Title:What Experts Are Saying About the Evolution of SaaS Market
Type of article:Insights/Blog
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The Software as a Service (SaaS) industry is now worth $116 Billion worldwide. By the year 2020, the figure is expected to reach a whopping $130 Billion. Moreover, 73% of organizations state that almost all of their apps will be SaaS-powered by 2020, according to Kahootz. Top three SaaS companies, Salesforce, Microsoft and Adobe Creative cloud alone constitute huge market share.

The worldwide public cloud services market is projected to grow 17.5 percent in 2019 to total $214.3 billion, up from $182.4 billion in 2018, according to Gartner, software as a service (SaaS) is a software that is owned, delivered and managed remotely by one or more providers. The provider delivers software based on one set of common code and data definitions that is consumed in a one-to-many model by all contracted customers at any time on a pay-for-use basis or as a subscription based on use metrics.

Organizations are shifting all their applications to SaaS indefinitely due to cutting edge technology and strategies of SaaS to attract, to sell and serve customers better. According to Gartner, a majority of the money spent on enterprise software will be used for SaaS as businesses upgrade, replace, or grow their current software. Back in 2016, Gartner claimed that 50% of all CRM software is SaaS and that by 2025, that percentage will shoot up to 85%.

The traditional software model has led to several challenges which has slowed its pace. The evolution of SaaS has been resolving those issues with the advancement of technologies. The past five years have been a boon for SaaS companies with its beneficial features. Since the customer expectations are constantly evolving, businesses are looking for the latest SaaS trends to fulfill it efficiently.

SaaS over the years:

o   In 2014, 45% of workloads in the cloud were SaaS and right now it is almost 56%.

o   The growth of SaaS does not come as a surprise to most of industry’s experts. Also, the type of work being carried out by SaaS is getting more serious. Originally, SaaS was just used for small test projects due to data sensitivity and hesitation to upload delicate data on a ‘cloud’ which is easily hackable.

o   But now more businesses are getting comfortable using the cloud and giving it more responsibility.

o   Companies are no longer relying on the cloud just for sales force processes and e-mail, although those (and similar processes) are still made much easier thanks to SaaS applications.

o   By 2016 itself enterprises moved an additional 15% of applications into the cloud and invested to have SaaS replace their on-premise software rather than contribute more money to upgrading their in-house software.

o   2017 will be remembered as the year of ultimate state-of-cloud performance for software providers, narrowing down the list of market opportunities to a single rule: no SaaS, no revenue!

o   33% more companies started using more SaaS applications than they did in 2016. 38% of US businesses started fostering a SaaS exclusive workplace compared to 17% in 2016.

o   The SaaS market reached $71.2B in 2018, continuing to be the leading cloud segment in terms of revenue. On average, we saw 18 SaaS subscriptions and about $136,000 in total spend at each company.

o   2018 was another notable year for software security, particularly due to the marked increase in privacy regulations due to the GDPR implementation.

o   The demand for Vertical SaaS had finally spiked in 2018. Unlike its horizontal counterpart, vertical SaaS provided a cost-effective, industry-specific alternative that enables businesses to personalize certain functionalities. This makes it more flexible and helps in cutting technology acquisition costs.

SaaS in 2019 and the PaaS ball game:

o   As SaaS continues to increase in maturity, vendors are now shifting their business strategies into retaining their customers. One solution to this is already an existing one in their array of resources—the use of Platform-as-a-Service (PaaS).

o   PaaS enables vendors to quickly introduce new apps and deploy code instantly. The PaaS market will continue to be dominated by the top 3 early leaders, namely Amazon Web Services, followed by Microsoft Azure and Google Cloud Platform.

o   Edge computing is another tech innovation that will draw out attention in 2019. Basically, edge computing involves placing data centers closer to the point of use.

o   More and more businesses have been embracing cloud computing since its launch in the early 2000s. For 2019, the growing trend is toward using multiple clouds.

o   For three straight years, the top initiative among businesses is optimizing their current cloud usage. Further, 84% of global corporations have already adopted a multi-cloud strategy. This clearly indicates that an all-inclusive cloud strategy will be of tangibility in the near future.

The Big SaaS Divide:

Segmentation validates the identity of consumer groups, while personas and job stories help to then enrich the identities for other marketing efforts. Considered segmentation leads to increased focused messaging, the ability to build trust more effectively, improvements in response and conversation rates, and can also influence hyper-personalization.

Google Cloud and Salesforce are spending aggressively, almost nearing $18 Billion to enable data-driven customer success. Salesforce is the world’s largest SaaS provider by a wide margin, and expects to generate about $13.5 billion in total revenue this fiscal year, with the vast majority of that coming from SaaS.

Conversely, while Google Cloud is known primarily as a heavyweight in the IaaS sector of the cloud, new CEO Thomas Kurian has made it perfectly clear that he intends to dramatically strengthen the company’s presence “up the stack” with a stronger SaaS portfolio.

Speaking of emerging players, there are an estimated 10,000 private SaaS companies, the vast majority of which are early stage generating less than $3 million in annual revenue.

To wind up, technology continues to evolve faster each passing year. The constant rise of blockchain and AI offers businesses with novel, valuable opportunities. PaaS provides SaaS vendors with enhanced flexibility through the provision of personalized solutions for current clients, thus enhancing retention. Understanding SaaS trends helps companies make decisions on technology investments. In sum, zeroing in on these technology trends allow businesses to spend on where they should put their money in and where not to invest. It also helps on how to better deploy and structure the apps that your employees already use.