SaaStr blog Gartner: SaaS Spending Will Grow Another 40% in Next 2 Years Alone brings some interesting data points about SaaS spending. Read the article and draw your own opinion. The actual Gartner press release is here. Few interesting passages:
Worldwide end-user spending on public cloud services is forecast to grow 23.1% in 2021 to total $332.3 billion, up from $270 billion in 2020, according to the latest forecast from Gartner, Inc. “Emerging technologies such as containerization, virtualization and edge computing are becoming more mainstream and driving additional cloud spending. Simply put, the pandemic served as a multiplier for CIOs’ interest in the cloud.”
The growth in SaaS buying should give you a +20% a year boost on top of your other sales and marketing efforts. That’s a huge tailwind. Budgets and spending are increasing a stunning 20% a year in SaaS. It’s not a zero-sum game, with stagnant budgets.
Another interesting passage speaks about the possibility for Gartner to underestimate SMB SaaS spending.
The SaaS companies with $1B in ARR have 1% of all total enterprise spend. Ok, it’s quite possible Gartner is way underestimating SMB spend here, the total spend on SaaS is likely $200B or more. Still, it’s interesting to think that the $1B ARR club at least in the enterprise is perhaps capturing 1% of all spend. E.g., if Slack at $1B is 50% enterprise, that probably means 0.5% of all enterprise SaaS spend is going to Slack. 2% for Zoom (50% of $4B in ARR). Etc. etc.
Which made me think about what is the possible implication for the PLM market. According to CIMdata, the PLM market grew by 3.5% in 2020 to a total of $53B. Check my earlier article. What segments out of the big PLM pie will be growing as a result of SaaS spending? This is a good question. My bet would be for $5B spendings for cPDM and $6B spendings for AEC. Both segments are focusing on a large portion of data management and collaboration and can be leveraged significantly from SaaS applications.
Still, the question is how AEC and PLM companies will be able to leverage the increase in spending. There are two important points here.
1- SaaS software is incredibly sticky. Once a company is starting to put their data in a SaaS application, the dependency on the service is growing substantially in the next 1-2 years. At the same time, vendors can continue to develop more services and more applications. The upsell effect can be strong because, for true SaaS software, the upsell is just another subscription update – in most situations, nothing will be installed and migrated.
2- Engineering software vendors will be focusing on growing SaaS applications in every possible way by developing and acquiring SaaS businesses. The continued M&A activities is a great confirmation of the PLM/AEC vendors’ interest to get more SaaS assets. Recent acquisitions of Arena Solutions (by PTC) and Upchain Inc (by Autodesk) create an additional sense of urgency in the market.
What is my conclusion?
The market of SaaS applications is growing substantially and having available SaaS applications assets will help vendors to collect more revenues and, most importantly, to get customers earlier in the web of their SaaS product offering. At the same time, the potential of the SaaS market can be even bigger than every SaaS software prediction. This is a good time for vendors to develop more SaaS applications and look for customers to grow the business, Just my thoughts…
Disclaimer: I’m co-founder and CEO of OpenBOM developing a digital network-based platform that manages product data and connects manufacturers, construction companies, and their supply chain networks. My opinion can be unintentionally biased.