SaaS: forecasts for 2021

The Software as a Service (SaaS) market has reached $100 billion or 23% of the global software market, and growth will continue in 2021.

The bar for the market is rising. Having a cloud-based subscription product is now the bare minimum for a SaaS, but it is no longer sufficient. There are other ingredients that your SaaS should have in 2021. 

Here are some characteristics and trends that we will see becoming increasingly relevant:

Artificial Intelligence

A successful cloud software fundamentally manages a large amount of data. A few years ago, “AI” could be a promotional label to impress investors, but today utilizing elements of artificial intelligence is essential to stay in the market. It is not necessarily about developing proprietary algorithms (which can indeed create value but also pose risks), but rather incorporating the countless ready-to-use services offered by the market (AWS, Google, and many others).

Artificial intelligence is a powerful means to achieve greater insights and value from data, but it is also a crucial tool to create simple user experiences.

White label

One of the challenges that SaaS face compared to legacy software solutions is that system integrators, agencies, and distributors risk reducing their profits or being excluded from the supply chain. For this reason, a SaaS designed to be completely resold as a white label has the opportunity to scale through channels other than digital marketing.

Verticality

Since SaaS software generally have fewer possibilities to be “bent” and adapted compared to open-source software, it is more likely that the customer can solve their needs with various interconnected vertical SaaS rather than a single horizontal SaaS.

A clear example of this scenario is that of successful software that only covers 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 typically components (in this case, an authentication system) useful in building other solutions.

User Experience

Much could be said about the importance of UX and UI; still, many believe that the user interface is a luxury and that “substance” matters more. The data collected from the market tells a different story. Also, if the user cannot interact with “the substance,” it unfortunately remains unused, nullifying the efforts to produce it.

To create a good User Experience, you must know your users well, and if you continually focus on what they truly want, revenues will certainly increase.

Startup Bakery believes so strongly in the centrality of user experience that it has created a specialized UX studio: Donux. By consulting their presentation “The ROI of UX,” you will notice its importance for any SaaS, even those B2B that we provide through the Bakery.

Cybersecurity

2020 was a critical year for cybersecurity. Since the beginning of the pandemic, the FBI has reported a 300% increase in cybercrime (IMC Grupo). Many companies were not prepared to manage remote working securely and the related risks of data breaches. With more and more data present and digitized, the opportunities for profit from cybercrime are becoming increasingly attractive.

Cybersecurity companies are in greater demand, and significant investments are anticipated in this sector, which will need to evolve in both technology and marketing and market presence.

To date, there is still a lack of awareness about the issue: 64% of Americans have never checked if their data was involved in a data breach, and 56% would not know what to do if this circumstance occurred. (Varonis)

For SaaS, it will be crucial to increase security levels, and SaaS solutions in the field of cybersecurity will attract the attention of venture capitalists. 

Transition to PaaS

This is a direction that increasingly established SaaS will follow; to grow even faster, they will offer other companies the opportunity to develop components to integrate into an already established ecosystem, with thousands or millions of customers. They will transform from Software as a Service to Platform as a Service: open platforms with their own marketplace of third-party applications.

Growth Predictions

The significant changes brought by COVID-19 to the daily lives of individuals and companies have further accelerated the ongoing migration to cloud software solutions, also thanks to the advantage of having costs proportional to actual usage and speed in activation.

For 2021, Gartner estimates a revenue growth in the SaaS market of over 16%, exceeding $117 billion.

How to Leverage Change?

To avoid being caught unprepared for the ongoing change, one must first be “lean” and consistent. It is not necessary to proceed in leaps, but much better to apply small changes in the indicated direction. This practice is certainly achievable by many startups and scale-ups. If, however, your corporate structure does not allow for internal progress in this manner, the ideal is to outsource innovation, co-creating with a third party, like a startup studio, the solutions to be integrated into your structure.

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