Top Software as a Service (SaaS) Market Trends Globally 2021 to 2025

Top Software as a Service (SaaS) Market Trends Globally 2021 to 2025

Software as a Service (SaaS) has been evolving constantly according to the current needs since its emergence in the market. With SaaS in the business vertical, gone are the days where people and enterprises had to depend on physical devices like compact disks and remote servers to store data. SaaS has been profitable in so many ways, in terms of both personal and professional utilization by offering fixed payment offers, easy upgrades and accessibility, improved scalability and ensures security. As many traditional business vendors are transitioning to cloud-based business models, SaaS has set new trends that support the transitioning according to the present scenario. 

It is expected that around 2022, SaaS will be able to generate close to $141 billion and the rate of growth will be around 12% in the next five years.

Product-based growth strategy

In the early stages of SaaS’s inception, many companies believed in the sales-led growth model, wherein a salesperson would interact with the customers to insist them on buying their best product. This method was later replaced by market-led growth that focused on marketing strategies and ad campaigns. Ultimately, both of these methods resulted in consuming a lot of time to reach enough customers.

This is precisely when the product-based growth came into play. Companies started developing products that are user-friendly by making them simple yet efficient so as to reduce the time consumed in making the customers familiar with the product. The best examples of product-based companies that accelerated product-led growth are Zoom and Slack. Zoom and Slack are both customer-facing product-based companies that connect end customers.

Hybrid Cloud installation

SaaS applications work on various cloud delivery models such as public or private cloud, that are supported by other service models like IaaS (Infrastructure as a Service) or PaaS (Platform as a Service). This combination of public and private cloud is known as a hybrid cloud. Hybrid cloud enables computing services that are more flexible and cost-effective. The efficiency of the cloud depends on the way it is designed to manage resources. Finding the right cloud service provider for the business who can provide elasticity, scalability and bills as per usage is an important factor. Cloud services mostly do all the heavy works in terms of meeting the business requirements rather than waiting for the internal IT team to do all the tedious works which consumes a lot of time and money.

The hybrid cloud market is expected to reach $128 billion by 2025 at a CAGR of 18.73 over these years.

Characteristics of hybrid cloud architecture:

  1. On-premises data center, private and public cloud workloads and resources must be managed commonly under the same data management.
  2. Already existing systems or systems that contain sensitive data can be connected to a hybrid cloud as it is advisable to not connect them to a public cloud which makes the system prone to cyberattacks.

Purpose of using a hybrid cloud

  1. Differentiating workloads: Since hybrid cloud consist of both public and private cloud, sensitive data or data that contains financial and user details can be saved on a private cloud while the other enterprise-related works can be carried out in the public cloud.
  2. Big Data processing: Hybrid computing is scalable. This enables big data analysis to be carried out in a public cloud while protecting sensitive data and storing them securely in a private cloud.
  3. Flexible capacity: One of the most remarkable features of the hybrid cloud is that it allows the temporary allocation of public cloud resources for short-term projects. This eliminates the need to invest in resources that are temporarily needed.

Unless the business explicitly needs a public or private cloud, the best option is to choose a hybrid cloud as it provides the advantages of public cloud and private cloud as well. Some of the companies that provide extraordinary cloud services are Amazon Web Services (AWS), Microsoft Azure and Google Cloud.

Shifting towards vertical SaaS models

Depending on the use cases, SaaS was majorly categorized into two divisions, namely, vertical and horizontal SaaS. Horizontal SaaS products focus on a wide range of audiences by providing common platforms that can satisfy the needs of businesses across the vertical.

Whilst, vertical SaaS provides solutions for a certain business in providing the solutions that are needed for that particular business and a particular group of audience that are related to the business respectively.

The global SaaS market is expected to reach $60.36 billion by 2023 with a 9% CAGR. 

Horizontal SaaS models were dependent on campaigning and marketing with the help of the sales and marketing team to reach a wide array of audiences. Since it is developed as a common platform, updating frequently or personalized customization seemed to be a tedious process and also involved a lot of investments. Meanwhile, vertical Saas solutions offered customized and business-centric solutions that required minimal investment and also proved to be satisfactory to the end-users.

Many enterprises are now in need of customizable and unique solutions for their business requirements. This need of customizable and business-centric solutions has enabled many companies to shift from horizontal model to vertical model. Although, there are some inevitable utilization tools that come under the horizontal category, like accounting tools. The major players in the field of the horizontal model are, Microsoft (Microsoft 365) and Salesforce (automation tools). Some of the prominent companies that provide vertical solutions are Madwire, Cilo and Procore.

Integrating AI and ML in SaaS

Companies have been competing with each other for a long time in implementing AI/ML in their SaaS solutions. It is clear that AI and ML will be the next step in the industrial vertical that can provide various opportunities in the near future. There are various reasons why businesses must integrate AI/ML, among which some of the reasons are mentioned below:

1) Personalization:  Using natural language processing (NLP) and artificial intelligence (AI), users’ interactions in using SaaS applications can be read and monitored to configure user interfaces to cater to the individual user needs.

2) Automation: The important factor in running a SaaS business is to maintain customer engagement. This might be very hard for larger enterprises. Integrating AI-powered chatbots can be of great benefit. This decreases the need to hire many employees to provide customer support. AI-powered chatbots are preprogrammed to answer the most frequently asked questions by the clients. Only on critical conditions customer service team comes in.

3) Enhanced security: When it comes to the cloud, data security is always a major concern as the data are very much prone to be compromised. In SaaS, AI provides security services that can replicate and learn from new security threats automatically. Companies like Oracle have recently implemented AI and ML for cloud security which can automatically detect threats.

According to Mckinsey digital, the improved accuracy of AI leads up to a 65% reduction in the lost sales due to inventory out-of-stock situations.

Improved mobile optimization

Mobile applications and smartphones have gained more popularity these days. This has created the need for new web-based applications and business needs in SaaS applications. As SaaS applications cannot be native applications that can be sold on Google Play or AppStore, they require utilizing mobile web. Mobile optimization enables users to customize the app according to their needs to a maximum extent. The major advantage is that, these applications are independent of the operating system and need not be downloaded or installed. Despite all these advantages, there are still some minor errors in mobile optimization such as difference in screen sizes and resolutions that have to be taken into account by the developers. Hopefully in the near future, a solution to resolve these issues.

To think about the future of SaaS, things are still uncertain as to how the trends will be changing and what will be the new use cases or needs of the end-users. But it is certain that the field of SaaS will only keep gaining momentum in the upcoming years will almost completely automated businesses and with improved security features.

Gartner predicts that the revenue of worldwide public cloud service, in case of SaaS will reach up  to $151 billion by 2022.

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