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

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.