What does the Future of SaaS look like? – Insights into a popular domain
October 3, 2017
October 3, 2017
Many years ago, this hot keyword industry SaaS (Software as a Service) started popping up as wildfire. Various analysts questioned its stability though as startups began to pop up, the majority of companies had not yet migrated to the cloud and software players were still battling it out for market share. 2017 sees the SaaS industry stabilizing itself as legacy software companies that have a stronger grasp on the market alongside further customer adoption and acquired startups.
Today’s workforce is fueled by hordes of millennials raised on technology in a space becoming more interconnected and shaken up by globalization while changing at a steep rate. Innovative and adaptable SaaS solutions are seen pervading each job sector. Experts believe in the near future SaaS will become pervasive with no real identity to a SaaS industry per se, thanks to all software being created in this manner. Thanks to legacy software vendors adopting such models, there is no surprise in the SaaS market being poised to cross the $112.8 billion mark by 2019 with the overall market looking to peak at $164.29 billion by 2022.
A simple breakdown of all things SaaS
In the basic terms, SaaS is the business model with a specific method of software delivery in which customers purchase rights to use hosted software on remote computers. This is a broad term and is interchangeable with cloud computing. The late 80s and early 90s witnessed drops in computer cost. This allowed employees to have desktop PCs. The SaaS industry jumped on this shift with early hub-and-spoke systems being replaced by Local Area Networks (LANs) which were basically in-house systems created for employees to access company only applications and business data hosted on central servers.
Between vertical and horizontal solutions, the growth estimates for the future of SaaS vary. Horizontal solutions focus on a broad software category such as accounting are going to see more modest growth thanks to incredibly fierce competition in such categories and long-term customers supporting the growth. Compound annual growth rates will stay steep in vertical SaaS solutions which meet the requirements of specific industries such as healthcare, real estate or education where marketplace education is in infancy.
Such dynamism in such a fast growing market means no easy predications. However there are a few trends that affect the shape and growth of the market.
What does Product vs Growth mean for you?
Founded in 2015, Zoho is a marketing automation tool led by Arvind Parthiban, Naveen Venkat and Santosh Kumar. Their proposition gave all companies the flexibility of turning their site into a visual dashboard for optimization, testing and insights to make required changes on the fly. With over 1450+ customers globally it came as a shock when they decided to partner with Freshworks. It became evident fast – Arvind explained the market automation market as being very competitive thanks to smaller players with specific feature sets and full fledged suites targeting enterprises. A focus on their product had meant a rising brand awareness, a high CAC and churn rate and also a long way to go for the company to find its product fit.
Airbnb went almost 4 years without finalising on the product everyone loves now. Nowadays user acquisition is mostly via word of mouth. We tend to forget how building something value-adding takes time. Many CEOs believe focusing too much on product hampers the product. DuckDuckGo’s founder Gabriel Weinberg states in his book how startups should spend 50% of their time on growth and 50% on product. The bigger your startup gets the easier it is to get fooled by sales numbers and inorganic growth. Don’t fall into the trap. Set more aggressive sales targets for your marketing and sales teams. Step back and understand what exactly is the problem with your product. You end up hurting your company by focusing on growth too fast, too soon.
Mobility a driving force in SaaS
Smartphones permeate every facet of our everyday existence. Mobiles these days empower us to do a lot more than calls, messaging, games and chat. Around 43 percent of all business owners are using their smartphones daily to manage operations remotely. This is raising the demand for the SaaS industry to provide ‘mobile first’ solutions and mobile apps. The opportunity doesn’t lie for just mobile users but for networked devices, products and even machinery. Wipro tech has predicted by 2020 the number of internet-connected devices will exceed the number of people on earth seven times. SaaS solutions with strong mobility presence help connect people not just to people and solutions but to sales displays, information kiosks and even products.
The most successful SaaS solutions host mobile-first apps empowering business owners and managers to conduct crucial operations on the go. Telephony, sales enablement, marketing automation, web engagement, social media integration and mobile marketing are all capable of being monitored and managed from iOS and Android devices. Streamlined mobile dashboards allow users to grow sales while converting leads from any locations.
Security at the core
In its infancy, companies perceived SaaS as a choice between cost advantages and ease of usage of premise-locked solutions. The industry has evolved now thanks to cloud security development and international laws for governing cyber security. Various assumptions are being made today regarding the lack of SaaS security on the basis of old, outdated models. SaaS developers are rewriting security parameters. These days the security features in cloud environments are advanced than traditional approaches and the range is software-defined and easier to implement and manage via a dashboard.
Various new acquisitions and area investments by tech giants such as Microsoft & Google are likely to push AI forward in SaaS. Google Cloud Services’ rebranding has resulted in further AI being woven into their apps boosting efficiency and productivity. Enabling ML to aggregate large amounts of data, Google states it is near the point where apps could prompt users to open files at various times of the day or propose a meeting based on user habits.
Predictive analytics are leading to unprecedented automation within SaaS, enhancing the user process and growing accuracy and efficiency. In sectors such as marketing, managers and sales people could spend less time curating data and more time using human skills to sell.
A slight change in revenue
Long gone are the days of developers and service providers struggling to determine paths to long-term revenue. Profitability is being accessed by small business services delivered via SaaS. Revenue models are evolving from purely fixed software models to blanket subscription fees and transactional models. Such models are expected to represent benefits to both solution providers and smaller companies being served.
Software-as-a-service is shifting on various fronts to accommodate more business practices for multiple business sizes. An Intuit study revealed 85 percent of small businesses choosing to invest in software more till 2022. Here lies the massive opportunity for developers. Globally there exist 600 million small businesses that encounter operations issues which can be solved by cloud solutions.
According to experts, ultimately, SaaS will turn so pervasive the notion of an industry will be gone thanks to all software being delivered through the cloud. The largest threat to innovation will continue being internal politics and organizational culture with resistance to change. These barriers will gradually slip away as attitudes towards SaaS change.
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