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Software as a Service (SaaS), also known as cloud-based software, has transformed the enterprise software industry over the past decade. SaaS companies build their products on top of cloud infrastructure and provide solutions for multiple levels of enterprise business operations and across most industry verticals.
SaaS has grown its share of the global enterprise software market from less than 2% in 2009 to 23% in 2019. By 2022, the global SaaS market is expected to be worth $140.63 billion. For customers, the service can offer greater access, convenience, and flexibility at a lower cost. And for vendors, it is easier, faster, and less expensive to roll out and sell to customers compared with traditional on-premises software development.
As enterprise SaaS matures, providers are making tactical shifts in their strategy and growth approaches to adapt to changing business needs and market conditions. Pandemic-related disruptions and the unprecedented move to working from home have forced nearly every vertical industry to ramp up digitization—and accelerate the shift from commercially licensed software to SaaS.
IT priorities have also changed fundamentally. While most businesses are anticipating minimal (less than 10%) to no impact on SaaS spending in 2020, more firms are pursuing cost reductions, which could limit the pool of new prospects in certain market segments, but also open opportunities to shift to SaaS from more expensive legacy maintenance costs.
In The Software as a Service Explainer, Insider Intelligence explores the SaaS model and its growing share of the enterprise software market. First, we examine the SaaS model and why it has become the dominant model for software delivery through the perspective of software providers and enterprise customers. Then, we look at the three SaaS deployment models and key market segments. Finally, we consider the underlying growth strategies providers are exploring to contend with the changing landscape.
The companies mentioned in this report include: Accenture, ADP, Allscripts, Athenahealth, AWS, Cerner, Datadog, Dropbox, Epic Systems, FIS Global, Fiserv, Finastra, Google, HubSpot, IBM, Microsoft, NCR, Oracle, Salesforce, SAP, Temenos, Ultimate Software, Veeva, Workday, and Zoom.
Here are some of the key takeaways from the report:
- Expanding the product suite is the primary route SaaS providers are following to grow their business this year. SaaS providers have three major avenues through which to expand the breadth of products and services they offer to increase the stickiness of their solutions, and each has its benefits and limitations.
- Vertical SaaS is a growing focus in the B2B software ecosystem, with the biggest adoption increase in SaaS expected to come from vertical-specific applications in financial services and healthcare this year.
- SaaS providers can grow their customer bases and derive more revenues by making core changes to their pricing strategies. SaaS vendors can employ a number of pricing models and activation models to support their solutions, and each approach has its strengths and weaknesses.
- SaaS providers will also be relying on a number of other tactics as they contend with changing customer needs. These include optimizing SaaS solutions for mobile devices, providing visibility into app performance, and incorporating AI to enhance customer support.
In full, the report:
- Provides an overview of the enterprise SaaS industry.
- Explores the fastest-growing market segments.
- Examines the biggest trends and growth strategies SaaS providers are prioritizing that will shape the year ahead.
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