Go to Market Cloud Computing Research

Go to Market Cloud Computing Research – SaaS Industry Metrics – Growth by Size of Company

  • The graphic below, provided by Pacific Crest Securities(registration required) represents SaaS companies that have more than $2.5M in annual revenues.
  • The fastest growing segment of those surveyed were SaaS companies whose annual revenues were between $7.5M – $15M, over 60%.
  • The growth rate of SaaS companies surveyed whose revenues were in excess of $100M had a median growth rate of 28%.

SaaS Benchmarking Stats - Median Growth by Company Size

 


Go to Market Cloud Computing Research – SaaS Industry Metrics – Sales & Marketing Costs

  • CAC Composition: Sales vs. Marketing Cost % of CAC
  • Overall, the median company in the survey devoted 30% of their CAC to marketing expenses, with the balance (70%) allocated to sales. However, ecommerce driven companies have a much greater reliance on marketing and those companies spent 65% of the median company’s CAC budget on marketing.

    SaaS Benchmarking Stats - Sales & Marketing Cost

     


Go to Market Cloud Computing Research – SaaS Industry Metrics – Spending Levels & Growth Rates

  • Sales & Marketing Spend & The Corresponding Growth Rates (Excluding Companies with less than $2.5M in annual revenue)
  • Based on the survey respondents, there was a clear correlation between sales and marketing spend and the overall growth rate of the company.

    SaaS Benchmarking Stats - Spend & Growth

     


Go to Market Cloud Computing Research – SaaS Industry Metrics – CAC Ratio Detail

  • CAC Ratio on New Customers vs. Up-sells vs.Expansions vs. Renewals – excluding SaaS companies with annual revenues below $2.5M
  • Median $1.13 (range spans from $0.98 to $1.38
  • Approximately half of the survey of respondents spent $.75 – $1.50 to generate $1 of new ACV

SaaS Benchmarking Stats - CAC Ratio

 


Go to Market Cloud Computing Research – SaaS Industry Metrics – CAC Ratios

  • Excluding SaaS companies with less than $2.5M in annual revenues, the median CAC spend was $1.13

 

SaaS Benchmarking Stats - CAC Ratio Detail

 


Go to Market Cloud Computing Research – SaaS Industry Metrics – Contract Size

  • Excluding SaaS companies with less than $2.5M in annual revenues, the median growth rate for SaaS companies surveyed was 35%.  Below is the detail of growth rate by company size.

SaaS Benchmarking Stats - Contract Size

 


Go to Market Cloud Computing Research – SaaS Industry Metrics – Contract Size

  • Excluding SaaS companies with less than $2.5M in annual revenues, the median growth rate for SaaS companies surveyed was 36%.  Below is the detail of growth rate by target customer.

SaaS Benchmarking Stats - Target Customer Size

 


Go to Market Cloud Computing Research – SaaS Industry Metrics – Up-sells & Expansion Revenue

  • Based on the SaaS companies surveyed, 15% of new ACV was derived from up-sells and expansion sales.
  • In general, there was a direct correlation between annual revenues of the SaaS companies surveyed and the contribution from up-sells and expansion sales (exception of companies with revenue greater than $75M annually).
  • SaaS Benchmarking Stats - Up-sells & Expansion

Go to Market Cloud Computing Research – Gartner Says $111B In IT Spend Will Shift To Cloud By 2020

Gartner expects that more than $1T in IT spending will be directly or indirectly affected by the shift to the cloud by 2020.

By 2020, Gartner expects that 43$ of Business Process Outsourcing spending and 37% of application software spending will shift at will shift to the cloud .

Go to Market Cloud Computing Research - Cloud Spending by Software Segment

 

What’s driving the shift in IT spending towards the cloud?

  • Supporting new business models
  • Revamping business processes to be customer focused
  • Staying in step with how customers are changing where and how they buy

 

Go to Market Cloud Computing Research - IT Spending ShiftKey takeaways:

35% of theBusiness Process Outsourcing IT spend, or $42B, or 35% of the total market, is forecast to shift to the cloud this year

25% of the Application Software spending, or $36B, is predicted to shift to the cloud this year

Gartner expects that the most significant shifts in IT spending to the cloud include Business Process Outsourcing (BPaaS) and application software.

Gartner expects 43% of all IT spending on Business Process Outsourcing (BPaaS) to be cloud-based through the forecast period (2020).

Gartner expects 37% of application software spending will shift to the cloud

10% of application infrastructure software is expected to shift to the cloud by 2020

Source: Gartner


Go to Market Cloud Computing Research – Gartner Says by 2020 “Cloud Shift” Will Affect More Than $1 Trillion in IT Spending

In Gartner’s Go to Market Cloud Computing Research, the expectations is that more than $1T in IT spending will be impacted by the cloud by 2020 and that should benefit startups that are built from the cloud up.

Gartner expects at least $1 trillion in IT spending to be impacted over the next five years as enterprises move to the cloud.  The absolute dollar amount is stunning and could therefore be considered one of the most disruptive forces of IT Spending.

The adoption of cloud computing has moved to the mainstream market (early majority) and it represents a significant percentage of total IT spend.

Go to Market Cloud Computing Research - Gartner Shift From Traditional IT Spending to Cloud SpendingIn the Market Insight: Cloud Shift — The Transition of IT Spending from Traditional Systems to Cloud there is a more detailed analysis.  The press release can be found at here >>

Below are some highlights from the report.

Go to Market Cloud Computing Research - Gartner Cloud Shift Spending Summary by Market SegmentGo to Market Cloud Computing Research – Legacy Segments: Business Process Outsourcing

  • Cloud Segment: BPaaS
  • Total market size in 2016: $119B
  • Total cloud shift in 2016: $42B
  • Cloud shift rate through 2020: 43%
  • Cloud Segment: SaaS
  • Total market size in 2016: $144B
  • Total cloud shift in 2016: $36B
  • Cloud shift rate through 2020: 37%

Go to Market Cloud Computing Research – Legacy Segments: Application Infrastructure Software

  • Cloud Segment: PaaS
  • Total market size in 2016: $177B
  • Total cloud shift in 2016: $11B
  • Cloud shift rate through 2020: 10%

Go to Market Cloud Computing Research – Legacy Segments: System Infrastructure

  • Cloud Segment: IaaS
  • Total market size in 2016: $294B
  • Total cloud shift in 2016: $22B
  • Cloud shift rate through 2020: 17%

IT spending is steadily shifting from traditional IT offerings to cloud services (cloud shift)

The aggregate amount of cloud shift in 2016 is estimated to reach $111 billion, increasing to $216 billion in 2020.

Enterprises are pursuing a new IT architecture and operating philosophy as they become prepared for new opportunities in digital business

Enterprises that embrace dynamic, cloud-based operating models position themselves better for cost optimization and increased competitiveness


Go to Market Cloud Computing Research – Pacific Crest 2015 Private SaaS Company Survey: Summary of Results

This Pacific Crest 2015 Private SaaS Company Survey provides insights into private SaaS companies and it is the sixth such survey Pacific Crest has completed.

Go to Market Cloud Computing Research – Pacific Crest Key Takeaways

  • The median revenue growth achieved in 2014 was 44%, while the median projected growth for 2015 is 46%.
  • Median 2015 GAAP Rev Growth ~ 36%
  • Median growth among field sales dominated companies slightly lagged inside sales dominated companies (by 6% points), but led internet sales by 8% points
  • Field sales remains the most common distribution channel (41%) – 32% if companies with <$2.5MM in revenues are excluded
  • Analyzed by contract value, field sales dominates for companies with median deals over $50K
  • Among companies selling $15K-$50K ACV
    • Larger companies tended to favor field
    • Inside sales driven companies had slightly higher efficiency, as reflected in $/FTE, however CAC, S&M expense ratios and growth were virtually identical
    • Gross churn was higher for inside, but net dollar retention was also higher, suggesting more success with “land-and-expand”.
  • Respondents (excluding the smallest companies) spent a median of $1.18 to acquire each dollar of new ACV from a new customer. The result drops to $1.06 if companies with <$2.5MM in revenues are included
  • The median CAC per $1 of up-sells is $0.28, or about 24% of CAC to acquire each new customer dollar. The CAC for renewals is $0.13, or 11% of the CAC to acquire each new customer dollar
  • Field sales has the most expensive CAC at $1.14, followed by inside sales at $0.90. Channel and online distribution have significantly lower CACs at $0.66 and $0.42, respectively
  • Overall, the median company devotes 31% of their CAC to Marketing expenses, with the remaining 69% allocated to Sales. However, Inside Sales- and Internet Sales driven companies have a much greater reliance on Marketing, with 38% and 65% of their CAC budgets devoted to Marketing, respectively
  • Field Sales dominated companies have 20% longer CAC payback periods than those primarily using Inside Sales, which in turn have approximately 20% longer CAC payback periods than those relying primarily on Internet Sales
  • The median respondent gets 16% of new ACV sales from up-sells; larger companies rely more heavily on up-sells
  • Median subscription gross margins are 78%
  • Approximately 30% of companies derive some amount of new ACV from “freemium” strategies, though virtually no one drives their business on it. “Try Before You Buy” is much more commonly used: 60% derive revenues through this strategy, and 30% derive the majority of their new ACV through “Try Before You Buy”.

Go to Market Cloud Computing Research - Pacific Crest 2015 Private SaaS Company Survey: Summary of Results

Go to Market Cloud Computing Research – Survey Sample

  • Responses from senior executives at 305 companies
  • 133 companies with greater than $5M
  • 57 companies with greater than $25M
  • 70% of participants headquartered in the U.S.
  • $21K median annual contract value (ACV)

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