Growth of Software as a Service (SaaS) Facilitated by Changing Economy

Today, spurred by cloud expansion, SaaS is steadily becoming increasingly common due to this business model’s easy-to-manage capability. The SaaS market is flourishing and is likely to keep doing so in the near future. Since 2010 the average spending on SaaS solutions per organization has been steadily growing every year. According to Gartner, the SaaS market is predicted to reach a tremendous $397.5 billion by the end of this year.

Your business didn’t move from on-premise to SaaS yet? Then it’s high time to roll up your sleeves and do the jump. Moving from on-premise to SaaS provides tangible benefits for both SaaS providers and their customers.

Some advantages of SaaS model

1. Simplified deployment

Unlike the traditional model, a SaaS solution comes installed and configured. Your customers just need to provision the server for an instance in the cloud and after a few hours, they can work with the software. Thereby, the time required for installation and configuration is minimized as well as the problems occurring during the solution deployment.

2. Cost effectiveness

SaaS is likely to be cheaper for your customers (or at least require lower upfront costs). This is due to the fact that customers will pay for using your software as they go with no need for buying a software license for each computer. Improvements like releases and upgrades are also less expensive than those included in the on-premise upgrade package.

3. High scalability and interoperability

SaaS solutions provide more scalable infrastructure than on-premise ones. Numerous integrations with different SaaS offerings are feasible.

Software as a Service in a nutshell

The SaaS business model requires a cloud provider to host software and ensure its online availability for users. As a rule, an independent software vendor cooperates with a third-party cloud provider that hosts software. Big companies like Microsoft tend to be both – a software vendor and a cloud provider all rolled into one.

Key SaaS characteristics:

• The SaaS model is applicable to a wide range of business tasks, including email newsletter, customer retention management, appointment scheduling, human resources, just to mention a few.
• SaaS is a software licensing model that enables customers to use a program on a subscription basis via external servers.
• It lets all users access software over the internet with no need for installing the program on users’ computers.

SaaS market overview

Salesforce was the first company to prove the vitality of the SaaS distribution model. Today, businesses, including micro startups and giants like Oracle and SAP are willing to adopt this model. Now the SaaS market is invaded by strong players. Salesforce, Shopify, Adobe, and Intuit lead the market. But in spite of fierce competition, there’s still room for micro, small, and mid-sized businesses that want to join the game offering a new SaaS product.

According to Statista, in 2021, there were around 15,000 SaaS companies in the US. Together, these companies had nearly 14 billion customers from all over the world. The United Kingdom took second place with 2,000 companies and 2 billion customers from all over the world.

Key types of SaaS market segmentation

The SaaS market can be segmented by the deployment type, application, industry, region, and more.

Types of cloud computing deployment

The SaaS market is broken down into public cloud, private cloud, and hybrid cloud. The choice of the deployment method depends on the company’s business needs. In short, the difference between the deployment types is as follows:

Public cloud – Data is delivered via the internet and can be shared with multiple individuals and organizations.
Private cloud – Access to data and other information is only available to users within a specific organization.
Hybrid cloud – This is a combination of the two above. Such an environment uses both – public and private clouds.

Segmentation by the type of application

By application, the SaaS market can be roughly segmented into:

• customer relationship management (CRM)
• enterprise resource planning (ERP)
• content management
• collaboration and communication
• business intelligence (BI) and analytics
• human capital management (HCM)

CRM solutions are among the most popular SaaS software products. In 2020 this segment held a market share of 25.1 percent. Such a popularity is related with wide CRM adoption across organizations to keep customer and prospect contact details, define sales opportunities, record service problems, and manage marketing campaigns.

Horizontal and vertical SaaS

A horizontal SaaS is a model followed by well-established cloud services like Salesforce, Slack, and Hubspot. This model enables large SaaS providers to serve a wide customer base originating from various industries. The model simplifies expansion or bundling up the SaaS provider’s offering. This approach allows the provider to broaden their offerings to combine multiple SaaS categories. For instance, Google and Microsoft created communication solutions in the form of Google Hangouts and Microsoft Teams.

In their turn, vertical SaaS products are tailored to a specific niche or domain-specific standards. This model concentrates on the domain’s verticals and allows a provider to offer tools for the niche domain’s pain points and demands. Guidewire is a great example of a SaaS provider that develops IT solutions only for the insurance domain.

Segmentation by industry

These industries are at the forefront of cloud adoption, whether private, public, or hybrid:

• banking, financial services, and insurance
• healthcare
• education
• government
• engineering

COVID-19 impact on the SaaS industry

The pandemic damaged the global economy. But, the crisis contributed to the increasing demand for SaaS cloud migration. Moving from on-premise to the cloud also escalated. With lots of specialists working remotely, the shift from office to home is easier with the cloud. Organizations that are impacted financially by COVID-19 still seek ways to raise productivity and efficiency and grow their business. And moving to the cloud is a great solution as it offers a more attractive initial buy-in.

Why SaaS will continue to grow as our economy shifts

What is the future of SaaS technology? Although the COVID-19 crisis has negatively impacted the global economy, some developed economies are starting to recover. However, there are some irreversible changes that have affected our future economy. It’s already evident what kind of businesses will survive and thrive. When traditional businesses suspended their activities, SaaS providers withstood and enabled other organizations to work and serve customers from home. Let’s view several peculiarities of the SaaS distribution model that prove that SaaS is here to stay.

SaaS provides unrivaled flexibility

Having no physical product, a SaaS provider excels other businesses by offering timely and quality service. Your employees can supplement, make some changes, and update your SaaS solution for all customers in one sitting in a matter of hours or days. Thereby, production takes less time and overhead is restricted to your team, not a physical location. Thanks to such flexibility, you can fulfill customer needs and react to changing economic demands much easier and faster than other businesses.

SaaS is great for remote teams

SaaS development teams and the way they work are perfect for remote work. Software engineers, marketing experts, sales personnel, and managers are prone to collaborate by using technology. SaaS workers were among the first to jump on the bandwagon of actively using digital chats, video conferencing software, and applications for issue tracking and project management.

The principle of SaaS development and promotion make SaaS specialists more agile and tech-savvy. Typically SaaS solutions are tailored to a global market, not limited by physical location. Thereby, SaaS teams are accustomed to serving companies from all over the world from one or numerous locations.

SaaS is highly adaptive to business sectors

A SaaS provider can tailor its solution to satisfy the demands of various sectors. As a result of the crisis, some market segments (like in-store software) might halt and be replaced by a new type of software (like eCommerce supporting software). SaaS providers can adjust their software solution to other regions and market segments if needed.

This SaaS model capability enables a SaaS provider to respond quickly to the changes dictated by the crises and identify new opportunities. A SaaS provider doesn’t rely on production of goods or store locations to offer new products. Employees working remotely can upgrade software and create new functionality to meet new customers’ needs with no dependence on their location. In addition, a SaaS provider can easily promote and provide their services to different business sectors thanks to the mainly digital nature of their SaaS growth marketing activities.

Conclusion

Today, the SaaS market is booming which convinces entrepreneurs and startups to invest in creating their own SaaS products. We hope that the insights we provided in this article assured you of the prospectiveness and viability of the SaaS business model. To provide your clients with an effective cloud-based app, make sure you’ll ensure the following:

• offer your clients a clear and reliable service
• conduct market research and identify your competitors
• wisely choose a technology stack
• learn about the SaaS economics to avoid a cash flow problem
• think over your pricing and SaaS marketing strategy
• find experienced SaaS developers