Cloud technologies have greatly changed the way business processes are organized. One of the main types of cloud computing services is SaaS (Software-as-a-Service) and that’s exactly what we are going to talk about in this article.
This blog post will cover not only the basic information about the present state of SaaS markets but will also include forecasts for the further growth of the SaaS segment as well as experts’ expectations about its future.
What is SaaS and why do businesses need these solutions?
Let us remind you that SaaS is a method of delivering apps over the internet. It means that users do not need to install any software and maintain it on their computers. Instead of that, they use applications provided and supported by a vendor and pay a subscription fee for it.
Today, many businesses are using SaaS development services to offer SaaS platforms to their clients. And this tendency can be observed thanks to the wide range of benefits and new opportunities that this model brings. Among them, we should mention the following ones:
Amazing accessibility regardless of users’ location. To get access to an app, it will be enough just to have a device with an internet connection.
Cost-efficiency. To use SaaS apps, there is no need to pay for their installation or maintenance. Vendors offer flexible payment models like pay-as-you-go which is today considered to be one of the most feasible methods for users.
Scalability. Such solutions are easily expanded and updated in accordance with any changing needs.
Improved security. Cloud technologies allow developers to introduce strong security tools that will ensure the necessary protection of sensitive business data.
Cloud storage. Companies do not need to keep on-premises servers as all data is kept in the cloud.
You can read more in one of our blog posts on creating a successful SaaS product.
If you think that SaaS solutions have a limited target audience, it is not so. Launching such a product you can be sure, that it can attract the attention of both small startups and huge corporations that work in absolutely different industries.
The huge list of advantages that SaaS products are associated with is one of the main boosters for the SaaS market growth. But is the market actively growing now? And what are other factors that have a positive impact on the SaaS market size?
SaaS industry overview
According to the data provided by the Grand View Research company, in 2021, the global SaaS market size reached the mark of $165.9 billion while the projected figure for 2022 is $186.6 billion. A CAGR (compound annual growth rate) for the period from 2022 to 2028 is expected to be around 11%.
However, these forecasts are not the most optimistic ones that researchers have today.
For example, experts at Allied Market Research believe that the SaaS market size will hit the mark of $702.19 billion by 2030 and the estimated CAGR for the period from 2021 to 2030 will be more than 18%.
The Fortune Business Insights firm also has rather ambitious predictions. While, according to their analysts, the SaaS market size was $130.69 billion in 2021, by 2028 already, this figure can be at the level of over $716 billion which means that a CAGR for the period from 2021 to 2028 can be 27.5%.
Only time will show whether these forecasts will come true. Nevertheless, already now we can analyze what factors have the strongest impact on the SaaS market growth today. The coronavirus pandemic (and especially, its first wave that was accompanied by the strictest lockdowns ever) became a serious obstacle for many businesses.
However, the SaaS industry has even benefited from the situation, if it is possible to say so. When people were enforced to stay at home and companies needed to find any possible ways to continue working in a remote format, the demand for cloud-based systems and apps drastically increased. And SaaS platforms became the right solution that helped businesses to sustain their activities and execute efficient control over their operations and processes regardless of all the newly appeared conditions.
The increasing demand from the side of companies all over the world for a single solution that will enable them to solve their business issues fully remotely regardless of the physical location of employees has become a strong trigger for the growth of the software as a service market.
Modern SaaS platforms unite under one roof a wide range of features and applications like supply chain management systems, CRM tools, business intelligence, analytics, and reporting apps, as well as eCommerce systems. Such complex systems not only increase the efficiency of employee performance but also build a ground for establishing a new type of corporate culture amid the quickly changing global conditions.
Just imagine, already in 2020 which was the year when the world faced the COVID-19 pandemic, businesses estimated that around 70% of all the apps that they used at that time were SaaS solutions. And it is believed that by 2025, the share of the SaaS apps used will reach 85%.
It is crucial to understand that with the increasing number of potential users of SaaS apps, the demand for custom SaaS development is skyrocketing as well. And the explanation for this trend is quite simple: the existing solutions that today are available on the market can’t satisfy the needs of all the companies that want to implement SaaS systems in their processes.
If you are also thinking about the launch of a solution of this type, we strongly recommend you study the SaaS industry trends that are expected to shape the market in the upcoming years.
How will the SaaS market change in the near future?
In order to succeed in launching a software product, it is vital to make sure that it satisfies the current needs of your potential users and meets their expectations when it comes to functionality, navigation, and design. That’s why we’ve decided to prepare this list of SaaS trends. We hope that this list will help you to better understand what kind of SaaS platform will bring the highest real value to users and your business.
Trend 1. Mobile-first platform development
When during the coronavirus lockdowns it became obvious that people needed to have tools that would allow them to work at any location, the demand for mobile solutions jumped.
Some SaaS vendors managed to quickly optimize their existing platforms for providing users the possibility to work with their apps on mobile devices. And it was the right decision on their side. More and more people today access the web via their mobile devices while personal computers are losing their positions.
That’s why even when you are working on the development of a business solution, it is important to make it available via a smartphone. Moreover, in many cases, it will be more feasible to start with a mobile product that will be further adapted for being used on a PC.
Trend 2. Vertical SaaS
This type of solution is built for a specific industry, for example, retail, healthcare, or education. Of course, these solutions have a lot in common but they help each business to address their needs more precisely given their industry-specific demands. Thanks to this, the work with SaaS platforms becomes more efficient and result-oriented.
With the expanding row of companies that change their business processes under the influence of the digital revolution, it has become absolutely clear that there are no “one-size-fits-all” solutions. As a result, today increased demand for custom development and industry-specific apps can be observed. Given this fact, if you are thinking about offering your clients a new software solution, vertical SaaS can be a good option.
Trend 3. Growing attention to data privacy
Data is one of the most valuable assets for any business. And that is clear not only to businesses but also to hackers and cybercriminals that every year have more and more sophisticated tools for their attacks. With the growing proficiency and skill of fraudsters, developers and product owners should focus their attention on introducing enhanced protection measures and technologies in order to make sure that all the data is securely stored and processed.
Trend 4. Third-party integrations
As we’ve already noted above, today companies are looking for cloud solutions that can provide them with access to multiple tools and apps simultaneously. And that’s when it’s time to think about integrating third-party solutions and APIs as well as joining forces with other stand-alone apps. With such integrations, you can offer users unique platforms that will unite all their business processes and data, increase transparency and visibility of all the tasks which will increase the efficiency of taken decisions and improve performance.
Trend 5. Micro SaaS products
That’s another trend that is expected to change the face of the SaaS markets. Together with the increased interest in huge SaaS solutions, there is an emerging demand for micro SaaS products that are small solutions intended for dealing with specific needs. Very often such solutions are intended for small businesses and niche markets.
Trend 6. AI and ML-powered tools
Platforms enriched with AI capacities are becoming a new standard for the SaaS industry. AI insights help to increase business process automation and cut down the number of tasks that should be performed manually. As a result, the time needed to take decisions and perform various tasks is reduced and companies have the possibility to optimize their labor force and resources.
Trend 7. Customer experience as a top priority
As SaaS businesses work on a subscription-based model, it is obvious that their profit depends on the number of clients that monthly pay for the use of their solutions. As you can understand, it is vital not only to attract new users but also to retain the already existing ones. How is it possible to do it? One of the key things here is to ensure a high quality of services, their reliability, and efficiency. That’s why SaaS companies need to continuously work on the improvement of their offers, timely introduce updates and quickly react to any reported issues. Otherwise, the risk of losing clients will be extremely high.
Bearing these trends in mind while thinking about your future SaaS product will greatly help you in creating a solution that will bound to win the hearts of users. And if you have plans to start your SaaS business, it will be extremely useful to read a SaaS business plan guide as this business model has its peculiarities and those managers who haven’t had a similar experience earlier may omit some important points and conduct serious mistakes.
Is it a good time to wow the market with a new SaaS product?
The quick growth of the SaaS market is one of the factors that demonstrate that there is still enough space for newcomers that are considering this sphere.
But there are also some other indicators that can be viewed as good signs.
Investments in the SaaS industry are continuously growing. If we take only the US SaaS sector as an example, we will see that in 2021, it attracted a record amount of venture capital investment. More than 4000 deals took place which brought $94 billion in investment. Just compare: in 2020, the investment volume was $38 billion.
It is interesting to note that the average public SaaS business has a valuation of around $27 billion. As of December 2022, among the largest SaaS companies based on their market capitalization, we should name Adobe Inc ($153.7 billion), Salesforce Inc ($131.1 billion), and Intuit Inc ($112.3 billion). And given the growing popularity of SaaS solutions and the increasing volumes of end-user spending on public cloud services, we have enough ground to suppose that SaaS businesses will have excellent chances to continue thriving (of course, if they continuously improve their services and adjust them to new market conditions).
Let’s boost your business growth with an efficient SaaS platform
As you can see, the future of the SaaS market looks quite bright and there are no reasons even to think that the demand for SaaS services is going to decrease in the upcoming years. If you are considering a plan to launch your own cloud-based platform that will help your clients and employees in dealing with their everyday tasks, you need to have a reliable development team by your side.
At Anadea, we will be always happy to help you in building a cloud-based solution that will be fully tailored to your needs. Our seasoned developers have a deep understanding of the current market landscape and strong practical skills in using the most cutting-edge tech tools. Want to learn more? Do not hesitate to contact us!
Frequently Asked Questions
What is the SaaS industry?
The SaaS industry is a business branch that unites a wide range of software products and vendors. The main peculiarity that makes them stand out from the row of other providers and solutions is the way of delivering apps as a service over the internet. Users do not need to install these cloud-based apps on their computers and other devices. They get access to them via their web browsers. Thanks to that, these solutions can be available to users regardless of their location if they have an internet connection. These applications are delivered by vendors in accordance with a subscription-based model with flexible pricing.
How many SaaS companies are there?
It is quite complicated to name the exact figure. But according to various estimates, as of 2022, there are around 30,000 SaaS companies worldwide and nearly 60% of them are based in the US.
How do SaaS companies make money?
As SaaS companies provide their solutions to users as a service, users pay for using this software. It means that the core source of revenue for such companies is subscription fees. Pricing models can be different. While some businesses choose usage-based pricing, some others adopt a seat-based approach. To attract new users, quite often companies offer so-called freemium deals. These deals include a free trial period that a person can use in order to understand whether the chosen solution is an appropriate one.
Besides subscriptions, companies can also introduce special premium plans or earn on publishing ads.
What are the reasons for the popularity of SaaS solutions?
Among the key reasons, we should name the flexibility and convenience that users can enjoy when they implement SaaS solutions in their business processes. They do not need to install software on their computers and think about the necessity to update and maintain it. Cloud-based apps can be accessed from any device and from any location, while all updates and modernization are the responsibility of a vendor.