AI Solutions Drive Growth of Global SaaS Market

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Software as a service (SaaS) solutions have been heavily depended on by most individuals and businesses since COVID-19 paved the way for today’s largely remote working environment. Remarkably, as the threat of the pandemic gradually dies down, its market continues to expand. A recent report by Technavio shows that the SaaS market is poised to grow by $99.99 billion from 2020 to 2025 at an annual rate of 11%. And its growth won’t likely be impeded by today’s concerns about inflation given the market’s resilience to such.

One of the SaaS market’s key drivers is the growing penetration of vertical SaaS or platforms that target specific industries. Although the market leaders mostly belong to horizontal SaaS, with their utilitarian approach to software functionalities, industry-specific solutions are also receiving a healthy share of buy-ins, especially in areas like retail, manufacturing, and insurance.

These systems, often coming from startups, can afford to go deep with industry-specific functionalities since their solutions target specific sets of use cases, compared to the more generalized solutions of horizontal SaaS. They also grant users a wide range of data and intelligence, enabling enterprises to flourish in their respective niches.

Interestingly, despite the strong push of vertical SaaS on the market, another driver—whose global market surges at a much faster rate than SaaS—contributes to even bigger growth: artificial intelligence. AI has gone to become one of the most in-demand technologies globally and is looking to empower SaaS solutions in as much as it does business operations.

How AI Enhances the SaaS Market

The demand for AI has drastically grown over the years and would grow even further within this decade. In fact, AI’s global market size is set to increase from $87.04 billion last year to a notable $1.6 trillion by 2030, at an annual growth rate of 38.1%. AI software solutions make up a hefty slice of this pie, and this includes the global SaaS market.

AI is closely tied to SaaS in that it has become a critical functionality of most SaaS platforms, regardless of their proprietary functions, widening their capabilities to provide more solutions to users. For instance, sales and marketing platforms adopt AI to enable users to map out customer journeys and workflows and automate the actions surrounding each stage. Meanwhile, business management systems incorporate AI so that users can receive business intelligence or data analytics in areas like sales, profit margins, staff performance, and competitor performance, among many others.

AI also powers an in-demand feature found in many SaaS solutions—chatbots. Through machine learning, these bots are able to mimic human speech, in relation to sales and technical support, and provide solutions to customer inquiries. As such, enterprises won’t need to hire a lot of customer support agents since much of the heavy lifting will be performed by AI.

As far as enhancing company performance is concerned, AI-powered SaaS platforms have it in spades. A 2021 PwC report reveals that 52% of business executives credit AI tools, including SaaS solutions, for boosting company productivity. Similarly, 50% of executives cite AI-based systems for enabling their organizations to reach their cost-saving goals. Moreover, the use of AI-powered platforms has helped innovate the products and services of 50% of organizations.

These numbers reflect AI’s transformative capacity for improving business operations. Meanwhile, SaaS comes as the digital chassis of AI solutions through which businesses can foster improvements. It’s natural for both the SaaS and AI markets to flourish concurrently.