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Insights Into SaaS Business Models and Factors Influencing Growth

SaaS June 21, 2022

Insights Into SaaS Business Models and Factors Influencing Growth
Kishor Venkatesh R

Content Developer

Contributors

Badhrieaswari R
Badhrieaswari R

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The global SaaS market, valued at USD 325.69 Bn in 2019, is projected to grow to USD 1620.6 Bn by 2030 at a CAGR of 15.8%.

    Subscription-based and centrally located on a remote cloud network, SaaS models are turning popular for their flexibility and affordability.
  • Increased investments in cloud-based technologies have become a crucial part of many firms' strategy and goals as they strive to strengthen their WFH capabilities.
  • SaaS transformation is primarily driven by multi-device popularity, Artificial Intelligence, emergence of 5G, and rapid Cloud adoption.
  • Challenges including pricing and delivery, operational structures and technical & product architecture are impacting the SaaS transition.

Download the full report to identify and micro-target top-spending prospects in SaaS and explore emerging trends, challenges, and focus areas for 2023.

The global SaaS market, valued at USD 325.69 Bn in 2019, is projected to grow to USD 1620.6 Bn by 2030 at a CAGR of 15.8%. Among the primary components of cloud computing, companies and organizations use the SaaS model in various applications such as conferencing, salesforce automation, customer relationship management (CRM), web content management, etc.

The COVID-19 pandemic crippled the global economy and impacted 75% of technology and SaaS companies’ sales. Businesses had to slash technology budgets or make department cuts. Yet, the demand for cloud computing has increased. Key players used the crisis to create strategies to restructure their business models.

Case in point, Microsoft Corporation collaborated with Aera Technology, an automation company offering digital solutions, integrating Microsoft Azure’s digital twin with Aera’s cognitive operating system to create a virtual representation of a physical entity in the automation process.

SaaS Grew Popular in the 2010s

Despite limited IT budgets, enterprises are increasingly adopting the subscription-based pricing model to satisfy the growing IT needs, particularly for SMBs and startups. Established enterprises also embrace the model to satisfy diverse needs with agile and modern solutions.

It results in a suitable business environment facilitating healthy competition among SaaS vendors while the market demand increases exponentially. SaaS growth rates, IPOs, and acquisitions all indicate this trend is not ending anytime soon for various benefits that include:

Higher strategic value compared to on-premise software deployments, including time and capital. The deployment time was reduced from several weeks and days to a few minutes/hours.

It provides a diverse set of resources to address varied demands. As a result, organizations are experiencing higher employee engagement levels with feature-rich SaaS solutions for improved customer service.

SaaS vendors can push feature improvements, bug fixes, and security updates in real-time. Traditionally, all these needed to pass through several organizational protocols and governance layers before reaching end users.

Here are a few reasons why SaaS adoption is growing in popularity.

Key drivers for SaaS

Growing Reliance of SaaS on New Technologies 

Incorporating artificial intelligence (AI), machine learning (ML), and the Internet of Things (IoT) also makes our list of important SaaS marketing insights. AI-centered SaaS can be installed to optimize your SaaS products or services. Its analytics tools can predict what customers will do next, source talent, and optimize pricing mechanisms. 

In the IT security industry, technology increases threat detection and identifies common threat patterns, helping derisk cyberattacks before they descend on software systems. 

  1. It amplifies automation – it can help you address customer queries quickly. 
  2. It increases sales productivity as it can process large amounts of data and leaves more time for sales teams to close deals. 
  3. It facilitates hyper-personalization by letting you zoom in on user personalization and improving any new feature and function design. 
  4. It provides predictive analytics, helping you detect changes in behavioral patterns before getting feedback, helping you resolve user-experience issues faster, and saving money. 

 

Key Factors Influencing SaaS Market Growth 

Growing demand among enterprises for a single solution to help them solve business problems propels growth by integrating various applications such as customer relationship manager (CRM), business intelligence, supply chain management, and e-commerce systems and can be customized for specific business needs deployed across various cloud platforms. 

Enterprises to increase investment 

Enterprises are increasingly investing by end-use on the cloud-based solution helping thrive the SaaS market in the coming years. Additionally, the prominent players in the SaaS market are focused on increasing investment to advance their product portfolio. 

In September 2020, Accenture invested USD 3 Bn to launch Cloud First. Users could gain access to Cloud-First across various industries and speed up their digital transformation to generate value at scale and speed. 

A rise in adoption of app-based services 

SaaS allows enterprises to access and store data online. Agility, scalability, reliability, and flexibility are among the major characteristics associated with SaaS reducing IT infrastructure costs, a prime reason for the increased adoption of SaaS applications. 

With smartphones being an integral part of individuals, enterprises spend more on mobile SaaS and app-based applications for easy access to information. Additionally, app-based SaaS allows individuals to synchronize, update, and control documents. The adoption of SaaS for smartphones and app-based services is expected to increase. 

North America to lead with the existence of vital players 

North America will still hold the forefront as a service market share during the forecast period due to the increased allocation and investment done in SaaS by end-users across healthcare, retail & consumer goods, and others. Moreover, major SaaS providers such as IBM, Microsoft, Oracle, Salesforce, Zoho, and Cisco could promote the regional market in the US and Canada. 

The Asia Pacific is expected to display considerable SaaS market share in the coming years, owing to large companies in China, India, Japan, and Australia. The growth in investment in innovative SaaS solutions is promoting the regional market. 

Key players and new launches to strengthen the market growth 

The market is filled with companies preserving their position by concentrating on novel launches, collaborations, mergers, and procurements. Such tactics taken up by vital players could reinforce its market opportunities. 

Case in point, Tata Consultancy Services (TCS) launched Jile 5.0 in July 2021, an updated version of a SaaS-based corporate agile application that will help businesses to offer large-scale development needs across numerous remote teams. 

Accenture and VMware partnered to form Accenture VMware to assist clients in leveraging the cloud’s robust capabilities and elasticity, critical for rapidly scaling business services, operating efficiency, and enabling scaled innovation. 

The SaaS transformation has impacted Kronos’ business and has profoundly transformed the company. The Kronos Cloud accounts for 90% of new product reservations. Cloud services are used by about 75% of the company’s 30,000 customers. Kronos now generates more than 60% of its revenue regularly. 

Additionally, Adobe, Microsoft, and AWS are leaders of the subscription economy and have set examples for independent software vendors to pivot to the subscription model to meet market demands. 

Draup analyzed the SaaS models and what could drive its future. The report has information about how companies are transitioning to SaaS models, key challenges, revenue models, future focus areas, etc. 

Draup’s sales intelligence platform provides information on deal intelligence, stakeholder engagement data, and real-time account intelligence. Its proprietary ML models provide comprehensive account and stakeholder intelligence to enable microtargeting. 

It enables you to subliminally repurpose your offerings so that it is exceptionally strategic in addressing your prospect’s business needs.

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