ISG Provider Lens™ Digital Business - SaaS Solutions - Global 2020 - Human Capital Management (HCM)
About this Report
This study evaluates the SaaS vendors that deliver human capital management (HCM), enterprise resource planning (ERP) and customer relationship management (CRM) solutions for large enterprise clients.
Top executives will find this report useful to help them decide on digital business platform choices. It helps top executives understand the nuances that differentiate vendors that are leading the SaaS market. The report takes the business perspective when evaluating SaaS source options, translating technology complexity and industry jargon into business terms such as risk, continuity, innovation, cost and business value.
The CIO will find argumentations and facts to support their technical choices when choosing HCM, ERP and CRM SaaS. The report observations and vendor profiles allow for best-ofbreed analysis versus one-stop-shop choices.
Software as a Service Observed Trends
The Software-as-a-Service (SaaS) market had been growing at a strong pace before the COVID-19 pandemic, reaching a record high in annual contract value (ACV) in the first quarter of 2020. According to the ISG Index™, which measures commercial outsourcing contracts with annual contract value (ACV) of $5 million or more, global sourcing slowed in the 2020 second quarter, as enterprises sharply reduced managed services spending to contend with the impacts of the COVID-19 pandemic, while still investing in ongoing digital transformation efforts. The global market has rebounded in the third quarter, and all indications point to slow recovery. The latest ISG Index™ shows the global SaaS market has decelerated from the second quarter, although ACV is up 2 percent from the prior year, and 3 percent higher year-to-date versus 2019. ISG is forecasting 15.5 percent growth in the as-a-service market for 2020, driven by Infrastructure-as-a-Service, with SaaS expected to be drag on results as enterprises delay decisions on major software platform purchases.
The ISG Index™ tracks a broader marker than the companies covered by this report. In 2020, the vendors included in this report continued to report a growth of more than 20 percent of their SaaS revenue, on average, while reporting reductions in their software licensing business. The market is moving from proprietary, licensed software to SaaS subscriptions. Innovation and user experience, rather than cost, are the key drivers for adopting SaaS.
AI and cognitive computing are some of the key drivers of innovation.
Many SaaS solutions offer artificial intelligence (AI), conversational interfaces and analytics out of the box, without any capital investment required. SaaS accelerates digital transformation and enables work from anywhere for enterprise clients.
Machine learning (ML) is in use to understand business data and provide predictive insights. Some of the most recent SaaS updates enable companies to understand late payments, predict cash flow and anticipate cash needs or availability. Using credit scores, AI can predict customer defaults. AI provides a more accurate understanding of seasonal impacts on revenue and sales, enabling predictive procurement. Financial planning and results forecasts can be improved by using current SaaS offerings. For HCM, AI is helping companies understand employee experience and its impact on health and productivity. Behavior analytics and sentiment analysis can predict retention and attrition. AI is accelerating the recruiting process by scanning candidates’ resumes. For CRM, AI can estimate deal close chances to predict revenue. In commerce, AI powers dynamic pricing and product recommendation. For contact center agents, AI translates voice to text to compare with previous calls and guide the next best action. AI provides real-time customer sentiment analysis, which can be used for automated call escalation when the agent's behavior can harm the customer experience.
Market consolidation
The SaaS market has an increasing number of participants, including small, niche solution providers dedicated to a single industry vertical in a limited geographic area. SaaS reduces vendor costs. At the same time, SaaS enables the scale that vendors achieve by promoting their solution to a large audience. All SaaS companies in this study have acquired smaller SaaS vendors in the last three years, except for Acumatica, which was acquired by EQT Partners, and Infor, which was acquired by its parent company Koch Industries, both in 2019. SaaS is ideal for large vendors, and ISG forecasts that market consolidation will continue.
When procuring SaaS, clients should pay strict attention to support options and the chances that a vendor might be acquired. Some vendors opt to provide customer support directly and others prefer to transfer support responsibility to partners. A larger number of partners and apps on a vendor’s marketplace is one indication of a robust ecosystem that attracts more contributors to innovation. A healthy ecosystem indicates the vendor has good chances to stay in the market. The companies that qualified for this study have met these criteria, but clients should consider the ecosystem strength and support strategy when comparing these large vendors to niche SaaS options or small vendors.
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