It’s hard to predict what lies ahead in the SaaS industry. But there are some current trends that can help us see where we're headed. Let's take a look at ten predictions for what might happen in the SaaS marketplace as well as a few thoughts on future trends.
New entrants into the SaaS space are a phenomenon that has been going on since long before Marc Benioff coined the term "software-as-a-service."
Product companies ranging from Apple to Google have entered the B2B world by launching their products in a software-as-a-service (SaaS) model.
Another example is Amazon Web Services (AWS), which offers cloud services that are used by companies that build SaaS products. For example, AWS powers many of the major SaaS tools including Cloudflare, ZenDesk, etc.
Even traditional product companies like Oracle have joined the fray by launching their own proprietary software-as-a-service (Oracle Saas) offerings.
It's quite an exhibit that there will be a new wave of new entrants, potential acquirers, and products.
Many of today's leading SaaS companies began by providing a single solution – often a simpler, more narrowly scoped version of an on-premise software product. Notable examples include Slack (team communication), RingCentral (enterprise communications),
The balance of power in the SaaS market has been disrupted as other companies (who were not typically) software companies enter the space with new and innovative products.
As a corollary to this trend, traditional software vendors have launched their own SaaS products to address new markets in which they may not have been traditionally active. But the marketplace will remain healthy and vibrant.
The rise of artificial intelligence will cause SaaS vendors to have a new and different approach for everything, be it product design, marketing, or sales.
The most recent advances in artificial intelligence (AI) are changing the way SaaS companies do business. These developments will ultimately impact the SaaS industry. One big example is recently released, Google Brain is a deep learning neural network designed to simulate human thinking.
As claimed by Alphabet Inc., Google’s parent company - In 2016, Google Brain was used to creating a program that could design its own software.
Now, Google Brain is being put to work for enterprise-class machine learning tasks, including speech recognition and image analysis, such as detecting cancer in medical images. This technology looks promising to replace many jobs that are currently done by humans.
AI will have an increasing impact on the SaaS industry in many ways.
Micro-SaaS is a new industry term for SaaS products that are delivered in low complexity and low cost, to niche markets. The service tiers and pricing models for Micro-SaaS are more akin to the "freemium" model than traditional SaaS offerings.
With a prominent growth in the SaaS industry, Micro-Saas startups will be able to provide more generalized services with higher adoption rates as they continue to refine their offerings.
This will allow for these micro-SaaS startups to become more viable companies in the SaaS marketplace as they grow their customer bases. Check out why micro-SaaS is the future in SaaS?
There are a number of micro-SaaS products that you can use regularly. For example, Amazon Assistant offers product comparisons and Grammarly provides grammar checking in Google Docs and MS Office. Some of these tools come as small browser extensions but add a big value to your work.
With the development of Micro-SaaS, we can see that there are ambitious goals for the United States. We see that by 2022, the market is predicted to grow to 6 million customers in the US which will amount to a 25% growth rate. It's projected that by 2020, this number will be at 3 million customers and it will be growing exponentially.
There has been much discussion about the move of IT sector spending from hardware-based products to software solutions and services. It's projected that by 2015, IT enterprise software spending will reach $264 billion dollars, source: Gartner.
Needless to say, this is great news for SaaS companies and up-and-coming startup founders. The benefits are twofold: a) all products are cloud-based and easily upgradeable to keep up with technological advances; b) SaaS solutions can be purchased on a pay-as-you-go basis, an attractive proposition for companies that might only need the product or service for a short time.
You'll see this trend continue as more IT companies shift budgets from hardware and services to software and hosted solutions.
With the high costs of data centers and hardware, many businesses are choosing to go cloud-based for their data storage needs. Examples include companies such as Box, Dropbox, Google Drive, and Microsoft Office 365.
For the past several years, the SaaS market has been characterized by a slight contraction in revenues. In 2017, the total increase in SaaS sales was 1% more than it was in 2016 figures.
Some of this is due to growth in on-premises software but it also appears some founders and investors in the market are taking a more cautious approach to expansion.
However, one area of growth seems to be tied directly into SaaS R&D spending. Most companies that are investing heavily in Research & Development (R&D) originally came from the enterprise software market but have grown into this space.
Companies that are investing in SaaS R&D include Google, Box, Dropbox, and Microsoft Office 365. The benefits of these companies spending money on Research & Development are the continual innovation to the market and staying ahead of the competition.
If you're not familiar with APIs, think of them as a set of instructions that allows your business to connect to other businesses or systems. By using an API, you'll have access to data from various sources all in one place.
APIs are the core technology behind how most software-as-a-service (SaaS) solutions work, and they are a fundamental feature of cloud computing.
One example of how APIs are changing the game is with Uber and Airbnb. Each company is developing its own API to connect drivers and hosts with people looking for a ride or place to stay, but neither wants to be limited to one city.
There are some great exhibits of how companies like Uber, Airbnb, and Facebook have built platforms to support their ecosystems of businesses that rely on them.
You must know that the trend toward a more connected, software-as-a-service world will continue. As it does, you will also see more and more APIs being offered by the software-as-a-service companies you use.
Commodity software is software that's available in a store, such as Windows, Photoshop, etc. Commodity software is designed for a specific customer base and often requires customization by the user.
Initially, SaaS providers were predominantly technology companies with their own infrastructure. The days of companies paying top dollar for expensive, proprietary solutions are quickly becoming part of the past.
Big companies like Microsoft and Adobe have now entered the SaaS marketplace by providing their own productivity suite.
The commoditization of software has occurred with the rise of sellers who offer professional solutions at a fraction of the cost through SaaS.
For those who are not familiar with the term, long tail refers to a business’s ability to maximize its sales by catering to niches rather than focusing only on hits.
This prediction is based on the idea that SaaS companies with a small number of customers will be successful. This is because their long-tail strategy allows them to have many individual customers at lower costs and still be profitable.
A small start-up could also benefit from the long tail by providing niche targeted products that would not interest competitors. For example, a social network for pet owners. Or an app that teaches you new latte art every day.
The niche apps may attract a smaller number of customers–the long tail–but the revenue generated will be more than enough to cover costs and produce profits.
Bigger companies will partner with smaller, more nimble SaaS providers to offer complementary products and services. For example, Oracle recently announced that it has partnered with HighJump Software to offer a hosted customer relationship management platform.
It’s easier for larger corporations to acquire small companies and work with more specialized partners to improve other areas of the business. In this case, Oracle’s customers will be able to benefit from HighJump’s outstanding customer service, which is a frequent concern for large organizations.
Moreover, Oracle will benefit by pushing more customers towards its other offerings that were previously not as relevant to smaller businesses.
To summarise everything: The SaaS marketplace will continue to evolve and the balance of power will be disrupted. The rise of AI, growth in enterprise AI, and more commoditization of software are all promising future trends for this industry. These changes may make it easier for SaaS startups with new ideas to get their products out there as well as shorten the time from idea to trial.
We will also see bigger companies partnering up and offer SaaS products and services which is something that we haven’t seen before but could possibly lead to more innovation in both areas. Although it can be difficult to predict what lies ahead in the SaaS industry. But observing the current trends can help us see where we're headed.
The ten predictions above for what might happen in the SaaS marketplace as well as a few thoughts on future trends were just ideas accumulated through keen observation.
Whether you’re an established SaaS company or just getting your feet wet with this space, these insights should give you plenty of ammo when planning out your own strategy and product roadmap.
In, case you need someone to talk it through, book a discovery call with us.
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