$1 trillion baby: How SaaS rose from traditional software’s ashes

The global market for SaaS (software as a service) has been forecast to hit A$1 trillion in the next six years – and a number of Australian businesses are well-positioned to ride the wave.

The global market for SaaS (software as a service) has been forecast to hit A$1 trillion in the next six years – and a number of Australian businesses are well-positioned to ride the wave.

The SaaS industry has come a long way since its origins around the turn of the century. Indeed, it was just five weeks after the world survived the Y2K bug threat that a then-young company called Salesforce boldly – and perhaps cheekily – declared ‘the end of software’.

While the company may have been guilty of a little marketing hyperbole, Salesforce did change the world by pioneering SaaS, which has since become the dominant software model of the 21st century, powering the likes of Xero, Microsoft Office, Amazon Web Services and Zoom.

With SaaS, users don’t purchase and maintain software. Instead they log in via the internet, and a provider manages application access, performance, security and storage.

Traditional business software solutions generally demanded large upfront investments in exchange for a limited number of installations, with each corporate customer required to provide their own energy, servers and storage, as well as planning for upgrades and disaster recovery.

So it’s perhaps little surprise that the capex reductions, rapid deployment, scalability, advanced security and other advantages that SaaS offers have proved such a winning combination.

Today, Salesforce has a market cap of almost A$250 billion, while the global market for SaaS is forecast to grow from $190 billion in 2021 to over $1 trillion in 2028, at a CAGR of 27.5%.

One Australian business on the SaaS train is ASX-listed tech company AD1 Holdings (ASX: AD1), which has a growing portfolio of market-leading software businesses and a corporate mission to deliver strong shareholder returns from its global SaaS brands.

AD1 – which experienced a revenue CAGR of 65% from FY19 to FY21 – owns four SaaS businesses, operating across the recruitment, mentoring and energy retail sectors, with annuity-like revenues and a large, sticky customer base in 26 countries.

CEO Brendan Kavenagh said AD1’s customers ranged from SMEs and big businesses to government entities such as the Australian Department of Defence, Royal Australian Airforce, NSW Government and the US Department of Labor. 

He added that the NSW Government recently renewed its contract with AD1 for continued delivery of its ApplyDirect recruitment solutions software, which is used across all NSW Government departments to advertise open roles.

To stay up to date with AD1 news and announcements, register your details here.

Reach Markets have been engaged by AD1 Holdings Ltd to assist with their communications and may receive fees for its services.

Sources:

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