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Microsoft Claims Salesforce Leadership Position in the SaaS Space

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Microsoft, not Salesforce, led the SaaS space in 2Q16

Earlier in this series, we discussed growth in the SaaS (software-as-service) space. SaaS and Salesforce (CRM) are so synonymous that whenever SaaS is mentioned in cloud space, Salesforce’s name automatically follows. After all, Salesforce pioneered the SaaS model, and SaaS is expected to be the fastest-growing segment of the cloud space.

However, a different story regarding Salesforce’s leadership position in the SaaS space emerged in 2Q16, when Microsoft overtook Salesforce’s in the overall SaaS space.
enterprise saas

According to Synergy Research Group’s recent report, Microsoft (MSFT), not Salesforce, is now the “overall enterprise SaaS market leader.” Despite losing its position to Microsoft in the overall SaaS space, Salesforce continues to rule the CRM (customer relationship management) space.

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Dominance in collaboration helped Microsoft emerge as leader

Collaboration, which is the largest segment in the overall SaaS space, grew 37% in 2Q16. Collaboration, in fact, grew at a faster rate than the overall SaaS space, which only grew 33% in 2Q16. Microsoft’s dominance in the collaboration segment has enabled it to achieve a leadership position in SaaS. Cisco (CSCO) and Citrix (CTXS) are also prominent players in the collaboration space.

A key factor contributing to Microsoft’s success story is its Dynamics business solutions, which is made up of Dynamics ERP (enterprise resource planning) products, Dynamics CRM Online, and Dynamics CRM on-premises.

Dynamics CRM is one of Microsoft’s core cloud offerings, apart from Office 365 and Azure, which generate the majority of the company’s cloud revenues. In 4Q16, Dynamics CRM Online seat additions more than doubled on a YoY (year-over-year) basis for the eighth straight quarter.

Notably, you can invest in the PowerShares QQQ Trust Series 1 ETF (QQQ) to gain exposure to Microsoft. MSFT accounts for 8.4% of QQQ. Investors looking for application software exposure might also consider QQQ. Application software accounts for ~28.4% of QQQ.

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