Taking the temperature of the SaaS market

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If your company's future involves SaaS applications, Montclare's research tools are well worth a look.

The pros and cons of SaaS applications are well known — and the pros greatly outweigh the cons, if we're to believe the analyst predictions. IDC, for example, forecasts that the worldwide SaaS market will reach $50.8 billion by 2018, up from $22.6 billion in 2013 — a compound annual growth rate (CAGR) of 17.6 percent for the five-year period.

"Demand for SaaS enterprise applications is accelerating and exceeding the demand for on-premise applications by five times...Generally, wherever new enterprise application software is required, the expectation is that SaaS applications are preferred, particularly for customer relationship management and enterprise resource management applications. However, most of the enterprise software currently in use today and in the near future remains on-premise, particularly in the areas of supply chain, manufacturing, and engineering," said Christine Dover, IDC's research director for enterprise applications and digital commerce.

Clearly there's going to be an increasing amount of choice in the SaaS market, which will make high-quality comparative research material extremely valuable. Two such resources are the SaaS 1000 and SaaS 250 from research and consulting firm Montclare.

SaaS 1000 and SaaS 250

The SaaS 1000 is a $995 Excel spreadsheet with the following data on the 1000 'most relevant' SaaS companies worldwide: company name, business model (SaaS or hybrid), 2013 revenues (ranges), public or private (inc. ticker symbol for public companies), Montclare SaaS 250 ranking (see below), primary solution area, website address, city, state/province, country and region. More depth is provided by the SaaS 250, which claims to identify "the world's most influential SaaS companies" and costs $2,999 for a 12-month subscription. The regularly-updated SaaS 250 uses a proprietary algorithm to analyse 20 out of a total of 60 data points per company, selecting the top 250 firms from over a thousand ISVs. The results are delivered as ranked listings, charts and maps, with an accompanying narrative, all packaged in an interactive browser-based interface.

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Here are some highlights from the SaaS 250.

Ranked listings
There are eight Top 10 lists (Overall, Hottest, Growth, Innovative, Public, Private, Hybrid, PaaS), each with accompanying bullet points on the companies concerned. Here are Montclare's ten most innovative SaaS companies:

saas-250-innovative.jpg
Image: Montclare SaaS 250

The SaaS 250 listing, and the Top 10 lists (without the commentaries) are available for free on Montclare's website. An extra listing, not available on the website, is Montclare's '25 To Watch' — a collection of SaaS companies that just failed to make the 250 cut, but "show future promise through their product and service offerings, growth, or the way they approach and operate in the SaaS market".

Animal metaphor
Montclare characterises SaaS companies on two axes: business model (hybrid or pure SaaS) and revenue (>$1 billion, >$100m, >$25m, <$25m). Hybrid companies are colour-coded in blue and differences in size mapped to various animals — elephants, bears, rams and rabbits. Pure SaaS companies are green and come in the shape of rhinos, lions, deer and squirrels. According to Montclare "the animal classification system imparts unique insights, and gives our report much more depth than traditional rankings". At the moment, just as they do on the savannah, the elephants outweigh the rhinos:

saas-250-animals.jpg
Image: Montclare SaaS 250

Funding
Along with M&A and IPO activity, the SaaS 250 examines the funding picture, in terms of SaaS company valuations and venture capital investments. Montclare notes that workforce management companies, led by Workday and Cornerstone, received particularly high valuations during 2013 and 2014 (averaging 11.7x across the category), followed by vertically-oriented companies like Athenahealth and Veeva Systems (averaging 8.4x across the category). When it comes to venture capital investment, the majority of the action is among the small and mid-sized pure-SaaS companies (squirrels and deer, in Montclare's terminology):

saas-250-venture.jpg
Image: Montclare SaaS 250

Growth
Although SaaS companies are located the world over, the heartland of the SaaS 250, with 215 firms, is North America. Unsurprisingly, many (139) are concentrated in the western US. Only six SaaS 250 companies — including Huddle, Mimecast and CloudPay — are located in the UK:

saas-250-map.jpg
Image: Montclare SaaS 250

DIY data exploration

There's a lot more to explore in Montclare's browser-based tool, and if you want to slice and dice the information yourself, you can download a spreadsheet containing a subset of the SaaS 250 data. If your company's future is likely to be bound up with cloud-based software, the SaaS 250 is well worth a look.


Acknowledgments
Thanks are due to Montclare for giving Tech Pro Research access to the SaaS 1000 and SaaS 250.

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