Some Thoughts on As-a-Service and Enterprise Software

When it comes to the cloud, anything and pretty much everything is being presented As-a-Service (aaS). This encompasses several different areas, types, and flavors, from Platform as a Service (PaaS) to Infrastructure as a Service (IaaS), Software as a Service (SaaS), and so forth. More and more modern-day enterprise software is being updated, repackaged, and presented as a SaaS offering. This “transformation” should have an everlasting and direct effect on the non-SaaS enterprise software markets. At least, that is what I expect to happen. After all, that is what the technology industry is all about: change.

The cloud industry, as a whole, is continuing to show strong momentum, and with that, strong double-digit growth year over year with forty-two percent growth in 2017. Here is an interesting tidbit of information: currently Microsoft and Amazon make up fifty-five percent of this industry, while at the same time Microsoft continues to grow at an accelerated pace. Sourcing my information from Cleveland Research, Company Reports, and CRC Estimates, let me present the breakdown of the reported revenue of some of the As-a-Service industry providers.

Starting off back in 2012, Amazon reported As-a-Service revenue of around $1.96 million and has seen consistent growth ever since. In 2013, revenue was reported as $3.1 million, a fifty-nine percent increase year over year. In 2014, the revenue was reported as being around $4.6 million, an almost fifty percent increase year over year. 2015 was a banner year for Amazon in this space, with revenue being reported around $7.9 million, a seventy percent increase year over year. Starting in 2016, revenue growth started to lose its momentum, with reported revenue coming in at around $12.2 million, a fifty-five percent increase year over year. In 2017, the estimated revenue has been set at $17.1 million, which would mean an increase of forty-one percent year over year, and Amazon has estimated 2018’s revenue to be $23.2 million, an increase of thirty-five percent year over year.

Microsoft started to get into the mix around 2012 and has been on fire since. In 2012, reported revenue was about a half-million dollars, and in 2013, that revenue was reported as $1.2 million, a 150% increase from 2012. In 2014, Microsoft got really busy, with revenue reported at $4.7 million, an amazing 277% increase year over year. In 2015, the revenue was $7.98 million, a sixty-nine percent increase over 2014. In 2016, Microsoft reported revenue at $12.3 million, a fifty-four percent increase year over year.  Microsoft believes that 2017 and 2018 will continue to be strong, with 2017 estimated at $18.6 million and 2018 estimated at $26.9 million. These estimates represent increases of fifty-one and forty-five percent increases year over year, respectively.

As I mentioned earlier, although Microsoft and Amazon represent fifty-five percent of the total market, there is another company to keep an eye on, and that company is Alibaba. Alibaba first reported aaS revenue in 2013 at around $128,000. In 2014, it had a modest increase of eleven percent from 2013, with revenue reported at $142,000. Things started to really take off for Alibaba in 2015 and 2016, with both years having triple-digit growth: a 158% increase in 2015 and a 122% increase in 2016. Alibaba has estimated it will see a ninety-seven percent increase year over year in 2017, and estimates 2018 revenue of around $3.0 million, an eighty-four percent increase from 2017. Alibaba is on a roll, and it will be interesting to see how long it can keep the momentum going.

With the solid growth in the aaS marketplace, you would think there would be a direct correlation with the reported revenue from enterprise software, and there is a downward trend. In 2011, Microsoft reported earnings of $57.1 million, and in 2016, software revenue was reported at $43.8 million. Oracle’s reported software revenue was $36.5 million in 2011; in 2016, it was reported to be $25.8 million. IBM is following the same trend, with software revenue reported at $28.6 million in 2011 and $17.4 million in 2016. SAP appears to be the exception in the group, with software revenue reported at $17.67 million in 2011 and $17.1 million in 2016. It has estimated an increase of seven percent year over year for 2017 and 2018, with 2018 revenue estimated at $19.58 million. This leaves SAP as the only company with any kind of overall increase in revenue from the 2011 reported numbers.

These reported numbers are an indication of the transformation that is happening in the industry as more and more software and services are being ported over to the cloud. The above are some of my thoughts on As-a-Service and its direct effect on the enterprise software market.

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