Trends in the SaaS business

The Software as a Service concept (SaaS) has been around for quite some time now. Therefore, we have gathered enough “historical” data to help us discuss short-term future trends. It is possible that some of them are not finally confirmed, since the business is so rapidly changing, but seeing buyers habits and trends, technology advancement and large players strategy, we can support our views with some degree of certainty.

• SaaS will gain momentum against Infrastructure as a Service or Platform as a Service: A large percentage of buyers of “aaS” are SMB’s which do not wish, afford or intend to commence internal development cycles. Therefore, they are – by definition – out of the IaaS/PaaS targeting. Of course, there are the big players which understand that buying “just” SaaS is not enough because of their complexity, special requirements, customization needs etc. and they turn to IaaS and PaaS. This market segment is not to be ignored. We just think that even if we see IaaS/PaaS business grow, it will do so with lower growing rates that SaaS.

• Mobile SaaS will display faster growing rates: One of the advantages of SaaS is the fact that it can best serve geographically expanded businesses and mobile users. In these days, a mobile user is not just a senior manager with access to mobile internet and a laptop, but also lower level staff and, in general, everybody who can have access to a smart phone. These devices are now powerful enough to run complex applications and so business owners and designers will surely put that fact in their equation of how to design the new “business model”. Mobile apps will be a part of the game and so mobile SaaS will grow.

• SMB’s will increase their adoption rate of SaaS: At first it was an experiment. During the 90’s that experiment failed (I’m referring to the ASP models). Now, we have come a long way and small business owners can be sure that modern SaaS applications can deliver acceptable (or better) quality and low prices. The lower part of that SMB pyramid has *no* reason whatsoever to select another solution. So, SMB will be the “steam engine” that will pull SaaS forward.

• SMB’s will experience and enjoy new kinds of functionality, exactly due to their SaaS adoption: SaaS vendors do not just “copy” basic ERP and accounting functionality from “older” systems and put them in a “SaaS package”. They are redesigning processes and embrace social media and collaboration best practices in their software. Also, CRM is now within touching distance of SMB’s. This kind of “exotic” functionality used to be part of larger, more expensive software, offered by big vendors, only. Not anymore. Now, an average SaaS vendor uses the internet/browser technology to deliver more functionality and better user experience. When SaaS vendors gather around their brainstorming sessions, they don’t just talk about newer and better functionality, but also about web 2.0, HTML5, web services etc. And all of these “goodies” work for the benefit of the SMB. In that context, we shouldn’t forget that this development is a never-ending (actually a one-way street) process of continuous improvement of SaaS products.

• SaaS Business Intelligence will be another area of fast development: If we accept the fact that SaaS software (back-bone such as ERP and peripheral such as CRM, HRM) has been adopted by a large number of buyers, they (the buyers) must make sure that it actually works for them. We are still in the beginning, so we can say that this has not been proven beyond any doubt. If, however, it is proven (it will not take much longer in my opinion), then SaaS early-adopters will start asking for more benefits from their decision: more information and support on their business decisions; hence, Business Intelligence. They will start by asking for more “reports” and then go to “dashboards” and will not stop until they gain access to BI tools and data warehouses of some sort. So, we can expect more SaaS products with such features or even specialized SaaS vendors.

• SaaS companies will have to invest in integration technologies: SaaS is, by definition, an outward-looking, extrovert kind of software; so are they buyers of that software (to some extent, at least!). Therefore, the buyers will expect that the new software that they have selected will be able to “talk”, communicate with a large number of other systems, relevant to their business or relevant to trivial back-office tasks. Examples of that are communication with bank systems to exchange payment data, credit scoring agencies, public web sites for CRM and lead generation purposes etc. This is a trend that we already see in the US market where, for example, DMS software *must* be able to communicate with famous US car sales web sites, such as Cars.com. Another example is that of the back-office integration, where a lot of specialized (industry-vertical software) solutions communicate with generally accepted accounting systems, such as Quickbooks. This trend will be even stronger in markets where the “best-of-breed” software selection criterion is stronger than that of the “one-size-fits-all-integrated-system”.

• SaaS companies will also have to invest on migration technologies and best practices: Everybody needs or wishes methods and technology for easy and fast migration. But SaaS vendors need it, the most. Why? Because part of the SaaS “fast adoption holy grail” is the ability to execute self-signup. But how can you achieve that if the end-user does not have the ability to load their old data in a fast, easy and reliable manner and without any specialized technical assistance? What good does a self-signup feature offer, if the user can’t make the system instantly operational? In a traditional in-premise purchasing contract, uploading (and probably sanitization) of old data is a distinct task (=$$$) in the project plan; but not on the fast growing SaaS space…

• SaaS will be adopted by the public sector (government, public utilities etc.), although IaaS and PaaS will have a larger share on that space: Public sector was never an “early adopter”. But it’s sure going to follow (note US government mandate on the cloud issue). We must remember, though, that SaaS does not have all the answers that these operations are asking for. They are not standard businesses that need specific, generally-accepted processes to work. Instead, they need customized solutions that most of the times are driven from government policies (and politics), local legislation and other obscure factors, that a SaaS vendor couldn’t possibly predict and pre-fabricate into their software (unless of course we are talking about specialized G2C/G2B vendors). On the other hand, public agencies have their own I.T. resource pool and they are capable of driving large I.T. projects, by themselves. Therefore, IaaS and PaaS could be a more suitable solution for them.

Let’s wait and see which of the above trends will become true in that ever-changing ecosystem…