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  • 2019 SaaS Industry Market Report: Key Global Trends & Growth Forecasts

2019 SaaS Industry Market Report: Key Global Trends & Growth Forecasts

Category: B2B News

sebastian lambertThe report and trend analysis below was prepared by Sebastian Lambert, CEO of FinancesOnline and our company’s guru on SaaS growth hacking and lead generation strategies. All trends are based on both extensive research of external sources as well as Sebastian’s analysis of SaaS-related data from FinancesOnline users and clients.

2018 was another groundbreaking year for the SaaS market space, where more transformative forces were unleashed into the digital world. AI, PaaS, Edge Computing, Blockchain, and 5G are leading the pack of disruptive technologies that will shape the global trends in SaaS that are unfolding before us. In this article, Sebastian Lambert will take a look at how these will impact businesses.

SaaS Industry Market Report

Cisco’s Global Cloud Index 2016-2021 predicts that SaaS will grow further from 71% in 2016 to reach 75% of the overall cloud workloads and compute instances by 2021. For the same period, Platform-as-a-Service (PaaS) will slightly increase to 8% of the total cloud workloads. However, Infrastructure-as-a-Service (IaaS) will decrease from 21% to 16% in the same period. By the end of this year, 59% of all cloud workflows is forecast to be SaaS. 

on-premise vs. cloud deployment

Compelling reasons why businesses are shifting to SaaS

SaaS has become absolutely necessary to how modern businesses operate. Around 64% of SMBs now depend on cloud-based SaaS to boost productivity and drive growth. Regardless of size, the majority of businesses (88%) are seriously intending to invest in new SaaS applications within two to three years.

Top criteria of IT experts when buying SaaS apps

2017 State of the SaaS-Powered Workplace

Cost

%

Security

%

Ease of Use

%

Integrations

%

Customer Support

%

Admin & Mgmt Capabilities

%

Uptime Guarantees

%

Scalability

%

Customizability

%

Data Center Infrastructure

%

Disaster Recovery Plan

%

Reporting & Analytics

%

Source: Bettercloud

Designed by

The force behind this is the continuing SaaS dominance of the worldwide computing marketplace. IDC predicts that 60% of public cloud spending will be SaaS by 2020. SaaS enables businesses to gain considerable cost savings by eliminating the need to install and run applications on-premise. Running apps in data centers via the cloud enables businesses to save resources, money, and time.

From only 12% of businesses using cloud-based apps in 2008, 73% of businesses will be using SaaS-powered apps come 2020. There are many other reasons that make SaaS deployment as a better option for businesses. These include automatic updates and customer support, scalability, and flexible payment options. One study even found that businesses using cloud-based apps will grow by 19.63%.

Top motivations for SaaS Deployment

Overall, businesses are increasingly deploying cloud-based SaaS apps primarily to:

  • Enhance IT service delivery speed (71%)
  • Respond with more flexibility to the shifting market conditions (63%)
  • Allow business continuity (58%)
  • Upgrade customer services or support (57%)
  • Cut down technology total cost of ownership (51%)
  • Replace proprietary technology (39%)
  • Save on capital expenditures (38%)
  • Decrease resource waste (35%)
  • Address the need for real-time data access (32%)
  • Hasten ROI (24%).

As a follow-up to our 2018 SaaS industry market report, we’ve prepared a new one for this year. We’ll first look back at some of the industry highlights that had shaped 2018 and share our evidence-based forecasts for SaaS for 2019.

Key developments in the SaaS market in 2018

Officially launched in 2008, SaaS has been around for more than a decade now. It has reached maturity only recently when top legacy software giants like Oracle and Microsoft has finally decided to ditch their obsolete delivery, licensing, and pricing schemes. They’ve joined companies like Salesforce and Slack in favoring SaaS and cloud subscription models.

PWAs Dominate the Digital space

Recently, mobile-first gave way to a digital-first, device-agnostic approach. And in such an environment, the Progressive Web Apps (PWAs) were among the most utilized SaaS apps versus mobile apps. For the uninitiated, the main difference is that there is no need to download it from an app store as it functions in a web browser.

A major reason behind the continuing rise of online mobile usage is the rise of PWAs. PWAs offer the same functions as native apps but without the need for some precious space. In fact, they provide as much as 25X less device storage versus native apps. This gives PWAs two distinct advantages over regular mobile browsing. One is the significant decrease in loading time and data usage.

Both PWAs and native apps do have their advantages and disadvantages. There are still some areas, for example, that only native apps offer, like system settings modification and phonebook access. But overall, PWAs are more efficient than native apps. PWAs are always accessible and work on-demand. Just like native apps, they also work even when you’re offline. Service workers make this possible. These browser tools help PWAs provide the same rich experience and high performance of native mobile apps.

PWA vs Native App

SaaS with Standalone features

SaaS apps are commonly flexible. This is to allow the mixing of add-ons or features. Another major advantage of SaaS over on-premise is that SaaS vendors can add new features relatively faster. And for 2018, a number of SaaS vendors have begun creating software on top of their current systems, which has proven to be an efficient strategy in a highly competitive market.

Creating SaaS that capitalizes on the strengths of proven solutions offers a host of advantages. Building a standalone from a mature SaaS app cuts the initial costs of creating a new app from scratch. For instance, a vendor can create added value for a common system by utilizing a widely-used generic ERP platform as the base and then creating particular standalone systems for other related use cases.

Building standalone apps, which are smaller in size, helps in cutting down the often immense size of some parent SaaS platforms. In essence, breaking down SaaS solutions make these platforms become more flexible and receptive for a wide range of customizations. This also allows businesses to create personalized solutions for a shared purpose, and at a relatively lower cost.

SaaS got more Secured

2018 was a notable year for software security, particularly due to the marked increase in privacy regulations due to the GDPR implementation. However, security remains a primary concern for SaaS. As cloud computing adoption continues to rise, so do security concerns. In fact, a long-term downward security trend was reversed in 2018 as 9 or 10 cybersecurity professionals had heightened their concern about cloud security.

The accelerating adoption of smartphones also paved the way for numerous entry points for security breaches, making enterprise and personal networks more vulnerable to cyberattacks. A major source of vulnerability is employee negligence, which one survey found as the biggest threat to endpoint security. This is why during the past year, companies have begun assuming a proactive cyber-resilience by investing in zero-trust techniques to better manage their increasing SaaS portfolio.

Biggest Cloud Security Concerns 2018

Survey Results among Cybersecurity Professionals

Data loss and leakage

%

Data privacy

%

Confidentiality

%

Accidental Exposure

%

Legal and regulatory compliance

%

Data sovereignty/control

%

Lack of forensic data

%

Incident response

%

Visibility & transparency

%

Fraud (theft of records, etc.)

%

Source: Cybersecurity Insiders' Cloud Security Report 2018

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Unbundling of SaaS

Last year, a considerable number of startups have begun focusing not on offering a full-featured product but rather packaging their core services as an API and a suite of small tools. The main idea of unbundling is that the same, cookie-cutter solution does not work for every company. Sometimes the solution is just too big for them or sometimes it’s just not specific enough to their particular needs.

This new breed of startups had shifted away from offering traditional “full-featured” SaaS products to their users but rather package their core service as an API and a suite of small tools. Unbundled SaaS seeks to fill the gap in the market for companies that struggle to find the right solution or wish that they could somehow customize solutions that they already have.

Due to overcrowded SaaS categories, many startups will start focusing on unbundling these features, offering tailored but rich, user-friendly services. These are often companies who’d rather not build an in-house solution from scratch, so putting together a customized solution from tools that are already available is appealing.

The Rise of Vertically Integrated SaaS

The demand for Vertical SaaS had finally spiked in 2018. Unlike its horizontal counterpart, vertical SaaS provides 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. Vertical SaaS involves vendors designing apps based on some specific industry or customer requirements. Horizontal SaaS uses the one-size-fits-all approach.

In the past, the SaaS industry had mainly concentrated on building apps that serve wide business functions like CRM, HR, and sales. However, there’s typically no single enterprise platform that can address all the needs of potential horizontally-aligned clients in a particular industry. 

Vertical SaaS systems, on the other hand, are configured to cater to all customer needs in their intended market niche, which made good business sense. No wonder that an increasing number of SaaS vendors, both legacy and start-ups, are coming up with vertical-specific solutions. Nevertheless, the buck still remains on the part of the business user, which is why it’s good to follow SaaS lead generation best practices to ensure that technology works to your advantage.

Vertical vs. Horizontal SaaS

The major SaaS market trends to shape 2019

Machine learning and AI have been dominating the SaaS market space. As businesses continue to deploy these disruptive technologies in their operations, they will be assuming bigger roles among SaaS vendors. From being selling points, AI and machine learning have now become essential offerings.

The Dawn of AI-empowered Smart Business Systems

Businesses need to automate as many processes as possible to enhance productivity and reduce time spent on non-core tasks. Numerous eCommerce firms are acknowledging the value of bulk personalization when they roll out their marketing campaigns. These are among the reasons why AI and machine learning for various core business processes like sales and CRM have become effective selling points that organizations positively respond to. AI technologies have already changed CRM as we know it.

AI has ceased to be a rookie in the technology team. Actually, AI has been around for over six decades. It has undergone major developments and has been providing numerous benefits since. They’re now an essential element of our daily lives. Many of the “ordinary” technologies we use today rely on AI, including Uber, chatbots, and even your very own Echo or Siri. The technology employs algorithms and data to forecast, suggest, and automate an extensive wide array of tasks, from simple automatic message response and reporting to the more complicated analytics and market predictions.

The AI Effect: Digital Labor and DaaS Advantages

The increasing use of AI is compelling decision-makers to take advantage of the 20-40% cost savings that digital labor offers.

This trend is likely to continue this year and beyond. According to IDG, 75% have deployed or are planning to deploy AI by 2019. More than half of businesses (54%) already have a plan to deploy AI, while 41% are planning to implement the technology soon.

Due to the increasing use of AI—including over 40% of digital transformation programs—30% of global enterprises will begin generating Data-as-a-Service (DaaS) revenues by 2019. By 2021, the same study predicts that 75% of commercial business solutions will have integrated AIs and more than 50% of consumers will connect with it.

For this year alone, AI technologies expected to enhance business productivity include AI-powered search, conversational chatbots and virtual agents, AI-powered talent acquisition solutions, and advanced AI assistants. Aside from these tools, AI is improving SaaS platforms by providing them with personalization, automation, and better security. In case you haven’t deployed any AI-powered solutions in your business operations, it’s high time to do so.

SaaS-powered intelligent automation business deployment

Appian's The Future of Work Survey 2018

3 in 4 organizations have either deployed or plan to deploy intelligent automation by next year

%

Machine learning is the most commonly deployed form of intelligent automation

%

Businesses planning to deploy intelligent automation by next year

%

Source: Appian, survey by IDG

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Top predictions for the SaaS market in 2019

This year’s chapter of technology innovation will be exciting. It will focus on businesses seeking to extend their digital reach, further use of smart technologies, etc. Here are FinancesOnline’s key predictions for 2019:

PaaS will achieve dramatic growth

As SaaS continues to increase in maturity, vendors are now shifting their business strategies into customer retention. One solution to this is already an existing one in their arsenal—the use of Platform-as-a-Service (PaaS). PaaS enables vendors to quickly introduce new apps and deploy code instantly, which used to take several months in the past. This solution allows SaaS vendors to become more proactive to consumer requirements and deploy more assets to development.

PaaS spending will be the second-fastest-growing category in the SaaS market in 2019. This growth will be driven by business purchases of data access, analysis and delivery platforms, integration and orchestration applications, and data management solutions.

According to a survey among CIOs, the cloud will further accelerate its already rapid growth. This will be driven by solid mainstream adoption and a global PaaS investment that will grow twice faster.

Another study reports that 58% of enterprises with PaaS investment anticipate a positive ROI within 3 months.

The PaaS market will continue to be dominated by the top 3 early leaders, namely Amazon Web Services in the first place, followed by Microsoft Azure and Google Cloud Platform.

Worldwide Market Share of Leading Cloud Infrastructure Service Providers 2019

Includes PaaS, IaaS and hosted private cloud services

Amazon

%

Microsoft

%

Google

%

IBM

%

Alibaba.com

%

Salesforce

%

Oracle

%

Tencent

%

Source: Synergy Research Group, Statista

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The Rise of Edge Computing

Edge computing is another tech innovation that will elicit considerable interest in 2019. For this year, it will extend computing power indefinitely and draw upon the possibilities of micro-services networks. Basically, edge computing involves placing data centers closer to the point of use. To do so, it needs fog computing, which is a standard that determine the workings of edge computing. 

The fog’s importance to edge computing is akin to the cloud-SaaS tandem. As a decentralized IT architecture, the fog helps in running networking, storage, and computing functions between cloud data centers and end devices. Edge computing use fogs as a kickoff point.

With over 75 billion IoT devices predicted to be running across the world by 2025, edge computing will be more crucial. In this digital world, edge computing will be an essential data generation engine for Big Data. According to Forrester, 27% of global telecom decision-makers said that they will be expanding or implementing edge computing in their operations by this year.

This trend is likely to expand further. In fact, edge computing is considered as an essential technology to help businesses address their digital transformation needs. By 2022, fog computing’s top verticals will include agriculture, healthcare, transportation, and utilities.

Growth of Fog opportunity by vertical market

Multi-Cloud Deployment

More and more businesses have been embracing cloud computing since its launch in the early 2000s. For 2019, the growing trend is toward using several clouds. 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 a reality in the near future.

At the same time, however, data protection continues to be the key challenge in a multi-cloud setup. Businesses must have a robust strategy to privatize data and manage how and for whom their data will generate risks and value.

Cloud services consumption, however, is predicted to achieve its optimum growth once cloud technology has achieved maturity in addressing the effects of multiplied innovation. 

By 2020, more than half of modern edge computing and network services will be cloud-based and will be protected by virtualized edge systems. By 2022, more than a million services and applications will be provided in the online marketplaces of the top five cloud service providers.

Top Cloud Initiatives in 2019

Optimize existing use of cloud (cost savings)

%

Move more workloads to cloud

%

Expand use of containers

%

Implement a cloud first strategy

%

Automated policies for governance

%

Better financial reporting on cloud costs

%

Expand public cloud we use

%

Implement CI/CD in the cloud

%

Move on prem software to SaaS

%

Manage software licenses in the cloud

%

Enable IT to broker cloud services

%

Source: RightScale 2019 State of the Cloud Report (Flexera)

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Transaction-Based Payment Scheme

By tradition, SaaS vendors have operated on subscription models, where users pay a set fee per year or per month. This payment scheme is effective for both businesses and customers.

The increasing diversity among SaaS vendors and the nature of their operations have made a sound business case for a transaction-based or “pay-per-use” (PPU) model. This payment scheme is the better choice for businesses offering services with limited lifecycle. And it’s becoming the logical option for many SaaS vendors nowadays.

A transaction-based pricing scheme works best for SaaS start-ups since they usually experience cash-flow issues. Initially, monthly or annual subscription arrangements are most welcome as these types help provide a solid business foundation and stability. But once you have established your customer base, adding a PPU provides flexibility to both your current and new clients. This will also expand your revenue sources.

Blockchain Integration

Blockchain only plays a supporting role in cryptocurrency. This is because it’s growing relatively slower than how experts have originally anticipated. Actually, the vast possibilities of blockchain transcend the cryptocurrency domain. It has the still untapped power to integrate solutions to three of the most challenging problems of the business world. These are security, decentralization, and imbalance on scalability.

Core business systems will include blockchain in 2019. This will enable security and transactional transparency through a broad array of business processes. This year will also witness blockchain’s expanding utilization in RegTech.

This involves helping automate processes that must comply with some particular regulations before they are conducted. One industry study found that 53% of businesses report that blockchain technology has become one of their main operational priorities for this year.

blockchain benefits

APIs and Integrations

Migrating to new hardware and software had always challenged businesses. The larger and more successful an enterprise is, the more complicated the demand to select and shift to a SaaS solution becomes. Businesses need to know that their current data will be secured and can be transferred easily through APIs without incurring considerable time and costs. More than ever, enterprises want SaaS solutions to function seamlessly with the current applications and processes their workforce is using.

Among SaaS providers, standardization is the top API technology challenge for 2019. As API providers further enhance their integration offerings, more innovations will be achieved this year.

Top API technology challenges in 2019

Standardization

%

Versioning

%

Composability/Multi-Purpose Re-use

%

Security

%

Scalability

%

Easier Integration between Tools

%

Authentication

%

Discoverability

%

Others

%

Source: The State of API 2019 Report

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The World Welcomes 5G

This long wait is over. Finally, 5G chips have arrived. The long-promised successor of 4G/LTE offers increased network availability worldwide and the unveiling of new capable devices. Only around 1 million 5G-phones will be shipped for 2019, which indicates a rather cautious stance from smartphone makers.

Still, 5G is promoted to be powerful enough to support next-gen technologies like autonomous driving and other augmented reality products. 5G’s businesses applications are vast, including faster download speeds and decreased communication latency. In due time, the best hosting services become more reliable than ever.

For this year onward, 5G wireless technology will have three major applications. These are for genuine mobile connectivity, for connecting devices like 5G modems or hotspots, and for 5G fixed-wireless access (FWA) devices. By 2023, 1 billion 5G devices will be connected across the globe.

Landscape of 5G

Bottom line

Technology continues to evolve faster each passing year. The global SaaS industry looks as dominant as ever as it reached an overall market value of US$116 billion. 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.

Adopting transaction-based payment models can help a business retain and draw in new clients. Multi-cloud approach and the growing number of APIs and integrations offer cost-savings, agility, flexibility, and scalability. 5G and edge computing drive innovation, improve risk management, and network performance enhancements.

Understanding SaaS trends helps companies arrive at strategic 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.

Like our other useful collections of top technology trends, we aim that this guide will help you achieve these business goals.

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FinancesOnline is available for free for all business professionals interested in an efficient way to find top-notch SaaS solutions. We are able to keep our service free of charge thanks to cooperation with some of the vendors, who are willing to pay us for traffic and sales opportunities provided by our website. Please note, that FinancesOnline lists all vendors, we’re not limited only to the ones that pay us, and all software providers have an equal opportunity to get featured in our rankings and comparisons, win awards, gather user reviews, all in our effort to give you reliable advice that will enable you to make well-informed purchase decisions.

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