The SaaS or Software as a Service market has grown considerably over the years. The main question now is not whether businesses should take advantage of these online solutions or not. The pressing concern in today’s SaaS landscape has shifted to which web apps should businesses use to fast-track their growth this year and in the months to come.
According to the Finances Online industry market report released last year, the expected growth of the SaaS public market by the time 2020 comes around is $76 billion! Aside from that, there was an increase of 33% when it comes to companies using SaaS applications in 2018 compared to 2016.
Finances Online infographic about the SaaS Market.
Intuit, the company behind popular online solutions such as Quickbooks and Mint, also did their own study. They highlighted that about 85% of small businesses will be spending more on SaaS products by 2020.
Clearly, the market is expanding and there are plenty of opportunities for you to grow your own business using the right online software. This is evident in the increasing number of web hosting service for SEO, productivity tools, and other services that prioritize integration and flexibility.
To maximize the benefits you can gain, take a look at these forecasts and trends in the SaaS market for 2019. See where the industry is heading and how you can capitalize and profit it.
AI and Machine Learning
Artificial intelligence and machine learning are everywhere these days. We see them in home products, such as smart home entertainment systems and video doorbells. They also exist in industries like automotive, health, data analysis, and more.
So, it is not a surprise that machine learning and AI will become a prominent part of the SaaS market. In fact, industry projections say that aside from software-as-a-service, the growth of machine learning-as-a-service (MLaaS) will be considerably quick this year, too. MLaas is projected to grow into a $19 billion industry by 2025 according to Transparency Market Research.
Small companies within the business and finance niche can especially benefit from this trend. By integrating SaaS and MLaaS solutions to your business operations, you can make your processes quicker than ever. And since you’ll be able to process substantial amounts of data without paying for your own servers and computing equipment (since everything can be done in the cloud), you can cut down costs.
Even better, the AI-driven tools will help your business get ahead because you’ll have highly useful data that can drive your marketing, customer acquisition and retention, and other business decisions to positive directions.
As of now, the leading providers in AI and machine learning technology are Google’s Cloud Platform, Amazon Web Services, and Microsoft Azure. They provide a wide variety of cloud-based tools worth looking more into.
Customized Integrations for Businesses
This is definitely good news for business owners and managers who are probably experiencing tech burnout at this point. You know, that heavy feeling of being inundated with so many apps and software that you don’t know which one to choose. Or that frustration of paying for apps that don’t do what you want 100%; that there always seems to be a couple of features missing.
There’s an ongoing debate on which model is best–operations-focused software (horizontal) or vertical (industry-specific). Many believe the former is sustainable, while others think the latter is geared more towards growth.
Both models have their advantages and disadvantages.
The goal, however, is to integrate multiple, hybrid application systems that:
- Help business grow and compete with leading players
- Help business break into new markets
- Deliver business value and credibility
- Drives customer loyalty
- Reduce inefficiencies and gaps typical of disparate systems
- Streamline processes for efficient business management and operation
This is the kind of integration that SaaS recognizes as more superior than both the horizontal and vertical models. This is why SaaS applications now allow integration of third-party apps and custom applications with existing business solutions.
Gone are the days when an API (application programming interface) or a handful of discrete integrations would be enough. SaaS understands that custom and out-of-the-box integration is the better solution for instant value, and addresses these needs through integration platforms they have acquired or built.
Increased thought leadership from SaaS providers
There are several misconceptions about SaaS, one of which is the belief that the tool is just one application. What many don’t know is that it ranges in form and function. This is evident in the more than 950 companies that offer SaaS across different industries.
SaaS 1000 lists down the top growing SaaS companies based on growth indicators, hiring trends, number of employees and other factors included in its proprietary algorithm.
The list includes Pitchbook, Magnitude Software, BlueHornet, AvidXchange, SimpleLegal, and Humanity.
No single tool would be applicable to a multitude of businesses such as these. This only shows SaaS’ versatility and its wide range of functions.
It’s this kind of misconception that SaaS companies and experts want to eliminate through equal measures of education and inspiration. In 2019, thought leadership is believed to become a prominent SaaS trend.
As of 2018, only 24% of SaaS businesses make an effort to educate through published content. 11% of the major players have yet to create a blog. The rest of these companies are purely focused on their business.
As more startups compete, however, more SaaS resources, such as blog content, videos, eBook, and interactive apps, will be available. Sofware as a service will be more transparent.
In the meantime, look up well-respected SaaS thought leaders and follow them.
Branding to drive competitiveness
In 2018, Gartner released a forecast that the SaaS market will grow in 2019 by 17.5%, with cloud application services as the largest segment. This will fuel SaaS revenue growth by up to $85 billion in 2019.
Revenue growth of cloud services. (Image from ZDNet)
As more companies will rely heavily on SaaS, competition becomes tougher. Existing SaaS companies are already competing against 9 competitors on average, according to a 2017 pricing study conducted by Price Intelligently.
SaaS startups today are facing more competitors. (Image from Price Intelligently)
The number is said to increase in the coming year. This is why the director of growth for Openview, Ashley Minogue, recommends investing heavily in branding.
More businesses will recognize that taking the top spot in search results is no longer enough to make them win. “In 2019, we will see more companies investing in their brand (as opposed to just direct lead generation) to break through the noise,” said Minogue.
When making a decision based on what a business can offer, customers will be looking at it as a whole, not just features and pricing. Thus, the need to focus on branding to stand out and ensure it’s a consistent detail throughout all customer touchpoints.
Consistency should be combined with a good follow-through in all areas as well for a company to sell using a strong and engaging brand identity.
Draw inspiration from Mailchimp and its educational, informal, and helpful band. Its branding uses colloquial language and provides users with a simple and directive experience.
More white labeling options
The term white label has been associated with SaaS in one form or another.
White label partnership, for instance, is among the many ways that existing companies and startups leverage SaaS. In this kind of partnership, a business can white-label software or solutions that are made by one company and then sell it to another.
If you want to be a reseller, for example, you purchase a white-label product license and then customize it to make it your own. You can rebrand it and sell it with pricing plans you created.
You can find plenty of software and SaaS companies that offer this type of partnership. These include TeamWave, www.sitebuilderbuilder.com
Each of these entities offers something valuable to interested partners and resellers.
TeamWave, for example, is an all-in-one platform that offers CRM, HR, and Project Management solutions.
This 2019, the kind of white labeling as a SaaS trend will go on deeper levels. More companies are predicted to use SaaS tools for the front-facing activities on their websites and would prefer them to be a native part of the system.
This is why many SaaS companies will work to create features and interfaces that will cater to the needs of a customer on an even deeper and more personal level.
Beamer, for example, is a news feed and push notification tool that many eCommerce and online websites use to update and engage customers. It has a customization feature where you can change the design of the Beamer newsfeed so it will match perfectly with the interface of your website. This makes Beamer look native to your website and app if you have one.
In other words, more personalization will happen as more companies switch to SaaS.
From SaaS to PaaS (Platform-as-a-Service)
When businesses have already established themselves in their market, they tend to switch their focus to customer retention from acquisition. The same is true with SaaS companies.
This should not be a surprise since it’s a lot cheaper to retain customers than acquire them. Just think; the average cost of acquiring new clients is $1.18 for every dollar, according to ForEntrepreneurs, but the cost of keeping them on is at least 9 times cheaper.
SaaSX SaaS Stats and Benchmarks
In the SaaS landscape, 20% of existing customers will be the source of 80% of future revenue, according to Gartner Group. This is supported by the Bain & Company theory that even if a company will only work to increase customer retention by just 5%, the increase in profitability will be up to 95%
Customer retention is a struggle for many, however. Faced with tons of choices every day, clients can easily switch to the competition or end their subscription at any time.
So how do SaaS businesses retain customers?
By providing them a richer experience through improved onboarding, increased product or feature adoption, increased upsells or account expansions, increased retention rates, and effective measurement of customer & account success.
How are all these achieved?
Through Platform as a Service (PaaS).
PaaS allows new applications to be added rapidly and for codes to be quickly deployed. What would take months to complete would be done in a shorter amount of time.
It also promotes scalability, allowing clients more freedom to choose and create apps to be added to the original products, effectively enhancing customer experience with the service they subscribe to.
When properly adopted, SaaS companies will be more responsive to the needs of their customers. They can also focus their resources on development.
PaaS has flexible, robust, and accessible offerings that companies can use to scale their business. Moreover, the PaaS model is secure because most of such developments regularly run automatic updates to fix bugs, issues, and other vulnerabilities promptly.
Rethink pricing strategy
As more competitors enter the SaaS market, companies would have to do more than spend 6 hours on average when creating their price models.
They need to develop a flexible pricing structure, providing customers with more payment options:
- Pay only for a specific feature
- Pay for a set of features for 1, 3, 6 or 12 months
- Pay per use (PPU), best for businesses with one-off products
In addition, they need to think global, setting price models for the global market. This is especially true when more new features and technologies are added or integrated into SaaS applications.
With all these variables to consider, SaaS pricing trend in 2019 will be more of a science than a mere calculation of numbers.
They need to analyze their metrics–monthly recurring revenue, cost per acquisition, lifetime value, average revenue per customer, and churn or the percentage of people who unsubscribe/leave per month. Then, based on data, decide on the best payment model for their business.
SaaS companies should also consider their cash flow. How good or bad it is will dictate which pricing structure to follow.
A company with severe cash flow issues due to high churn or other reasons, for example, should not use the PPU model as this will only worsen the situation. The best solution would be annual subscriptions as this will give a company enough funds to establish stability.
Once a strong foundation is established, introducing PPU and other in-payment options will help draw in more customers that will result in revenue growth.
It is also important to set prices according to the local currency of the customers. Data from a 2017 price localization study showed that localized pricing strategies result in more demand.
Localization equals growth. (Image from Charge Bee)
Takeaway
2019 is predicted to be an exciting year for the SaaS market as it grows exponentially. With this comes major changes that companies must understand, work with, or adopt to thrive in the changing landscape.
Before following any trend, however, a good amount of study and analysis should be carried out. Not all SaaS businesses are created equal, after all. What works for one company may not work for another.