SaaS has become an absolute necessity in the operation of modern businesses. A recent report revealed that about 64 percent of SMBs heavily rely on cloud-based SaaS to not only enhance productivity but also stimulate growth.
Size notwithstanding, more and more businesses are seriously considering investing in new SaaS applications in the next two or three years.
What Is the Origin of This Dominance?
For starters, SaaS allows businesses to make significant cost savings mainly because the user doesn’t need to install and then run applications on-premise. The ability to run apps in data centers through the cloud makes it possible for brands to save money, time, and other resources.
It justifies the rampant growth in businesses using SaaS-powered applications from 12 percent in 2008 to the projected 73 percent by 2020.
A research study conducted by Cisco ranked SaaS at the top of the list of the most employed global cloud service between 2016 and 2019.
What is SaaS?
SaaS stands for Software as a Service. It is one of the most popular types of cloud computing alongside IaaS (Infrastructure as a Service) and PaaS (Platform as a Service). It is a software distribution model where service providers host applications for customers and then give access to them via the internet.
One of the reasons why this model of software delivery has become popular amongst many different types of business apps is its ease of access. A growing number of enterprise software vendors have realized the benefits of incorporating the model into their delivery strategies.
SaaS history can be traced back to only a decade ago. The model reached maturity just recently with software giants such as Microsoft and Oracle getting rid of their outdated schemes of pricing, delivery, and licensing.
Understanding SaaS Advantages
The ever-growing SaaS solutions deployment has been attributed to its numerous advantages. Of course, cost savings is not the only factor making the implementation of SaaS an excellent option for businesses. Other factors, such as explained below, also come into play.
A significant advantage that SaaS offers over on-premise is the capabilities it gives its vendors as far as adding new features is concerned. Almost immediately after its launch, a good number of SaaS vendors started creating software, besides their usual systems – a move that has since turned into a productive strategy in such a competitive marketplace.
As already mentioned, SaaS is associated with cost savings. It eliminates the need for brands to install and run apps in their data centers or computers. This benefit alleviates the expenses linked to the acquisition of hardware, provision, maintenance and software installation, licensing as well as support.
Most businesses, big and small, are now shifting to SaaS as they seek to boost their productivity and accelerate growth. This push is not likely to slow down anytime soon as IT experts jump on the bandwagon in a bid to reap its numerous benefits, as highlighted below.
Other advantages of SaaS include:
SaaS apps are mostly flexible enough to facilitate the combining of add-ons and other features. Cloud services of this nature allow high vertical scalability. This means that customers are at liberty to access fewer or more services and even get on-demand features.
Persistence and accessibility
As long as you have an internet-enabled device, you can access SaaS applications from any location because they are delivered via the internet.
With SaaS, you forget the constant need to buy a new software. You can rely on your SaaS provider to perform automatic updates.
With automatic updates in place, you also take away some of the burdens that your in-house IT staff has had to carry all this while. As a result, they get additional time to focus their attention on more critical activities.
SaaS offers eliminate the need to purchase software to install or even but additional software for supporting it. The pay-as-you-go model applies where users pay for the service monthly.
What a better way to practice a better as well as a more predictable budgeting approach than embracing recurring operating expenses? In any case, if you desire to stop the recurring costs, you can terminate your SaaS subscription whenever you want.
Compared to others, a SaaS-based platform’s downtime is very low. As long as a SaaS platform is implemented correctly, updates happening from the side of the developer don’t affect the customers.
That’s why downtimes linked to maintenance or upgrades are extremely low compared to on-premise software. Another thing that lowers downtime is the fact that version upgrades and maintenance are done from one location for all the users.
The fact that today’s SaaS applications run on enterprise-level security means that company data is entirely protected, and only authorized users can access it. The presence of database-level security and services makes it even better.
SaaS companies have offers for a wide variety of business applications. Examples of these applications include human resources management, email and collaboration, customer relationship management, financial management, billing and payroll processing, enterprise resource planning, document editing/management, database management, and sales management, among numerous others.
Just like other cloud services, providers adopt the subscription model – either monthly or annually. It is quite different from the conventional model where users pay for software via a perpetual license characterized by a relatively substantial upfront cost, and an optional continuous support fee.
Making the Most out of SaaS
There are numerous things that SaaS users can do to reap optimal benefits from this technology. One primary strategy is to keep up with industry trends.
Understanding SaaS means being aware of not only what is happening and what has changed, but also knowing what is about to change soon.
Having this knowledge will help you prepare accordingly and embrace the foreseen changes when they knock the door. This is why you cannot ignore SaaS trends.
Now that we are talking about trends, how did the SaaS ones for 2019 look like?
2019 witnessed a lot of exciting trends in SaaS such as:
- Product driven growth – A good number of companies have focused on the creation of product-catalyzed go-to-market engines. This concept entails people trying out the product, gathering in-depth understanding, qualifying themselves, and then deciding whether to upgrade and/or play a role in the sales process. Businesses that have adopted this approach attests to its super capital efficiency.
- Machine learning – Talk of software that keeps improving with their usage. In 2019, nearly every company has gone mobile. Almost all of these firms use machine learning. They are always in search of software so they can improve with time.
- Hybrid delivery model – client/server dominated the early days of software. Then came the era that saw both the applications and the server put on the cloud. Then we saw the SaaS application running in the cloud adjoining multitenant database containing all the customer data. In 2019, new regulatory acts and security regulations have been pushing software vendors to employ on-premise hosting. This doesn’t mean governments want us to go back in time – that is, to the deployment of servers on the office buildings/business premises. Instead, they are advocating for virtual private clouds. New architectures have cropped up for the next-gen software organizations where customers can control data within databases as well as data locality.
These are just some of the trends that gained momentum in 2019. You must have witnessed or interacted with numerous others.
Now that the year is coming to an end, have you paused and imagined what awaits us in 2020?
So what does the future of SaaS hold for businesses?
Here are 6 SaaS trends that are likely to shape the world of business in 2020.
1. Artificial Intelligence
Top in the list of SaaS 2020 trends is the projected increase in the usage of more sophisticated artificial intelligence tech. We must come to the realization that AI is no longer in a budding stage and that it has taken the world of business by storm.
Surprisingly, it has stretched previously unfathomable limits. AI has upturned the way companies are managed. Clearly, it is no longer business as usual. The following graph illustrates the state of AI funding between 2016 and 2018.
The introduction of artificial intelligence into the SaaS equation has attracted immeasurable attention. If whatever we have witnessed is anything to go by – and it surely is – its capabilities are bound to cause a turnaround in everything ranging from accounting programs to customer relationship management (CRM).
Businesses will benefit from the optimization of the business process, automation of redundant tasks, enhanced efficiency and productivity, as well as augmentation of human potential – all thanks to artificial intelligence.
Sadly, as much as IT industry leaders have gone out of their way to developing artificial intelligence systems, only a small proportion of the existing potential has been employed. Understandably so when you consider the potential risks involved, which has been the biggest hindrance. Thankfully, the situation will not last for long because SaaS companies are on the verge of overcoming this challenge.
Its risks notwithstanding, a SaaS industry overview reveals that AI remains one of the most innovative technologies. It explains why SaaS organizations are quickly breaking the barriers that obstructed the development of artificial intelligence, and in turn, paving a clear path for its application in SaaS.
It is not a new challenge as it has been on-going since 2017, and the industry players have shown no signs of slowing down ever. As such, you must keep your eyes on this 2020 SaaS trend!
2. Vertical SaaS
Vertical SaaS, which is just taking shape, is expected to gain increased popularity in 2020. Many organizations are now leveraging the efficiency of vertical Saas.
The currently popular horizontal SaaS – usable in all industries – will experience reduced demand. Since it permits organizations to target supply chains and clients and at the same time, customize operations, vertical SaaS will become more common.
Vertical SaaS examples include retail analytics software, modern logistics analytics, and healthcare BI software. Organizations pursuing specialization benefits will find them highly cost-effective because of the customizable features.
IT experts view vertical SaaS as horizontal SaaS’ new generation proxy because of its potential to serve the different needs of any given industry.
The last decade saw more and more organizations develop enormous inclinations towards SaaS solutions capable of solving their specific needs comprehensively. It justifies the recent massive growth in the vertical SaaS software market.
Notable benefits of this delivery model include customer intelligence, enhanced data governance, and business value. Furthermore, vertical SaaS solutions are customizable according to the specific-industry needs or the demands of the clients.
Apart from the increased flexibility, vertical SaaS products offer more opportunities for upselling and impressively low client acquisition costs.
- While vertical SaaS has a smaller total addressable market (TAM), it is easier to market. That’s why it is enjoying increasing popularity, particularly amongst software developers. Marketing teams of horizontal SaaS face various challenges during their sales and marketing. For instance, they must run multiple campaigns simultaneously to win over new clients.
- If your business demands high customization and targeted solutions, vertical SaaS is your surest bet. Vertical SaaS is typically a cloud computing solution designed with specific industries in mind, such as retail stores, tourism, and agencies. It offers tailor-made software products for small niches that had previously been left out, yet currently constitutes an invaluable market share.
3. The Emergence of MicroSaaS
As you continue thinking about SaaS, take a moment to imagine something smaller. 2020 foresees the rise of microSaaS, whose primary target is niche markets with a greater focus on a small, yet dedicated user base.
More significant SaaS products such as Grammarly and Boomerang for Gmail may also find microSaaS useful as an add-on.
A microSaaS is typically a small tool created by a person/ small group of people to enhance an already operational feature of a SaaS product. Examples of these tools include add-ons, extensions, or other platforms’ accessories.
With the growing number of nomads and solopreneurs interested in productizing their businesses and generating passive income, IT experts anticipate growth in microSaaS products in 2020.
In general, an average of nine-plus competitors dominates the biggest SaaS niches. This has made it almost impossible for up and coming vendors to shape a path for themselves in these highly competitive arenas.
Fortunately, the imminent market saturation hasn’t discouraged innovative minds from being impactful. They have gathered inspiration to develop micro solutions that add to the core niche offerings functions. These challenges have given birth to a valuable industry keen on the development of microSaaS solutions.
There are already a lot of microSaaS tools that are performing exemplary well within the SaaS market. Apart from the two mentioned above (Boomerang for Gmail & Grammarly), others include Mailtrack, Sprout Social, and YoastSEO plugins.
One of the benefits of microSaaS projects is that they involve small costs. As such, one can accomplish a project in the absence of outside funding. These projects are location-independent and usually deliver high margins. With these benefits, it is no wonder industry experts foresee a massive emergence of new and powerful microSaaS solutions in the coming year and beyond.
One might wonder, what is in it for software users? With the proliferation of microSaaS tools in the marketplace, users can anticipate increased ways of customizing their software solutions.
4. Changes In The Pricing Policy, Improved Customer Experiences
For a long time, SaaS companies have been riding on flexible pricing structures. By taking full advantage of price flexibility for their users, vendors found it easy to grow their revenue. In recent years, this trend has been changing.
With competition getting stiffer with each passing day, and increased features emerging, SaaS providers are left with no option but to rethink their pricing policy. The pressure emanates from the need to retain existing clients and also woo new ones.
Vendors have realized the importance of implementing strategic pricing changes if they are to continue reaping desired margins.
In many instances, well-thought-out pricing offers an anticipated outcome. For example, a report by Open View Partners revealed that 98 percent of organizations obtained positive results thanks to new pricing policies.
SaaS companies have exhibited a similar spirit and aren’t afraid of diving into the new pricing trend in SaaS. The availability of data-driven pricing methods is enough reason to anticipate pricing policy changes in the coming year.
In the same spirit, SaaS users can expect improved customer experiences. More than half of customers have confirmed that the experience they get from a company is as vital to them as the products/services they buy.
This means that an unhappy user will definitely look for happiness elsewhere. The SaaS marketplace is now more competitive than ever, and with more outside funding available, SaaS competitors are having sleepless nights.
SaaS vendors must up their game in 2020 as far as customer relationship management is concerned. They must improve their customer experiences to not only delight their customers but also win their unwavering loyalty and referrals. Unfortunately, it won’t matter if you have the top-rated SaaS solutions if your customer service is questionable.
For the users, the change in pricing policy will mean an opportunity to spend their SaaS budgets wisely. If there is a time you will enjoy a field day as a SaaS consumer, it will have to be 2020 moving forward. Make the most out of it.
5. More services from SaaS companies
Apart from strategic changes in pricing policy and enhanced customer services, consumers of SaaS products will also enjoy additional services from SaaS vendors. The desire to exceed the expectations of their customers will push SaaS companies to offer other services.
According to Gartner, revenue in cloud application service, SaaS will grow by 14.28 ($94.8 to $110.5 billion) percent 2019 and between 2020. At the beginning of 2019, 19 percent of cloud budgets went to services associated with cloud consulting, execution, migration as well as managed services. Gartner predicted that the figure would go up by 28 percent by 2022.
An anticipated SaaS trend in 2020 is SaaS firms imitating tech giants who provide their customers more than just a given product. An excellent example of these firms is Salesforce, which also offers a vast array of advisory, adoption and success services at a fee to help their customers make the most Salesforce.
6. ore SaaS Spending
Based on the information in the table below, SaaS accounts for nearly half of all worldwide public cloud spending – making it the biggest cloud computing category.
Table 1. Global Public Cloud Service Revenue Projections in Billions of U.S. Dollars
A recent update from The International Data Corporation (IDC) revealed that global spending on public cloud infrastructure and services would increase by more than half between 2019 and 2023.
IDC predicts a five-year compound yearly growth rate of 22.3 percent, which translates to a total market of close to $500 billion by 2023.
Now that you know the space to watch in 2020, how can you make the most out of SaaS?
- Re-evaluate your app stack. Understand how your tools fit together as well as how they complement each other. This activity should be aimed at ensuring that your tools are correctly integrated.
- By all means, do not bear any more pain. If your current provider of SaaS doesn’t meet your expectations, free yourself up. There are a lot of better options out there where you can enjoy user-friendliness and the best customer experiences.
- Embrace automation and syncing. Doing so will go a long way in helping you save time, work with more accurate data and also, get rid of menial tasks.
Other areas that will most likely shape the future of Saas and are worth noting include media and entertainment, which subsequently enable media companies to enhance their customer experience. How? By being able to provide rich content across all devices easily.
Future SaaS will also be instrumental in enhancing and improving customer loyalty and intimacy, which is rapidly becoming a must-have for growth. Ecommerce and online payments are other areas that will be impacted by SaaS as the cloud becomes a key enabler. This is mainly due to its ability to connect, connect and validate through the cloud.
Consumers have become increasingly dependent on their mobile devices, which means the devices are on most of the time. Smartphone makers are also trying to produce devices that have longer battery power in a bid to make users happy.
This means that consumers will be using their smartphones to exchange data mostly through cloud services even more than before.
Whatever you do, understand that your company will be affected by these SaaS trends – irrespective of whether you are a vendor or consumer of SaaS products. Since these changes are streaming in thick and fast, remember to align yourself accordingly. Among other things, make sure that you have the right software tools for your business – irrespective of the size.