Pandemic Renders Consolidation Of SaaS Market More Likely Than Ever

In 2019, Oracle CEO Mark Hurd shared his thoughts on the consolidation of the SaaS market: "It will be a long tail, but many of the companies will go away," the executive said during Oracle's Media Day.

Become a Subscriber

Please purchase a subscription to continue reading this article.

Subscribe Now

"By the early part of the next decade, 40% to 50% of workloads will be in the cloud," Hurd predicted. "Last year alone, 15% to 17% of data centers in the United States closed. That shows that companies are getting out of their fixed spend."

He suggested that by 2025, two companies would account for 80% of all SaaS revenue.

Cloud suites from trusted providers offer the full spectrum of benefits of cloud services with complete integration across all products, from human capital management to enterprise resource planning in both front- and back-office operations.

Businesses who can’t invest in more advanced and modern capabilities will not be able to keep up as enterprise platforms gain momentum. Eventually, small organizations will be absorbed by larger competitors, creating an industry-wide consolidation.

Opinions on the subject differ, as consolidation can be harder than it looks, while software mergers and acquisitions are relatively tame. However, this has changed dramatically in the last year. In 2019, Salesforce spent north of $22 billion on bold, strategic acquisitions. It bought MuleSoft for $6.5 billion and acquired Tableau for $15.7 billion. Additionally, SAP now owns Qualtrics, Oracle has NetSuite, and IBM spent $34 billion to acquire Red Hat.

In a recent interview, Zoho Chief Executive Officer Sridhar Vembu warned that the pandemic could accelerate the SaaS market's consolidation. "The worldwide SaaS industry was already overcrowded and ripe for consolidation. That was also true in India," he told LiveMint. "The pandemic may force that consolidation wave."

With smaller competitors unable to keep up, large enterprises have more opportunities to grow and eventually take over smaller providers. Hurd noted at Oracle OpenWorld 2017, "You got an opportunity here to simplify while you transform. And I think people will take advantage of that opportunity. Fewer application providers. That means you have to have a suite, you have to have a platform, you have to have infrastructure."