Cloud Investors Increase Investments in SaaS and PaaS Businesses

By Erin Harrison
Executive Editor, Cloud Computing

Enterprise software companies as well as already established cloud companies will continue to actively invest in Software-as-a-Service (SaaS (News - Alert)) technologies over the next 18 to 24 months, according to new industry research.

While Infrastructure as a Service (IaaS) has led the way for cloud to gain momentum with adoption by large organizations, cloud vendors are now looking to implement SaaS and Platform as a Service, according to Headwaters MB’s Fall 2012 Cloud/SaaS Market Update.

Over the past 12 months, an increasing number of IaaS players have made acquisitions to move their companies higher up the value stack, adding SaaS and PaaS to expand their “as a service” businesses.

The industry is also seeing greater VC money being put into the SaaS market.

“The SaaS market is continuing to develop as a strong target for venture capital and private investments. During the second quarter alone, almost 63 investment deals were reached, with investments adding up to $678 million,” according to a recent IBM’s (News - Alert) Midsize Insider blog post.

While it’s clear the cloud market is large – and on an upward climb – the industry numbers vary according to the source – from $40 billion (IDC) to $109 billion in 2012 (Gartner (News - Alert)). That said, Headwaters MB’s SaaS index is up by more than 40 percent since January 2012, outpacing various market signs.

Whichever number you go with, vendors are expecting significant returns on these multi-million dollar investments in the SaaS sector, pointed out the blog’s author, Bob Prince Alo.

“A key reason for these investments is to serve the growing demand from corporate customers to sort challenges associated with big data and enterprise mobility. Despite spending on hardware and IT infrastructure, businesses remain unable to fully utilize the potential of emerging enterprise IT trends such as enterprise mobility and business analytics,” he said. “Cloud vendors are capitalizing on the fact that businesses need to harness the power of cloud technology to process demanding workloads and enable employees stay connected across disparate locales.”

In related news, International Data Corporation recently predicted that U.S. revenue in the public cloud market will grow from $18.5 billion in 2011 to $43.2 billion in 2016, which is a compound annual growth rate (CAGR) of 18.5 percent over the forecast period, TMCnet reported.

The new report focuses on the public cloud services that are shared among unrelated enterprises and consumers, open to an environment of potential users, and designed for a market, not a single enterprise. The forecast is segmented by five functional technology categories and by six vertical sectors.

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Edited by Rachel Ramsey