks. This is another half-billion or more sector.
Add these figures together and you get about $7 billion, which equates to somewhere between 3 and 5% of the global software market, depending on whose figures you use. I probably missed some sectors too. So don't dismiss SaaS as just a sideshow. This is a major part of today's software scene, and it's growing rapidly — this time next year it should be within striking distance of being a $10 billion industry (if it isn't already).