SaaS Industry Trends to Know

Software-as-a-service has revolutionized the way companies do business.

It has allowed them to decrease their costs, streamline their business operations and maximize efficiency. Turning to SaaS products has helped so many companies grow and adapt to the ever-changing market demands.

But that’s not all.

The popularity of SaaS products is also due to their simplicity, easy accessibility, and security. The less companies have to worry about software maintenance, the more time and resources they can invest in what they do best–their primary business activities.

As companies seek more ways to improve their business processes, the SaaS industry will continue to provide more innovative solutions and cater to the needs of the market. As a result, it will only continue to grow and innovate.

So, if you want to join this quickly expanding industry, you should be aware of the emerging trends we’re about to describe.

Artificial Intelligence

Artificial Intelligence technology is already a big part of our everyday lives, but it will become a game-changer for companies that want to improve their businesses in the years to come.

We’re already familiar with spam filters in our email inboxes or talking to virtual assistants, but there are even more ways in which AI helps with running a business.

First of all, it automates tasks and services to save time and resources. But where AI truly shines for businesses is personalizing the user experience and facilitating decision-making with timely and relevant data.

SaaS companies can partner with AI providers to incorporate artificial intelligence into their businesses. For example, WalkMe, a digital adoption software company, partnered with Infer and leveraged their AI-powered lead scoring.

That partnership helped them identify the top 40% of leads which were contributing to 80% of their revenue.

Source: Infer

To put it simply, companies can function better with AI and serve their customers more successfully. Integrating AI in business operations will become necessary if companies want to increase efficiency.

In light of this, we can expect even more resources to be directed into products with artificial intelligence.

Source: Google

In fact, many tech giants, such as Microsoft, IBM, and Google, are already heavily investing in artificial intelligence, applying for and creating thousands of AI patents.

Because of this high interest, the artificial intelligence market is set to reach $126 billion by 2025.

In the coming years, SaaS companies will have to turn to developing AI features to help customers reach their full potential. This will be essential if they want to stay competitive and continue growing.

Machine Learning

As a subset of artificial intelligence, machine learning predicts outcomes based on the collected data, and thus helps businesses make better-informed decisions.

It goes without saying that the ability to estimate the outcomes of specific actions in advance is invaluable to companies as they strive to meet their goals. Imagine all the ways in which you could shape your business operations if you could accurately predict your customers’ buying behavior or preferences.

This is why machine learning is heavily used in predictive analytics. It is a method of using data to anticipate future developments by analyzing current patterns. With machine learning, you can build customer personas by examining the behavior they exhibit. And as you gather more data, the predictions get more accurate.

Companies like InsideSales use machine learning and AI to help businesses boost their revenue by targeting the right accounts and collecting data from customer behavior.

The technology predicts which leads are more likely to convert and thus shapes how companies engage with customers.

Source: InsideSales

Machine learning is already widely used, and the demand for more accurate data analysis is on the rise. So, it’s no surprise that some expect the machine learning market to reach $117 billion by 2027.

In the end, companies want to dig deeper into their data to get a competitive edge. Therefore, we can expect more SaaS companies to incorporate machine learning into their solutions to help businesses boost their processes.

Centralized Analytics

Companies are already spending trillions of dollars on digital transformation. This is because they want to be more agile and do business more intelligently.

In light of this, analytics-centric SaaS products are likely going to become the most important business investment for businesses in the upcoming years.

The benefits they offer are numerous.

Centralized data infrastructure helps companies collect data from multiple sources, thus providing a more comprehensive overview of the company’s operations.

The great advantage of this is that everyone in the company has access to vital information at all times.

That provides transparency and justifies different business strategies, allowing the entire company can work with the same set of information and move uniformly and efficiently.

Source: Alteryx

In light of the many benefits of centralized analytics, we can expect more companies like Ahana, Alteryx, and Databricks to offer SaaS products with similar features.

Maybe you could be one of them?

Vertical SaaS

More and more SaaS companies are focusing on targeting specific segments of customers within their chosen industries. This is called Vertical SaaS.

The main reason behind vertical SaaS is that specialization can help SaaS companies customize products more efficiently. Thus, they create better products with the customer’s specific needs in mind.

For their part, businesses want SaaS providers that understand their industry. Hence, they’re more likely to invest in products that offer a specific solution to their business, rather than a generic product.

What is more, such products are far stickier than horizontal SaaS, as the chart below illustrates.

Source: Duda

As SaaS companies add more features to their industry-specific product, they are able to offer more value, so customers churn far less. Moreover, as you can see from the graph above, they can also charge more, meaning they’re also garnering more revenue.

Vertical SaaS is not as well-developed as horizontal SaaS, but the market is booming.

Source: Nasdaq

Newer startups are jumping at the opportunity to tailor their products to the demands of specific sectors. They are purposely limiting their product range to offer better support and functions to certain sectors. And the results are more upselling opportunities and lower CAC (customer acquisition cost).

So, if you’re looking to create unique solutions for specific industries, keep an eye on Vertical SaaS.

Better API Connectivity

Switching to new tools is tricky and costly, especially for large enterprises. The more established the company is, the more processes and systems become complex. As such, they often can’t be easily managed with new software.

So, as more companies adopt SaaS products, one of their most pressing concerns becomes how to integrate new technologies into existing systems.

In fact, integration seems to be the second most important challenge large companies face, right after security.

Source: BetterCloud

The solution for this problem is using APIs for better product integration.

API stands for Application Programming Interfaces, and they enable data transmission between two software products. In other words, customers can seamlessly connect different software products with APIs without making drastic changes to their existing processes.

This results in reducing costs and saving precious time, which are the main appeals of APIs. The appeal is so great that some experts estimate the API market will be valued at $1.78 billion by 2026.

To conclude, customers want well-integrated tools to work with. So as large companies make strategic choices to migrate their systems, we can only expect a proliferation of new and innovative API-first SaaS products.

White-Label SaaS

What do VendAsta, Salt Edge, and Wheel have in common?

They are all white-label SaaS companies!

Source: SaltEdge

These companies offer fully developed products or platforms users can customize with their own branding. White labeling is not new, but we will see more startups integrate ready-made solutions and repackage them as their own in the upcoming years.

Why?

First of all, many companies are reluctant to launch their own digital solutions (such as business apps) because they’re afraid of the development costs or lack the manpower.

But white label products eliminate this concern. When startups purchase white label products, they get a quality platform they can rebrand and offer their solutions to their customers without building anything from scratch.

This further helps companies get in the game early and gain market share quickly. They can focus on connecting with their customers and solving their problems, but without the hassle of maintaining and developing software.

On the other hand, a company providing white label products can expand its revenue by offering the same solution with minor tweaks to multiple companies in the same niche.

All in all, white labeling benefits everybody involved. And as more companies want to respond to customers’ needs without worrying about investing their own time and resources in development, the great surge in white-label products will continue.

Micro-SaaS

As the SaaS industry continues to grow, it’s becoming increasingly saturated.

In fact, Statista estimates there are over 25 000 SaaS companies currently in existence. A lot of them offer similar products, too, so customers have thousands of choices for one single category of SaaS products.

To stand out in a saturated market, there is only one solution: to become an expert in a specific niche. This is where micro-SaaS comes into play.

Tyler Tringas, the owner of Storemapper (a store locator app), coined the term when he started his own micro-SaaS business in 2012.

In his words, micro-SaaS is “a SaaS business targeting a niche market, run by a small team and focusing on a small user base.

Source: Storemapper

Micro-SaaS products are complementary add-ons to existing platforms, so they’re used by customers who need a specific feature that’s missing from the standard product.

But how can developing those be profitable for SaaS businesses?

On a surface level, targeting a small user base seems like it would spell disaster for most companies, but that wasn’t Tringas’s experience. In fact, he sees it as a strength for micro-SaaS companies.

With micro-SaaS, business sustainability and profits are prioritized over growth, making these small companies successful for a long time. What is important is customer retention.

First and foremost, micro-SaaS companies make sure the customers are successfully onboarded and retained.

According to Tringas, almost 50% of trial users become paid Storemapper customers, with less than 1% monthly churn. Those customers have the potential of paying him for the next 12 years, he concludes.

So, if launching an entire multi-faceted product seems daunting, you can join the trend of small SaaS products and create a valuable business. The more specific you are, the better, because that makes you more valuable.

Mobile-First Optimization

Forward-thinking businesses make their products accessible on multiple devices, but especially mobile phones.

The simple reason for this shift is that more people use mobile phones, especially smartphones. Nearly two-thirds of the world’s population own a mobile phone, and that number is only growing. Statista’s predictions for the next five years confirm that.

Source: Statista

Why is this happening?

With smartphones, people have advanced technology at their fingertips. They can access information and do their daily tasks whenever and wherever they are.

Moreover, mobile phones enable companies to increase productivity and improve customer service. Small businesses can build their brand simply by using phones to contact customers and manage important data.

You will see many SaaS providers offering both desktop and mobile versions of their products. Workable, an applicant tracking system company, is one example.

Source: App Store

Because of this, SaaS companies are stepping in to provide more unique products and features that will help users work from anywhere.

In the end, companies need to go where their customers are. By that logic, creating products for mobile users seems like a no-brainer for any company that wants to grow in the upcoming years.

Low-Code SaaS

No-code or low-code tools enable even users with limited technical knowledge and coding experience to design their own digital solutions.

Such platforms allow more people to use your product, so you can increase sales and revenue. Thus, having a no-code product will become essential for SaaS companies that want to expand their customer base or change the type of customer they target.

For example, Pixpa is a user-friendly website-building platform that enables users to create websites without needing to code. They have an intuitive drag-and-drop feature, as well as templates and preset layouts to build professional websites.

With this, they’re able to target customers with different needs–from industry professionals to students.

Source: Pixpa

More and more companies want immediate results without having to do complicated work. They want to launch their products fast, and simplify their workflow.

Therefore, the challenge for SaaS providers is to develop products that will help businesses thrive without needing the help of an IT person.

Conclusion

What key takeaways can we get from these SaaS trends?

First, there is a great demand for SaaS solutions that have to do with leveraging insights from data and streamlining operations. Businesses want to be more agile, so AI and machine learning will be at the forefront of new developments.

Then, many new companies want to partake in the digital revolution but don’t have the required expertise. To cater to them, SaaS companies will have to focus on creating simple products that anyone can use or sell.

The trends we’ve described indicate what kind of products customers may expect in the future. In order to succeed, potential future entrepreneurs would do well to listen to them and leverage those insights as soon as possible.

About The Author
Asaf Darash
Asaf Darash
CEO and founder of Regpack

Asaf, Founder and CEO of Regpack, has extensive experience as an entrepreneur and investor. Asaf has built 3 successful companies to date, all with an exit plan or that have stayed in profitability and are still functional. Asaf specializes in product development for the web, team building and in bringing a company from concept to an actualized unit that is profitable.

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