For every industry, there’s a supporting industry. There’s always a great business opportunity to support a business in any little thing they do. As business in almost all industries has moved in some way to digital, the opportunity to support their processes online have exploded. There are so many ways opportunities to constantly create solutions and improvements for business processes as well.
That’s where SaaS comes into play. SaaS works to constantly evolve the way we work through various new tools and solutions that meet our evolving needs. SaaS changes the way companies work, who does what work, and the resources companies need.
What exactly is SaaS?
Saas stands for Software as a Service. SaaS refers to when software is licensed out on a subscription basis to users. SaaS platforms and tools are hosted on third party providers and are available online. Popular examples of SaaS products are Customer Relationship Management platforms like Hubspot, email marketing tools like Mailchimp, Cloud storage and sharing services like Dropbox, and social media management tools like Buffer.
Here are some incredible stats that detail just how SaaS is transforming the way companies are moving forward.
How big is SaaS? SaaS Market Stats.
Overall, SaaS companies brought in $72.2 billion last year.
This is expected to grow by over 16.4% in 2019.
SaaS usage is widespread and grows as companies do. The average firm with over 250 employees uses over 100 SaaS applications. Firms with no more than 50 employees use around 25-50 SaaS applications. Growth is consistent as companies grow and will likely increase for all companies.
How does the average SaaS company perform?
Despite a full two decades of SaaS rise, there have been only 400 software companies overall to cross the $500M mark. Despite the big pot of gold that makes SaaS so attractive (low overhead, exponential recurring revenue), it’s actually quite difficult to hit a point of momentum and timing to reach great success. And it’s only getting harder. The SaaS market is at a very competitive turning point. Many SaaS companies do not survive long term and the initial investment required makes early success vital.
In the beginning, investment really matters and makes a big difference for the success of Saas companies because of the nature of building and deploying software. Companies that are bootstrapped starting up (funded by founders and early revenue) grow, on average, of 28% per year. Those who raise funding see 43-50% growth annually. A big difference!
The average value comparative to growth of SaaS companies might surprise you because the press tends to cover unicorns ($1 billion valued companies). On average, it takes companies 4 years to reach $1 million in annual recurring revenue.
But growth in general isn’t enough, unlike other industries, SaaS companies that experience 20% growth every year, which in other industries is pretty good, still has a 92% chance of shutting down within a few years.
Naturally churn, or the percentage rate at which SaaS customers cancel their recurring revenue subscriptions, is a top concern. Top SaaS companies experience a 5-7% churn rate annually. Keeping this number low is critical for growth and survival!
Who is the SaaS customer? SaaS customer stats.
Who do SaaS companies sell to? How is the market changing? SaaS has made its way from just the Silicon Valley/tech crowd into all areas of all types of businesses. SaaS is now fundamental to the way many organizations function everyday and will continue to be integral.
SaaS is literally for everyone. 38% of companies say they are running almost completely on SaaS and 73% of companies plan to make all their business systems based on SaaS by 2020.
It’s not just large corporations. Even small businesses rely on SaaS. Around 85% of small businesses will invest in using SaaS solutions by 2020. This is a huge potential for emerging SaaS companies in terms of expanding into new spaces.
The type of SaaS products companies are looking for is shifting as well. Productivity is priority. Large enterprises will focus their budget for SaaS on productivity solutions this year and beyond. Check out the best SaaS tools to boost business growth here.
Ultimately, it’s in companies’ best interest to make work more enjoyable. SaaS is popular with employees. 86% of end users said SaaS helps them be more productive and successful that desktop programs.
How are SaaS companies growing? SaaS Marketing Stats.
As the competition heats up, SaaS marketing and sales tactics and trends have changed and grown. SaaS companies have shifted from a very B2B type of sales and marketing style to really focusing on the end user and SaaS buyer personas to make SaaS sales more effective.
The SaaS decision process is a little longer than consumer products. SaaS companies have quelled this by offering free trials. But is it better to require a credit card or no card? Companies that do not ask for credit card info when signing up users for a free trial generate 2x as many paying customers in the end.
SaaS companies have also learned that you can’t always take the people out of software sales despite all the tools in use. Leads that get on the phone with a representative from your sales team are 70% more likely to become paying users.
SaaS marketing material has changed as well from technical white papers to more creative mediums that are more engaging as well. It turns out, people love to hear SaaS companies actually speak. 18% of the top SaaS companies have their own podcasts as a marketing tool.
Pricing is something that is really contentious and unique to SaaS because everything is recurring in some sense! Recent stats show that SaaS companies should revisit pricing. SaaS companies could increase profits by 11% with just a 1% increase in pricing. We’ll see who switches up this year.
What’s the future of SaaS? Upcoming SaaS trends to watch.
So what’s next? What do we expect to see SaaS move into and how will SaaS companies continue to evolve? There are a few things emerging to watch:
Artificial Intelligence.
Companies are looking towards how they can use Artificial Intelligence to save time and money. A division of SaaS that utilized AI within tools and platforms is called ‘AI as a service’. Many AI as a service tools that are driving the industry right now focus on processing and organizing data using AI. The AI as a service market is expected to be worth almost $11 billion by 2023.
Security.
Security is a top reason that companies hold back from adopting SaaS tools rather than turning in-house for solutions. 1 out of every 3 companies lose data as a result of SaaS tools. Security and what SaaS companies can protect against for companies will continue to be a huge selling point.
Personalization.
Personalization is mandatory for eCommerce customers. Companies are looking at ways they can easily and automatically personalize customer experience. 89% of digital businesses are investing in personalization tools and software.
Shopify
With new emerging technologies reshaping SaaS and the competition growing for SaaS companies simultaneously, it will be interesting to see how SaaS companies shift how they interact with customers, sell, market, and position themselves to stay ahead of the curve. For the best way to engage customers within your SaaS product and on your site, try Beamer.
