“The Biggest category of winners is the big data practitioners. This echoes a sentiment expressed by then Wall Street analyst Peter Goldmacher (and current Aerospike executive): The reason, as Dana Blankenhorn suggests, is that while “PaaS merely enables, SaaS delivers value.”
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As PWC writes, “Perpetual license revenue has been shrinking since 2004, while subscription revenue (including SaaS and other subscription models) is forecasted to have a 17.5% growth rate in the 2012-2016 timeframe.” There’s money in SaaS This is true of the cloud, generally, but particularly so for SaaS.
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As Tunguz writes, “While cloud software may not be able to wrest all the revenue from legacy players–there are, after all, some institutions where security remains paramount and cloud solutions just won’t fit the bill–SaaS startups have enormous opportunities before them.” Wall Street has therefore gifted the traditional vendors 82% of the market valuation for software, as Tunguz illustrates:Įven so, a quick look at the fortunes of, Workday, and other SaaS companies gives us a glimpse into the future. While SaaS currently delivers roughly $24 billion in annual revenue, traditional vendors sell 10X that ($240 billion). That’s changing, but if we look at where software value still resides, it’s clear that legacy vendors dominate, as Redpoint venture capitalist Tomasz Tunguz shows. Most IT purchases still revolve around yesterday’s software deployment model. In all the furor over Amazon’s success, it’s easy to forget that enterprises still buy lots of on-premise software. The company generated $5 billion in cloud revenue, and it keeps getting bigger.
Most of the cloud attention has lately been focused on Amazon, and for good reason. The reason? Though everyone needs infrastructure, far bigger checks will be written by the business as it dumps old-school applications. No, that distinction goes to software as a service (SaaS), a market that could dwarf the ballooning IaaS (and PaaS) markets. With public cloud VMs growing at a torrid 20x clip, billions of dollars are flowing into the public cloud.Īnd yet IaaS isn’t where the big cloud money is. Public infrastructure as a service (IaaS) companies like Amazon are on a tear. Public cloud vendors like Amazon are booming, but the biggest money is in SaaS.
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