Remember the days when we needed DVD players to watch our favorite movies? Thanks to SaaS for giving us Netflix.
The days of game parlors and joysticks? Web-based games took them away.
Spotify put an end to the ‘download first, listen to later’ procedure of enjoying songs.
SaaS technology has become so much a part of our day-to-day lives that it’s almost impossible to imagine our lives without it. Will you ever like to go back to the time of DVD players, joysticks, and downloaded songs?
Netflix, web games, and Spotify are just the tip of the iceberg. For all we know, SaaS has entered every part of our lives.
Why is SaaS becoming so popular?
- COVID- 19 and the resultant shift to online work culture gave people a reason to explore the SaaS world.
- With the spread of the internet to even the remote areas of the world, accessing a SaaS product is easier as compared to its alternatives.
- Due to 5G, the time required to access it is further reduced.
- Great products and their great marketing strategies attract customers. We see an ad (because they show it to us), feel tempted to check their website, take a free trial and realize its utility. That’s all. We’re hooked.
- There is absolutely no responsibility to maintain and update the software. SaaS providers do that.
- SaaS software can be accessed anytime, anywhere. A good internet connection is the only prerequisite.
If a particular technology makes things easier and enhances efficiency, there is no reason to not accept it. And once accepted, it’s almost impossible to go back. Can we reason about going back to an internet-less world?
The utility of a SaaS model goes across the boundaries of industries, hierarchies, and jobs. Be it the product or service industry, clerks to C-level executives, from consumers to software developers, SaaS makes everyday jobs easier for everyone.
A big reason SaaS has seen the recent boom is its subscription model and the flexibility to renew it.
Moving upwards in the funnel, SaaS eases operations for direct sellers of products and services. It facilitates conducting business, connecting with customers, and managing miscellaneous operations. According to Synergy Research Group’s latest cloud market analysis, enterprise spending on SaaS was 4 billion higher than the previous quarter, a 35% growth as compared to the fourth quarter of 2019. Name a business operation and there exists a SaaS making it easier. Time management, accounting management, project management, and website builder software are just a few examples.
Small businesses and startups are also gaining a competitive advantage due to the cost-effectiveness of a SaaS model. “It is also an opportunity for smaller, more agile companies to compete with the big guys – addressing a single challenge with one solution rather than being everything to everyone,” says Greg Evans, VP Strategic Partnership, PageCloud.
What’s a better example of this than Shopify which made business without investment possible. The app and its ready-to-use tools make resources accessible with a single click. Also, helping subscribers to reach a global audience. In 2020, total sales made by Shopify customers were more than US$1.5 million.
Moving further up, SaaS makes life easier for manufacturers and wholesalers. A transformation is already visible in the movement of goods from one place to another. Ten years down the line, the supply chain will be completely different from what it’s today. The increasing popularity of e-commerce and rising cross-border trade are resulting in a shift to dropshipping.
Dropshipping software makes the movement of goods cost-efficient and transparent. With Oberlo’s ‘Starter plan’, the basic dropshipping services are available to customers for free. Additional features are also accessible at affordable rates. The future demand for dropshipping SaaS is sky-high as the global dropshipping market is likely to grow at a CAGR of 208.8 % from 2019 to 2025.
Greater spending by companies means greater income for SaaS providers. Slack is a cloud-based platform for smooth communication within the team. It’s a robot sidekick, helping customers through their daily tasks. Slack made an announcement for its fourth quarter and fiscal year 2020 results. It states that the total revenue was $181.9 million, an increase of 49% year-over-year.
Let’s move to people who develop SaaS, SaaS-based models help them too!
Platform as a service is their go-to place when developing and running SaaS software or mobile applications. Like SaaS, PaaS also provides a ready-to-use infrastructure. Developers join the platform, develop, test, deploy and manage their products, paying according to the resources they use. More resources and low spending is a deadly combination.
The global Platform as a Service (PaaS) market will reach US$ 22780 million by 2026, growing at a CAGR of 18.5% during 2021-2026. Two leaders in the PaaS market are Amazon Web Services and Microsoft Azure. Together, they occupy 50% of the cloud provider market. Their revenue growth speaks for itself. Microsoft Azure’s revenue grew 50% year-over-year in fiscal Q2, 2021.
That’s not the end of the story. There is more.
For highly technical developers with a need to build their customized configuration, IaaS provides a basic infrastructure to work on.
Infrastructure as a Service lets them do exactly what they want to, taking care of the rest. It reduces the required time by providing readily available visualization, servers, storage, and networking. All this, on a per-user basis. With IaaS, the user gets an opportunity to use leased servers. Server cost gets divided among multiple users, none of whom have to take care of its maintenance. Benefits go beyond cost as developers can now focus on more important areas.
“At the end of the day, each of these technologies requires a scalable, elastic, and high-capacity infrastructure platform like public cloud IaaS, which is why the market witnessed strong growth,” said Sid Nag, research vice president at Gartner.
As the governments of North America, Europe, and the Asia Pacific are raising their ICT expenditure, IaaS demand is likely to increase. The large enterprise market accounted for the highest share of IaaS in 2019, as it helps them avoid the complexity and costs of managing their own physical servers. The IaaS market size will reach approximately USD 201.83 billion by 2027, growing at a CAGR of 23.2% during the period.
SaaS is a profitable industry that’s here to stay. The following table shows consistent growth in user spending in every variant of a cloud-based model till 2022. More spending by consumers means more revenue for SaaS companies
Table 1. Worldwide Public Cloud Services End-User Spending Forecast (Millions of U.S. Dollars)
|Cloud Business Process Services (BPaaS)||45,212||44,741||47,521||50,336|
|Cloud Application Infrastructure Services (PaaS)||37,512||43,823||55,486||68,964|
|Cloud Application Services (SaaS)||102,064||101,480||117,773||138,261|
|Cloud Management and Security Services||12,836||14,880||17,001||19,934|
|Cloud System Infrastructure Services (IaaS)||44,457||51,421||65,264||82,225|
|Desktop as a Service (DaaS)||616||1,204||1,945||2,542|
Source: Gartner (November 2020)
When Stocks Speak
When deciding about investment in a stock, investors consider the market potential and market growth in the near future. They would never invest in SaaS if it had no future.
In the third quarter of 2020, 27 SaaS companies qualified for the unicorn category. In the third quarter of 2019, there were 10 such companies.(Bessemer Venture Partners, 2020). In 2020 alone, European venture capitalists invested nearly $12 billion into the SaaS sector. Twilio, Zoom, and Shopify are drawing sharp attention from investors, trading around 20 times, 37 times, and 51 times of their initial values. Gartner’s survey found that more than a third of the organizations see cloud investments as one of their top three investment priorities.
Due to the pandemic and global lockdowns, SaaS companies started gaining significant attraction in 2020. Investors have reported crazy returns of >200% in 2020 alone. SaaS in travel, entertainment, sports, furniture, restaurant, bar, and hospitality industries was negatively affected. On the other hand, SaaS in fintech, automation, databases, and cybersecurity witnessed a push. Easy predictability of profits due to the recurring revenue model of SaaS-based companies is a major attraction for investors. Figures like ARR, MRR, and CLM reflect future profits clearly.
Microsoft continues to lead the enterprise SaaS market, also continuing with its overall market leadership.
SaaS is growing. With it, arises the requirement for services of affiliate industries. Marketing agencies and freelancers are a great resource for SaaS firms. They develop and deploy strategies to build brand awareness, customer acquisition, and retention, which in turn gets revenue to SaaS firms. A great product is not the only thing needed to be the customer’s favorite. The product should also reach the consumer.
How can SaaS firms reach the customer?
There are two categories of potential clients.
Firstly, people who aren’t aware of the SaaS brand. Such clients come to the internet in search of a solution to a real-life problem. Informative blogs and educational content can guide them partially through their issues, bringing them to the provider’s website for more. Free ebooks, ‘how-to’ guides, and video content develops brand authority in a targeted community. Email sign-ups, free trials, and live chat are an added opportunities. 82% of consumers agree that they feel more positive about a provider after reading the content published by it. 90% of the customers find the content useful.
Secondly, people who’re aware of the brand. They would use the internet to research and compare the product with other brands. Guest posts, reviews, SEO content, or recommendations are effective ways to convince them. Optimization of websites is equally important as content and backlinks are the top two ranking factors for Google. The well-optimized website should answer all client queries, leaving no space to think of going to the competitors.
Content marketing, social media, website advertising, and targeted emails are vital to enhancing the competency of a SaaS firm in the market.
SaaS is becoming an industry standard. The growth and survival of individual categories may vary according to various factors. But, core benefits like low cost, quick installation, flexibility, and updates are universally effective for all businesses.
The free trials, flexibility in subscription and canceling subscriptions, regular updates are features that will continue to make tasks easier for customers.
Be it end-users or businesses, SaaS saves them time. Try, decide, subscribe and they’re done. SaaS is simple to install and easy to use. Remote work and telecommuting SaaS is here to stay due to more work-from-home opportunities
‘Software’ provides more value to their customers or simplifies complex tasks. Its provision ‘as a Service’ saves the effort and time of micro-managing installation and maintenance.
All of this is only the beginning.
Due to the advancement in artificial intelligence and machine learning, and their integration in software, SaaS products of the future will be more intelligent and effective. For SaaS owners, a recurring source of revenue is worth developing a product that solves a problem.
And if you have a product that can solve a real-life problem, NOW is the best time to go for it!