The Software as a Service (SaaS) products market has reached 100 billion dollars, that is, 23% of the global software market, and the growth will continue in 2021.
The market bar is rising. Having a cloud-based product sold by subscription is by now the bare minimum for a SaaS, but no longer enough. There are other ingredients your SaaS should have in 2021.
Here, then, are some characteristics and trends we will see grow ever more relevant:
Artificial intelligence
A successful cloud software finds itself, by default, handling a large volume of data. If a few years ago “AI” could be a promotional label to impress investors, today using elements of artificial intelligence is fundamental to staying on the market. It is not necessarily about developing proprietary algorithms (a process that can indeed create value but carries risks), but about incorporating the countless ready-to-use services offered by the market (AWS, Google and many others).
Artificial intelligence is an extremely powerful means to obtain more information and more value from data, but also a fundamental tool for creating simple user experiences.
White label
One of the difficulties SaaS products encounter compared to legacy software solutions is that system integrators, agencies and distributors risk seeing their profits shrink, or being cut out of the value chain. For this reason, a SaaS designed to be resold entirely white label has the opportunity to scale through channels other than digital marketing.
Verticality
Since SaaS software generally has fewer possibilities of being “bent” and adapted compared to open-source software, it is more likely that the customer will solve their needs with several vertical SaaS products connected to each other, instead of a single horizontal SaaS.
A clear example of this scenario is that of successful software limiting itself to covering only a part of the solution (e.g. backend APIs) instead of being an end-to-end solution.
There are already numerous unicorns, like Auth0, that are essentially components (in this case an authentication system) useful in building other solutions.
User experience
A great deal could be said about the importance of UX and UI: many still think the user interface is a frill and that “the substance” counts more. Market data says quite the opposite. Not least because, if the user cannot interact with “the substance”, the substance unfortunately remains unused, nullifying the effort of producing it.
To build a good User Experience you must know your users well and, if you constantly concentrate on what they really want, revenues will surely grow.
Startup Bakery believes so strongly in the centrality of the user experience that it created a specialised UX studio: Donux. Browsing their presentation “The ROI of UX”, you will realise its importance for any SaaS, including the B2B ones we bake through the Bakery.
Cyber security
2020 was a critical year for cyber security. Since the start of the pandemic, the FBI reported a 300% increase in cyber crime (IMC Grupo). Many companies were not ready to manage remote working securely, along with the related data breach risks. With ever more data present and digitalised, the opportunities for cybercrime to profit grow ever more attractive.
Cyber security companies are increasingly in demand, and large investments are expected in this industry, which will have to evolve both in technology and in marketing and market presence.
To this day, awareness on the theme is still lacking: 64% of Americans have never checked whether their data has been involved in a data breach, and 56% would not know what to do if that circumstance occurred. (Varonis)
For SaaS, raising security levels will be fundamental, and SaaS solutions in the cybersecurity field will draw the attention of Venture Capital.
The transition towards PaaS
It is a direction that more and more established SaaS will follow: to grow even faster, they will offer other companies the possibility of developing components to integrate inside an already established ecosystem, with thousands or millions of customers. From Software as a Service they will thus transform into Platform as a Service: open platforms with their own marketplace of third-party applications.
Growth forecasts
The great changes brought by COVID-19 into the daily lives of people and companies have further accelerated the ongoing migration towards cloud software solutions, thanks also to the advantage of costs proportional to real usage and speed of activation.
For 2021, Gartner estimates SaaS market revenue growth of more than 16%, exceeding 117 billion dollars.
How to exploit the change?
To avoid being caught unprepared by the change under way, you must first of all be “lean” and constant. There is little point in proceeding in fits and starts: it is far better to apply small changes in the indicated direction. This practice is certainly pursuable by many startups and scaleups. If, instead, your company structure does not allow you to proceed internally in this direction, the ideal is to outsource innovation, co-creating with a third party, such as a startup studio, the solutions to integrate into your structure.
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