Top 5 SaaS Trends to Keep an Eye on in 2023
Despite the devastating global impact of the COVID-19 pandemic, the continued growth in the Software as a Service (SaaS) industry is a testament to the fact that SaaS is here to stay.
At a time when more companies than ever recognize the importance of cloud technology as a viable means to achieve their business goals, the SaaS industry has cemented itself as a go-to tool that Fortune 500 companies and SMBs alike leverage to maximize their chances of success.
Revenue is expected to show an annual growth rate (CAGR 2022-2027) of 9.97%, resulting in a market volume of US$344.00bn by 2027.
– Statista
The stats speak for themselves. Apart from the projected 9.97% increase in the SaaS market’s CAGR between 2022 and 2027, reports from Zippia affirming that SaaS reels in as much as $100M in annual recurring revenue paint a positive future for the SaaS industry.
Discover the top 5 trends that companies the world over predict will take center stage in the SaaS industry as of 2023.
Let’s dive right in.
1. The World of Micro SaaS
Throughout 2023, the world can expect to see a marked increase among companies in the adoption and use of micro SaaS products.
As a branch of SaaS development that prioritizes the delivery of targeted solutions for a small niche market, micro SaaS pushes against the conventions of traditional cloud development practices that aim to serve as large a user base as possible.
Historically, successful software companies have spent efforts releasing loads of features for their Software as a Service products to target multiple problems at once. That said, as the business world becomes more competitive, companies all over the globe have pivoted toward acquiring software solutions that target specific pain points they experience so that they can gain an edge against their competitors in the market.
94% of businesses are planning to invest in competitive intelligence. With a large-scale number of companies seeking data-based solutions for their business ventures, the only way to stay afloat is to join in.
– Small Biz Trends
Micro SaaS has emerged as an innovative, modern strategy that businesses can implement to increase revenue and, in turn, sharpen their competitive edge moving forward. By building products that offer concrete solutions to the specific needs and demands of a given industry, companies forgo large user bases for a more likely increase in product adoption and client retention as well as a higher potential customer lifetime value (CLV) for their end users.
From the standpoint of a company outsourcing software standpoint, micro SaaS products present themselves as cost-effective solutions since their features complement a company’s existing software solutions with little to no overlap. On the other hand, micro SaaS solutions are usually low-cost development projects that promise a high return on investment, thus making them ideal low-risk business ventures for freelance developers or small-budget SMBs.
No doubt, in 2023 the world can expect to see companies continuing to invest in either the development or acquisition of micro SaaS products as the demand for these cloud solutions keeps its upward trend of growth.
2. Investment in Information Security & Risk Management
The surge in the accessibility of cloud technology solutions coupled with the rapid speed at which software companies feel compelled to release SaaS products has brought on a wave of serious security risks for end-users.
This year, as SaaS file security violations spiked 134%, over half (55%) of respondents say their biggest security concern is not knowing where sensitive data exists.
– Better Cloud
In Adaptive Shield’s 2022 SaaS Security Survey Report, as many as 63% of respondents indicated that they had fallen victim to a security incident within the last 12 months. The report goes on to reveal the concerns that companies have for SaaS security breaches, with as many as 56% of respondents citing an inability to correctly evaluate 3rd party applications as a primary cause for concern, and rightly so. According to a report from IBM, in the U.S., a data breach can cost a company as much as $9.44M.
With file security violations increasing by as much as 134% between March and July 2021, the need for resilient cybersecurity solutions is more critical now than it has ever been. Companies have already started implementing security measures such as Domain-based Message Authentication, Reporting, and Conformance (DMARC) Record Checker which help to reduce email spoofing.
That said, DMARC offers protection against only one major type of cybercrime. Companies still struggle to find comprehensive solutions that mitigate the risk of all cyberattacks. What’s more, despite the tremendous advancements in IT technology, businesses still suffer from API failures, malware, and a host of technical issues that damage the credibility of a company and offset its supply chain. Technical issues are gateways for hackers to violate your data’s security walls and obtain key information about your consumers that compromise their privacy.
As we move into 2023, we can expect to see an increase in the demand for cybersecurity solutions for SaaS products to protect company data, reduce the likelihood of costly data breaches, and improve overall customer experience.
3. Blended Pricing Models
In 2022, the world saw the rise of the consumption pricing model in the SaaS industry. Also known as a usage-based pricing model, consumption pricing models took the SaaS world by storm and garnered immense popularity among end users.
From a user’s point of view, consumption pricing models seem fair because they bill users based on how often they use a given SaaS product.
However, we must also remember that micro SaaS is an emerging trend that’s expected to leave an indelible mark on the SaaS industry. While customers might be happy with a pay-as-you-go type of pricing model, the reality is that consumption pricing models for some SaaS products force users to pay a fixed usage amount to access an entire suite of features even if the user only makes use of a select few functionalities. Therefore, in such cases, while the user pays based on their use of the SaaS product, some argue that it is unfair for them to pay only for the specific features they use as opposed to their general usage of the cloud app.
For that reason, despite the sharp increase in the adoption of consumption pricing models for SaaS products, value-based pricing models are still predicted to reign supreme come 2023. This is because value-based pricing prioritizes a system where a customer agrees to pay an amount of money based on the perceived value that a product offers. In the mind of a user, this is also fair since common types of value-based pricing systems like tiered pricing and subscription-based models offer users multiple choices from which they can choose the payment plan and product suite that best suits them.
Despite the ubiquity of value-based pricing models, since 2022 has already ushered in an era of increased consumption pricing model adoption, the world can expect to see companies adopt a blended approach to their pricing model strategy come 2023. Companies and users alike have already grown used to a combination of tiered pricing and consumption-based billing plans. Businesses enjoy the best of both worlds by offering customers flexible plans to access their SaaS products. For users, having the option to bypass upgrading their subscription plan by simply paying extra based on their usage of a cloud solution is also equally as attractive.
4. Vertical SaaS
Micro SaaS isn’t the only branch of the Software as a Service industry that will be a hot topic in 2023. Vertical SaaS is yet another trendy area of cloud development that can expect continued adoption from innovative, competitive companies in the years to come.
Often confused with micro SaaS, vertical SaaS pursues the development and delivery of intricate, high-level niche-specific software platforms to end users. While micro SaaS serves to deliver a handful of features targeted toward a specific market, vertical SaaS emphasizes the development of solutions that target a particular market. While the two share commonalities, micro SaaS solutions can be managed, built, and delivered by a single developer while vertical SaaS products are more complex and require the expertise of a team of software developers.
That said, being akin to a trend in cloud development such as micro SaaS rightfully implies that vertical SaaS also enjoys the luxury of being a branch of SaaS that is on course for growth in 2023. The COVID-19 pandemic was the catalyst that drove interest in vertical SaaS development as more and more companies were forced to embrace new technologies to stay afloat. This shone a light on the absence of products that offer not only a few stand-alone solutions that complement existing product lines, but rather an entire suite of products (PaaS) that target specific niches like automotive, legal companies, and more in order to solve their pain points.
Between 2020 and 2021 alone, we saw a sizeable uptick in the number of global vertical companies that come close to 30%. Not only that, but companies such as Blend and Toast that operate within this specific branch of SaaS have achieved monumental success, yet another indicator of the profits to be earned in this niche. Without a doubt, 2023 will be another year for expansion for the vertical SaaS niche as companies continue to break ground and develop more targeted solutions for specific niches.
5. Artificial Intelligence & Machine Learning are Here to Stay
In the cloud development world, artificial intelligence (AI) has evolved from being a novel branch of data analysis and has become a staple feature that enhances the appeal and value proposition of products today. AI has now made it easier for companies to customize content, make their product offerings more competitive, and conduct more in-depth market analyses to extract more powerful customer and user insights that’ll help them build better product experiences.
Since AI remains a fairly new type of innovative technology, companies are clamoring for software development companies to keep refining AI solutions until the world gets to a place where AI offers even more solutions at a cheaper price. For that reason, in 2020 alone, SaaS software that incorporates AI commanded as much as $247.6B of the AI market, a figure which is only expected to increase exponentially in the years to come.
Machine learning (ml) is yet another area of software development that is projected to revolutionize the SaaS industry in the coming years. The world has already seen the way that ML enhances SaaS solutions by streamlining internal processes and improving operations. As companies continue to imbue AI-powered SaaS products with ML, no doubt the machine learning market will also grow by leaps and bounds in 2023 and beyond.
Conclusion
The exponential boom in the SaaS industry is undeniable.
Despite the global challenges brought on by the COVID-19 pandemic, the SaaS market has proven itself to be resilient as it continues on its chartered course for monumental growth.
For the year 2023, we can expect to see software companies continuing to expand their development efforts in key areas such as micro SaaS, vertical SaaS, artificial intelligence, and machine learning among others, to continue the trend of delivering innovative solutions to end users.
The road ahead for SaaS is filled with uncertainty and promise. But no doubt, it will be a year full of excitement as the world watches the phenomena of SaaS conquering even more ground.
