SaaS revenues rise 60 per cent as PwC calls time on the Pure Play era
New data from PwC shows that whilst the top companies in the software industry recorded a low 5 per cent increase in total software revenues for 2012 to reach $255bn, Software-as-a-Service (SaaS) revenues in the top 100 increased by 60 per cent to $20bn. This is evidence, says PwC, of a consistent and growing shift towards SaaS.
It’s not the only change in the industry. Other trends identified in the annual report include a move towards ‘ease of use’, competition from hardware companies adding their own software, and non-technology companies digitising their products and services with software.
“As markets and resources expand globally, it’s not out of the realm of possibility we may see non-traditional companies enter future Global 100 rankings,” said Mark McCaffrey, Global Software Leader, PwC. “Boundaries between hardware and software are blurring as technology products are being commoditised and companies are looking to the value of software to act as a differentiator. While challenging, as competition over innovation increases, we’ve entered a period of great opportunity for those who plan and act strategically.”
Software companies are moving away from developing complex products and towards ‘easier to use’ applications that can be offered as a service in the cloud or installed and run on computers in the building of the person or organisation using the software, rather than at a remote facility. This comes as competition intensifies from hardware firms. Previously, technology companies had clear, delineated lines of what kinds of products and services they sold and what markets were served. There was a distinct server market, storage market, enterprise software market and so forth. This is all changing.
Then there’s the affect of digitisation from non-technology companies. For example, clothing companies are delivering health and fitness information to customers by analysing information obtained from sensors embedded into garments. These businesses are now relying on software and online services for more than just marketing. As technology companies move from being ‘pure play’ operations, their entire development, sales and distribution models will be upended, according to PwC.
“The blurring of TAMs and the shift in the way companies buy technology has created a tipping point for the technology sector,” said McCaffrey. “The era of the ‘pure play’ in this sector is over. Technology companies need to decide what function they want to play and in what markets. Those who capitalise on increased digitalisation will have huge growth opportunities, and those who don’t run the risk of getting lost in the shuffle.”
Sign up to receive TelecomTV's top news and videos, plus exclusive subscriber-only content direct to your inbox.