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Everything You Need to Know About the Growing SaaS Industry Trends

EF Staff Updated on May 4, 2020

Everything You Need to Know About the Growing SaaS Industry Trends

To someone who’s just starting out, the SaaS industry might seem rather scary.

But it’s actually simpler to understand than most people realize. With the right guidance, you can use the latest SaaS industry trends to improve your business’s brand awareness, conversion rates, and overall staff productivity.

If you already operate a SaaS business, you may learn a thing or two to increase your SaaS company valuation, so don’t stop reading just yet.

The SaaS Industry in a Nutshell

SaaS stands for Software as a Service. It’s a business model where software delivery, licensing, and usage are all done through a paid subscription model. It maximizes cloud-based technology and eliminates the need for users to purchase and install individual programs on separate computers.

Generally, a SaaS business model simplifies the buying process for both consumers and service providers. For example, SaaS providers can control and manage all their customers’ accounts through cloud-based technology. This means they can deal with software bugs, glitches, and customer complaints remotely.

Meanwhile, small and mid-size businesses can exponentially lower operating costs by letting their SaaS provider handle maintenance and installation. Remember, building an in-house IT team is very expensive.

Some current facts about the SaaS Industry:

  • The industry is expected to be worth $63.6 billion dollars by 2023. This equates to a 9% growth as compared to its value in 2019.
  • A survey by OpenView reveals that 40% of SaaS businesses price their products based on the value they provide, 26% compare prices with their competitors, 25% heed the company’s best judgment, and only 9% follow a cost-plus approach.
  • Cloud-based technology will play a major role in SaaS developments as 93% of CIOs plan to integrate it into their products.
  • Microsoft holds an 18% share of the SaaS industry, making it the biggest SaaS services provider today. Other market leaders include Adobe, Salesforce, Next Ten, SAP, and Oracle.

Is the SaaS Industry Growing?

Is the SaaS industry growing? The answer is a big Yes!

The SaaS industry is a fast-paced environment where new trends and innovations are discovered on a regular basis. If you don’t make an effort to keep up with the latest SaaS innovations, your business might not make it through the next decade.

What Are the Upcoming Trends Affecting the SAAS Industry & Market?

Whether you’re a business owner in need of SaaS services or an IT firm interested in developing your own SaaS program, here are the top trends to watch out for:

Larger Presence of Artificial Intelligence

MarketWatch estimates the AI industry to be worth $191 billion by the year 2024. Meanwhile,  PWC global predicts that the industry will exceed that and hit a staggering value of $15.7 trillion by 2030! So it’s no exaggeration to say that artificial intelligence or self-learning technology might be one of the largest SaaS industry trends on the market today.

Artificial intelligence is a very complex subset of computer science. It tackles research that strives to create intelligent technology that can react and function as similarly to humans as possible.

So how does AI technology affect the programs that SaaS businesses offer? Generally, AI can help:

  • Secure data. One of the most common fears first-time users have when it comes to using SaaS is security. But AI can easily resolve this issue. SaaS providers can boost security by creating a new, unique identification and self-recovery system with the use of pattern-recognition technology and automation. This ensures that only authorized users can access their respective accounts.
  • Improve speed. SaaS companies can improve their program’s processing speed and responsiveness through AI. Some of the best systems can produce thousands of results to a single query in just a matter of milliseconds.
  • Automate server and processing systems. Perhaps AI’s biggest contribution to the SaaS industry is automation. By creating intelligent, self-learning machines, you can eliminate the need for manpower. For example, in recent years, automated chatbots have been replacing customer service representatives. This is a very cost-efficient solution that many businesses have adapted.

Integration of PaaS

The current SaaS system eliminates the need for individual licensing and installation. This makes distribution and maintenance easier for everyone involved. What worries some subscribers, however, is that SaaS businesses may be sacrificing customization for ease and convenience.

While the above statement isn’t entirely false, keep in mind that the SaaS industry is extremely fast-paced, and innovation is constantly happening. Thus, the lack of customization may only be limited to first-generation SaaS programs.

In the near future, we expect the SaaS industry to resolve this issue by offering more Platform as a Service (PaaS) options. The main difference between PaaS and SaaS is that the former is far more flexible and scalable. It offers customers the option to purchase new add-ons and updates to make their SaaS program more unique and personalized.

This flexibility provides scalability for all parties involved. For instance, SaaS businesses can improve their current services through helpful upgrades. Meanwhile, subscribers can customize their current programs to suit their changing needs and demands.

Currently, the only serious concern with PaaS is security. The provider should be able to keep up with the frequent updates and demands of their subscribers. Otherwise, the stability of their entire system will be put at risk of malfunctioning or shutting down.

Development of Mobile-Friendly SaaS Programs

During the early stages of SaaS, companies primarily focused on creating programs geared toward computer devices. Not many brands invested in creating mobile-friendly SaaS apps. There are a couple of reasons for this:

  • Technological Limitations: Mobile devices do not nearly have the same processing power as computers do. This means your phone would constantly crash and freeze if you decided to run even a very basic SaaS program on it.
  • Insufficient Market Demand: Most entrepreneurs manage their businesses on a laptop or desktop computer. Operating a business solely through the use of a mobile phone is almost unheard of. In fact, just to manage a small e-commerce store requires the use of an actual computer. So even if you did create a mobile-friendly SaaS program back then, there wouldn’t be much demand for it.

However, recent market trends now require the development of more SaaS programs geared toward mobile devices. Clients and developers have both shown interest in adopting this new technology.

The Appearance of Micro-SaaS Companies

Having a great, innovative idea is not enough to build your own SaaS company. You also need startup capital, multiple investors, and good manpower. And even if you have all of these, there’s still no guarantee that you will be able to create a successful SaaS business.

Aspiring tech brands understand this, which is why many of them devote their resources to becoming a micro-SaaS company instead. A micro-SaaS company is a brand that offers add-on services and upgrades to existing SaaS programs.

So, what does this mean for you?

  • SaaS companies can work with micro-SaaS brands to improve their products. It’s no secret that the SaaS industry is still imperfect. Therefore, having two or three brands working on a single product will definitely go a long way when it comes to software development.
  • Customers should be more satisfied with the services they’re subscribed to because they can customize their current program to suit their unique needs and demands.
  • Small business owners will have a better shot at entering the SaaS industry. As we said, creating your own SaaS program is very difficult, and thousands of developers fail annually. It is more practical to start off by entering a subset of the SaaS market.

Use of Blockchain Transactions

To make SaaS industry advancements more accessible to a global audience, the market now demands an easier, more streamlined mode of transaction. And that’s exactly what blockchain can offer.

Plenty of SaaS companies now use blockchain for regular transactions, but a lot of people are still on the fence about the general use of cryptocurrency. The primary concern is the fact that they’re not regulated. While user-to-user transactions are made simpler, these systems lack security and privacy.

There’s also the potential risk of cryptocurrency losing its value. If a user isn’t that well-informed on blockchain systems, they may lose their investments in just a matter of hours.

Despite these weaknesses, blockchain systems still show strong potential. Developers are also hard at work creating a more secure, efficient system. Thus, a time where most, if not all, SaaS companies support cryptocurrency payments, isn’t that far off.

Integration of a Pay-Per-Use Model

SaaS companies usually offer their services in exchange for a monthly, quarterly, or annual fee. This is the way it has been since the inception of SaaS services.

However, recent market trends dictate that there could be a shift in the way companies charge their users. We predict that a pay-per-use option will eventually be added.

The idea here is that users will only need to pay for SaaS services when they’re needed.  No more monthly or annual fees. This primarily benefits startups who are forced to pay monthly fees for a service they only need once a month or so.

Stronger Brand Recognition

During the early years of SaaS technology, companies primarily focused on innovation. Their main goal was to bring something new to the table.

In fact, up until a few years ago, not many software developers paid much attention to branding. Making a recent discovery in an unexplored area of computer science was already enough to disrupt the market.

But with the saturation of the SaaS industry, innovation becomes less of a concern as more brands begin to offer the same services. Companies will start to shift their focus toward becoming a brand leader.

Positioning yourself as a pioneer greatly affects how consumers see you. Users are more likely to trust a brand backed by years’ worth of experience than one that has only been around for a few months. Of course, that doesn’t mean fledgling companies don’t have a shot at the top.

Plenty of factors come into consideration, such as a program’s user interface, pricing models, payment options, and of course, brand presence. In the coming years, we predict that plenty of brands and companies will be competing for the number one spot at being recognized leaders in the SaaS industry.

Integration of MLaaS and SaaS

MLaaS stands for Machine Learning as a Service. It’s a piece of technology incorporated in various devices ranging from exclusive, high-grade computer programs to our everyday smartphones.

MLaas provides us with an array of services, including data visualization, cloud data computing, face recognition, and even predictive texts. Basically, it’s a self-learning piece of technology that recognizes patterns.

However, don’t confuse MLaaS with AI. Artificial Intelligence is a larger subset of computer science and focuses on creating technology capable of producing human-like reactions. MLaaS is limited to self-learning through repetition.

By incorporating MLaaS to software programs, modern SaaS providers won’t have to invest as many resources as their predecessors did. MLaaS learns and adapts to changes on its own, so the required manpower may be very minimal.

The Unbundling of SaaS Platforms

Traditionally, most SaaS providers try to jam as many services as they can into a single tool. This may be useful when it comes to customer acquisition because you can entice prospects with a multitude of offers and services. However, this strategy doesn’t do so well when it comes to customer retention.

No matter what industry you’re in, you have to remember that there’s no one-size-fits-all solution to your customers’ issues. You have to deliver unique, personalized products if you want to keep your clients happy.

In light of this, we predict that more SaaS providers will begin to unbundle their products and platforms in the coming years. No more bundled packages filled with the same, saturated services.

By breaking down your core offers, you can provide exactly what your clients are looking for. This might seem time-consuming, but it’s actually far more efficient than forcing clients to subscribe to services they don’t really need.

Vertical SaaS Products

Most pioneer SaaS providers strove to create horizontal products that could be used across all sectors. Thus, whether a user was in sales, marketing, real estate, or IT, they would be able to use the software.

This may have been fine during the early years of SaaS, but with more competitors entering the scene, the market now demands industry-specific solutions.

Some factors that need to be considered in order to make vertical SaaS products include:

  • Customer Feedback: Conducting surveys and studies to identify the needs and pain points of your target market will be very beneficial. It doesn’t even have to be a full-blown research project right from the get-go. You can start by posting simple polls on social media.
  • Potential Value Added: For any SaaS product to sell, it has to provide value to its users. It can be through the automation of tasks such as bookkeeping, lead generation, or customer service support.
  • Industry-Specific KPIs: Integrate a unique KPI system into your SaaS software. It needs to be simple yet comprehensive enough to conceptualize the user’s long-term business performance.

Rise of SaaS Thought Leaders

When we think of SaaS, the first things that come to mind are automation and cloud-based technology. In fact, a lot of people assume that SaaS systems are limited to these b2b services.

However, there’s a small, growing percentage of SaaS providers that aim to become thought leaders. Rather than providing automated services, their goal is to create industry-specific, high-quality content for their subscribers.

The idea here is that consumers will pay a monthly fee to the SaaS service provider in exchange for private lessons. This includes access to eBooks, PDF documents, videos, and PowerPoint presentations, among others.

At the moment, not many SaaS businesses aim to educate. According to Callbox, only 24% of SaaS companies publish some kind of content for educational or recreational purposes. 65% only work with companies and businesses. Meanwhile, 11% of major SaaS companies don’t even have a blog.

But as we said earlier, the market is becoming extremely saturated. So it’s not impossible for more SaaS providers to focus on becoming thought leaders. This might be a niche that certain SaaS businesses specialize in and successfully exploit.

Is Your Business Ready for SaaS Technology?

The SaaS industry is a fast-paced, data-driven, and ever-changing market. It may be a fairly new concept, but the industry is predicted to explode in the coming years. As mentioned, it’s a monstrous market that’s estimated to have a staggering economic value of $63.6 billion by 2023!

So if you don’t incorporate SaaS products into your business soon, you might get left behind by your competitors. Not to mention that its stock prices can spike any time soon.

But before you decide to subscribe to SaaS systems, be sure to ask some important questions:

  • What value will a SaaS subscription add to your business? This is the very first thing you need to consider when looking for SaaS software. As a general rule, opt for one that’s specific to your industry and offers exactly what your business is lacking.
  • Can your current system handle the SaaS software you plan to subscribe to? Let’s say you find the perfect program. The next thing to consider is your current computer system. Keep in mind that some programs have specific processing requirements.
  • Is your data protected? Never subscribe to a SaaS system with a flimsy security network. The privacy of your company’s data should be of the utmost priority.
  • Can you afford it? This is self-explanatory. Only subscribe to SaaS programs that are within your company’s budget. Your system should produce more money than the amount it costs to run every month.

Owning a SaaS company

With the trends moving in an upwards trajectory now is the time to get into the SaaS world.

Believe it or not, you don’t have to be an experienced developer to create a SaaS company. Purchasing a business that is established and is already turning a profit has become easier than ever.

Take a look at the SaaS companies for sale on our marketplace.

Confused by how SaaS companies get their valuation? Well, you’re not alone. To answer these questions we’ve written a guide that aims to explain SaaS valuation metrics.

To speak to one of our experienced business analysts you can schedule a call. They will be able to guide you through the process of buying an online business.

Maybe we’ll see you feature in one of our future trends.

Schedule a Call

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