The global SaaS market is booming. McKinsey Digital predicted the market worth of the SaaS industry will reach $20 trillion by 2030. Is your business ready to grab this growth opportunity?
As an entrepreneur, you must prepare to capitalize on the upcoming wave of meteoric rise in the SaaS industry. Thrilling breakthroughs are expected in the coming years. Technology advancements will create new possibilities. Staying updated with the latest SaaS industry trends is the only way to stay ahead of the curve.
So, are you eager to thrive in today’s competitive digital landscape? If yes, we bring you five SaaS industry trends that will have a major impact on businesses in 2024 and beyond. Check out these trends to get actionable insights into the future of enterprises in the age of SaaS.
Software as a Service Industry: A Brief Overview
Software as a Service (SaaS) has seen unprecedented growth in recent years. Various factors are contributing to this growth.
For example, most businesses nowadays prefer cloud-based SaaS solutions to on-premises systems. SaaS gives them the flexibility to access critical features anytime, anywhere. It facilitates remote and hybrid working and removes geographical boundaries.
Similarly, the cost-efficiency of SaaS solutions appeals to startups and small businesses. Emerging firms with limited budgets can choose SaaS subscription plans as per their needs. They need not purchase expensive traditional software that requires on-premises installation.
The below figures give us a brief overview of SaaS industry highlights:
- In 2023, the global SaaS market was valued at $197 billion.
- The number of SaaS companies worldwide is expected to rise from 30,800 in 2023 to 72,000 in 2024.
- Out of 30,800 SaaS companies, 17,000 are located in the US.
- The SaaS industry has grown more than five times in the last seven years.
- Companies using SaaS apps are leading the digital transformation drive.
5 SaaS Industry Trends For 2024
Over the years, significant developments have been made in the SaaS industry. The rise of generative AI and breakthroughs in supercomputers has further empowered the cloud computing sector.
We have enlisted five B2B SaaS trends that will reshape the global business landscape and create new growth opportunities in 2024 and beyond. Let’s explore them one by one:
1. Integration of Generative AI
The 21st century is the age of Artificial Intelligence. The AI-led digital transformation is going to change every sector, including SaaS. A recent example is ChatGPT. Since its launch in November 2019, the AI chatbot now seems to have become the essential need of every organization today.
In 2024, AI-powered SaaS products will remain the top priority of cloud providers. The integration of generative AI significantly enhances the functionality of SaaS applications and makes them more useful.
The practice of AI integration with SaaS has already started. For example, Canva released Magic Studio to enable users to create stunning designs and visuals based on user prompts. Just enter your design requirements and let the AI do the rest.
Other examples of AI design tools are Firefly and Midjourney.
Similarly, Microsoft has integrated GPT-4 into Microsoft 365. Users can now leverage the power of AI to perform various tasks while using Word, PowerPoint, Excel, Outlook, etc. Soon, Gmail will also launch an automated email writing feature powered by generative AI.
2. Low-code/No-code Platforms
If we look back five to ten years ago, being a coder was a dream for many. To become a programmer, you had to enroll in some IT institution, learn the coding basics, and master any programming language. Some practical experience was also critical.
However, things have changed a lot now. Today, you can become a coder, even without technical skills.
Low-code/no-code platforms have made it possible for us to build custom apps with ease. Instead of focusing on highly complicated and time-consuming programming tasks, we can use the built-in functionalities of these AI-powered tools to complete IT projects. All you need is a perfect prompt, including your product requirements.
With this modern approach to SaaS development, cloud companies will look for new ways to leverage low-code/no-code platforms in the coming years. AI-powered automation offers flexibility and efficiency.
As a result, businesses can automate software development and focus on more critical tasks. Particularly, small businesses and SMEs can benefit from low-code/no-code solutions. They can quickly deploy custom software without stretching their budgets.
3. Alternate Pricing Models
For years, cloud companies have relied on a traditional subscription-based pricing model. It has been a successful approach. Users could choose custom plans as per their requirements.
Today, the SaaS industry has become more competitive than ever. As a result, cloud providers are experimenting with different pricing models to attract more users. One major reason behind this new pricing approach was the rising inflation of SaaS products.
In 2023, for example, the average spending on SaaS tools increased by 27%, reaching $7,900 per employee annually. There was a need for some alternate solutions to bring down these costs without compromising on quality.
One good alternative to subscription-based pricing is usage-based pricing. This model gives users the flexibility to pay depending on how much they use the product or service. Hence, the need not worry about year-on-year inflation in the SaaS industry. There is no fixed subscription fee involved.
Usage-based pricing, also called consumption-based pricing, has been a great success, data suggests. For instance, data management company Snowflake reported their Q4 revenues surged by $21 million more than previous estimates by moving to a credit-based model.
Hence, over 60% of SaaS companies have already moved to user-based pricing in 2022. The number will rise in 2024.
4. Micro SaaS Applications
The SaaS startup ecosystem is taking another shift in 2024. New players are coming to this highly competitive industry. Funding remains one of the key challenges for new startups with limited resources. Micro SaaS is the solution to this problem.
Micro SaaS will remain one of the most significant B2B SaaS trends in 2024. It refers to agile and compact SaaS products developed by small teams. Micro SaaS companies are very specific in their niche. They don’t target a broad audience; rather, they focus on a specific sector, market need, use case, etc.
This new approach has two benefits. First, it enables young SaaS entrepreneurs to compete with dominant players. For example, Adobe has various products targeting multiple customer segments. A micro-SaaS company can build a cloud-based solution as an alternative to one of Adobe’s products. High competition would give users more freedom and a range of options to choose from.
The second benefit of Micro SaaS is you can launch these products into the market fast with minimal resources. Young entrepreneurs can validate their ideas and quickly respond to market changes.
Eventually, small setups can evolve into large SaaS giants. This strategic approach is attracting fresh university graduates who want to become tech entrepreneurs and compete with well-established SaaS brands.
5. Increasing Focus on Cyber security
What is the biggest worry of SaaS users these days? Almost 9 out of 10 users would say cyber security is the biggest threat to the credibility of SaaS apps.
And here’s why.
According to the Internet Crime Report, The Federal Bureau of Investigation (FBI) received over 800,944 complaints related to cyber security in 2022. Besides, the estimated losses resulting from cyber security attacks reached $10.3 billion in 2022, a nearly five-fold increase from 2018 ($2.7 billion).
Therefore, cyber security is expected to remain among the top SaaS industry trends in 2024. Considering the nature of cloud products, SaaS companies need to be proactive with their approach to handling data breaches and malware attacks. Hence, cloud providers are taking robust measures to ensure the security of SaaS apps.
Some of the crucial steps taken in this regard are data encryption, 2-factor authentication, and blockchain-based SaaS solutions. Additionally, SaaS companies are also complying with data protection ordinances like CCPA and GDPR. Investments in authentication tools, compliance monitoring, and employee password management have also been raised.
All these steps are aimed at overcoming the challenges posed by cybercriminals and improving the overall security of SaaS applications.
Final Thoughts
SaaS trends define the direction the industry will take in the coming years. Whether you are an entrepreneur or an employee, staying updated with these trends is crucial for the success of your organisation. They give you valuable insights into users’ demands and guide you toward optimising the performance of your products.
We have discussed the five most popular SaaS industry trends for 2024. These trends include the Integration of generative AI, low-code/no-code platforms, and alternate pricing models. Besides, micro-SaaS applications and increasing focus on cyber security would also remain the top priority of SaaS providers.
To take your SaaS business to the next level, make sure to incorporate modern technologies like AI and machine learning. Besides, find the right balance between essential features and industry gaps.