While most businesses have suffered some sort of crisis during the COVID-19 pandemic, SaaS industry growth doesn’t seem to stop. Software as a service, or SaaS, tools offer solutions to many challenges that appeared during lockdown, such as the inability to work in the office and the need for remote interactions among teammates. SaaS products make it possible to access data from any device connected to the internet from any part of the world using convenient subscription-based software, making them the go-to solution for many companies.
The shift to the cloud has only accelerated over the past two years due to COVID-19, as organizations responded to a new business and social dynamic. Technology and service providers that fail to adapt to the pace of cloud shift face increasing risk of becoming obsolete or, at best, being relegated to low-growth markets.
Michael Warrilow, research vice president at Gartner
In this article, we take a look at some of the current SaaS statistics, and highlight a few SaaS trends that are moving the industry right now.
20+ SaaS statistics to consider in 2023
Businesses should consider the rapidly changing SaaS industry trends to adjust to them as quickly as possible. We offer you the most current SaaS statistics in 2023 that can be game-changing for your business.
We have analyzed the most recent SaaS reports and have chosen the most relevant statistics on the SaaS market, SaaS businesses, and the status of the SaaS distribution model across the world. These statistics should be insightful and help you make important business decisions.
SaaS market growth statistics
The pandemic was an important factor in the growing popularity of SaaS products, as many companies were forced to switch to remote work and had to use software to make operations run smoothly. Let’s take a look at how the SaaS market is developing now.
-
SaaS is evolving along with the growing popularity of remote work
The first months of 2020 were the most difficult part of the global pandemic. Сompanies started to do everything they could to ensure their employees remained productive while working from home. Numerous technologies were employed to empower remote workspaces. SWZD has reported that 64%_ _of businesses implemented remote work due to the pandemic. The same report suggests that nearly 25% of workers will continue to work remotely despite being able to safely return to the office.
The economic, organizational and societal impact of the pandemic will continue to serve as a catalyst for digital innovation and adoption of cloud services. This is especially true for use cases such as collaboration, remote work and new digital services to support a hybrid workforce.
Henrique Cecci, senior research director at Gartner
According to Statista, the number of companies that use SaaS services has been constantly increasing since 2015. The biggest leap was between 2017 and 2021, over which period the number of companies grew almost sevenfold (from 16 to 110 SaaS apps used by a company on average).
It’s safe to say that in 2022, many businesses will continue to adopt cloud-based services to fulfill the needs of their remote workers.
-
Growth of the SaaS market isn’t likely to slow down
The total value of the global SaaS market has been showing stable growth over the last few years. In 2021, it was estimated at approximately $152.18 billion. In 2022, this value increased to $176.62 billion, growing by around 16% in one year. In 2023, the value of the SaaS market is expected to reach $208.1 billion, which is 17.5% more than in 2022.
-
Half of all data in the world will be stored in the cloud by 2025
The 2020 Data Attack Surface Report estimates that by 2025, data stored in the cloud will reach 100 zettabytes (1 zettabyte = 1 billion terabytes), which is 50% of the entire world’s digital data.
-
The SaaS market has been growing intensively since 2015
According to BetterCloud, the number of IT-sanctioned SaaS apps has increased tenfold since 2015. It’s expected that by 2025, 85% of business apps will be SaaS-based.
SaaS and business statistics
It wouldn’t be a mistake to claim that SaaS is one of the most important technologies for business success right now. So how are things going with SaaS in the business field?
-
SaaS adoption promotes gradual migration to centralized management
From the BetterCloud report, we know that companies today are using seven times the number of SaaS products they used five years ago. Gartner predicts that these companies will go further, starting to use SaaS even more intensively:
By 2026, 50% of organizations using multiple SaaS applications will centralize management and usage metrics of these apps using a SaaS Management Platform (SMP) tool.
According to this prediction, half of companies that now actively use SaaS applications will start using SaaS SMP tools for centralized management by 2026.
-
SaaS is one of the most important technologies for business success
In a Harvey Nash survey published in 2021, 73% of 1,724 respondents said that SaaS technologies are important for realizing business goals. Thirty-five percent claimed that SaaS technologies are “quite important,” and 38% said they were “very important.”
SaaS technology is prioritized by the majority of business owners. They choose it over artificial intelligence, Internet of Things (IoT), and the blockchain.
-
There’s a growing demand for employees in SaaS companies
As of January 2022, Salesforce was the largest SaaS provider in the world. In 2007, the company had only 767 employees and by 2022 this number had increased to 73,541 employees. We see a steady growth over the last few years:
In just three years (from 2019 to 2022), the number of employees doubled.
The second largest SaaS provider, Adobe, shows a similar pattern in terms of employee count. For example, 22,516 people worked for Adobe in 2020, and this number increased by 3,472 in just one year to reach 25,988 in 2021.
-
There’s a growing need for businesses to update their IT infrastructure
According to SaaS stats from SWZD, 52% of midsize businesses and 56% of enterprises that have never used SaaS technologies before are now interested in doing so. After COVID-19, a lot of companies started to feel the need to increase their budgets in order to create and support a remote workspace for their employees with the help of cloud-based services.
-
Large and midsize enterprises are actively using SaaS applications
A BetterCloud survey reveals that companies with fewer than 50 employees tend to use no more than 16 SaaS applications. Meanwhile, companies that employ from 50 to 100 employees use 24 SaaS applications on average, which is a 50% increase. Companies with more than 1,000 employees use over 150 SaaS applications on average.
This shows that larger companies tend to use more SaaS apps.
-
The majority of organizations use at least one SaaS service
O’Reilly surveyed 1,283 software engineers, technical leads, and decision-makers from all around the world to find out the scale of SaaS usage by organizations. The survey revealed the following:
- 88% of respondents said their organization uses at least one cloud service and will increase their SaaS use over the next year.
- 25% of respondents claimed that they expect their company to move all of their software to the cloud in 12 months.
- 49% of respondents stated that they are going to continue using traditional, on-premises software along with cloud services.
-
More and more companies are trying to make SaaS a long-term part of their business
As SaaS market growth seems to be at its peak, fewer companies are afraid to invest their money in switching to SaaS technologies. BetterCloud statistics show that around 38% of companies claim they are running almost completely on SaaS, while 80% of businesses say that they are planning to switch all of their systems to SaaS by 2025.
-
The shift to SaaS technologies will have a huge impact on enterprise IT spending
Gartner claims that the transition to the cloud will increase IT expenses by more than $1.3 trillion in 2022 and that this number will grow to $1.8 trillion in 2025. Around 65.9% of spending on software is expected to go to SaaS technologies by 2025, up from 57.7% in 2022.
-
Business leaders claim SaaS improves business agility
Workday reports that 75% of business leaders have moved to SaaS as it helps to improve business agility. Almost the same percentage of interviewees said that SaaS implementation is fast and trouble-free, so they see no problems in moving to SaaS completely.
-
Companies expect their service providers to switch to SaaS
According to FinancesOnline, 86% of organizations expect the majority of the software involved in their business processes will be available as SaaS solutions by 2022.
-
The vast majority of organizations use SaaS products to increase their productivity
The most common reasons why companies use SaaS are to increase productivity (54%), reduce costs (35%), and increase security (27%).
-
SaaS giants increased their valuations between 2020 and 2021
Between 2020 and 2021, the growth of many of the world’s biggest SaaS companies was astronomical.
Shopify claims that 2021 was its “biggest year ever.” The company’s revenue increased by 225% (from $52.1 billion to more than $185 billion) in less than 20 months.
The last two years have been extraordinary. We nearly tripled revenue, more than doubled GMV and the Shopify team, and the number of merchants using Shopify is nearly twice as big as 2019 levels. We are emerging from the sprint of these last two years even stronger and more ambitious.
Harley Finkelstein, Shopify President
From January 2020 to September 2021, Salesforce’s revenue grew from $161 billion to $251 billion, increasing by more than 50%.
-
SaaS will become a key enabler of new and upcoming technologies
According to Oracle, 91% of organizations believe that SaaS is going to help them adopt emerging technologies such as AI, the Internet of Things, digital assistants, the blockchain, and virtual and augmented reality.
-
More companies have switched to the hybrid–remote model of work
According to GitLab’s Remote Work Report 2021, 42% of companies have switched to a hybrid-remote arrangement after 2021, and such arrangements are supported by SaaS-powered technologies.
SaaS statistics in different parts of the world
Slowly but surely, SaaS is taking over the world. In some countries, it’s taking a confident position in both the business-to-business (B2B) and business-to-consumer (B2C) domains. In other countries, it’s just starting to gain momentum.
-
SaaS in North America
The most advanced SaaS market is in North America. The region has many enterprises with advanced IT infrastructure and the largest SaaS vendors in the world: Google, Microsoft, Adobe, etc. North America also takes first place by the number of SaaS companies: as of 2022, there were 17,000 SaaS organizations in the US alone, among 25,000 SaaS companies worldwide. Around 60% of all SaaS companies in the world are located in the United States.
-
SaaS in Europe
In Europe, the SaaS market is expected to grow intensively till at least 2025. As of 2022, 42% of EU enterprises use cloud-based technologies (primarily for file storage and email hosting). It’s a noticeable increase compared to 2020, when the figure was 36%.
- Germany is seen as the European country that will experience the largest increase in the SaaS segment. The value of the German SaaS market is expected to grow from 6.85 billion euros in 2022 to 16.3 billion euros in 2025.
- In France, revenue from the SaaS segment is projected to reach $6.82 billion in 2022. The annual growth of SaaS companies’ revenue is likely to reach 10.65%, resulting in a market volume of $10.22 billion by 2026.
- In the United Kingdom, the SaaS market generated approximately $10.2 billion in revenue in 2021. Revenue for the UK market is likely to reach around $16.47 billion by 2026.
-
SaaS in India
The SaaS industry in India is expected to grow from $50 billion to $70 billion by 2030, winning 4% to 6% of the global SaaS market.
-
SaaS in the Asia-Pacific region
When it comes to the Asia-Pacific region, Japan appears to be a leader in SaaS adoption. The country accounts for at least 40% of the region’s SaaS spending.
Top 5 SaaS Trends You Should Follow in 2023
The statistics we’ve presented highlight the most significant SaaS trends of 2023.
-
Artificial intelligence for business needs
Artificial intelligence is an alternative to human intelligence: it allows programs to make decisions based on analysis of information just as a human would. An intelligent software program is also able to learn over time, so any business-related data it has to work with contributes to better decision-making in the future.
There are a lot of ways that SaaS products can use AI. Let’s take a look at some of them:
-
Personalization
One of the reasons why AI became one of the growing SaaS trends is because users expect a more personalized experience in every app they use. AI helps programs to better understand what users want and automatically adapt the product to their needs. For example, when incorporated in business software, AI may analyze workers’ app usage patterns and adjust the home or menu screens to bring the most used features to the top.
-
Automation
SaaS companies use AI to reduce the risk of human error and automate manual operations and time-consuming processes. In this way, they save money and other resources. AI automation can be used for intelligent data capture, intelligent and robotic process automation, and customer communication management.
Services like Amazon Textract significantly reduce the time required to complete paperwork by automatically extracting printed and handwritten text from any document using AI.
-
Predictive analytics
Predictive analytics uses complex algorithms to analyze enormous amounts of data to forecast outcomes, trends, users’ behavior, etc. Basically, predictive analytics as a part of SaaS platforms can give you insights you can use for the benefit of your business. Such an AI system works in the following way:
- AI analyzes historical data and creates summary statistics.
- AI identifies why certain events occured and builds a pattern accordingly.
- The results of this analysis are used to forecast future events.
With the help of predictive analytics, companies can better plan their budgets, foresee and mitigate risks, etc.
-
Security
Data stored in the cloud is vulnerable and requires unprecedented security measures. AI allows you to use intelligent algorithms for security purposes. AI-based security systems can automatically learn about and prevent new threats. Plus, such systems can work without user intervention and don’t require skilled cybersecurity specialists.
Some industry leaders have already illustrated the perks of applying AI.
- Seedata.io innovation
Seedata.io, one of the fastest-growing startups in 2022, uses AI for security purposes. This SaaS-based cybersecurity platform is designed to mitigate data leaks. AI is employed to identify incidents before they pose a threat to vulnerable data. Seedata.io generates fake data that imitates a user’s real data and traps cybercriminals into thinking that they’re interacting with the real data. Then, the AI-based system analyzes interactions with the fake data and informs the user that someone is trying to break into their database.
Grammarly is an AI-powered text editor that uses natural language processing techniques to give users language and grammar suggestions in real time (to correct mistakes, reduce repetitive language, replace complicated sentences with simpler ones, etc.). It helps users strengthen their writing and is an effective tool for both native and non-native speakers, helping them to easily and quickly enhance their communication.
2. Blockchain and SaaS
Built on the principles of cryptography and decentralization, the blockchain ensures the security of transactions. SaaS products take responsibility for users’ sensitive data, and blockchain solutions can be valuable for securing transactions within SaaS software.
The blockchain helps SaaS businesses create reliable systems and avoid security-related problems that are hard to overcome with traditional databases. This technology allows for securing such processes as smart contracts, online payments, auditing, and tax collection. As a result, it leads to enhanced customer loyalty.
It’s hard to imagine SaaS startup owners that don’t want to build trusting relationships with their customers. That’s why the blockchain has become one of the fastest-growing SaaS trends.
Let’s take a look at some growing SaaS-based blockchain startups.
OriginStamp is a blockchain timestamping service that allows users to upload unique files to a public blockchain ledger to timestamp them and obtain proof of ownership. OriginStamp can be integrated with more than 1500 apps, so users are free to import files from Google Drive, One Drive, and many other services.
MythX detects vulnerabilities in Ethereum smart contracts. The service is mainly designed for developers and allows them to run a security scan to identify and prevent security breaches. It works by carrying out a full-scale code analysis. MythX also encourages the use of cryptocurrencies by permitting users to pay for subscriptions using stablecoins (Tether, USD Coin, Dai, Binance USD, etc.).
3. Vertical SaaS
As competition between horizontal and vertical SaaS products reaches a fever pitch, we can assume that vertical SaaS will continue to trend in 2023.
Unlike the horizontal approach, which attempts to cover as many fields as possible with a single SaaS product, the vertical SaaS strategy focuses on satisfying specific needs within an industry and allows a SaaS provider to get closer to the potential client. Let’s explain this difference with some examples.
Veeva, a company that provides software solutions for the pharmaceutical industry, belongs to the vertical SaaS category. It provides cloud-based software to help pharmaceutical companies manage their sales and operations. Thanks to Veeva, companies of all sizes can release products to market faster and more efficiently.
Slack, in turn, is a horizontal type of SaaS product, as it isn’t centered around a particular industry: it’s a universal platform for online communication, and any company can integrate it into their workflow regardless of the industry.
We’ve identified three main reasons why vertical SaaS has become such a trend.
-
Successful marketing
By specializing in a particular niche with a precisely defined target audience, vertical SaaS providers can launch more successful marketing campaigns. Targeting a narrow group of customers, you can find out what they like or dislike, what social media channels they prefer, and what marketing tricks are most effective for this specific group of users. Vertical SaaS products also afford more opportunities for cross-selling and upselling. As a business owner, you can know what products to bundle and how to win customers’ hearts with special offers.
-
More opportunities for business growth
The majority of solutions try to cover a wide range of needs and be one-size-fits-all, which means they develop horizontally.
Vertical products are built on a completely different foundation. By catering to more specific requirements, you can deliver greater business value. The number of solutions tailored to distinct market needs is smaller, and so is the competition.
Consider the aforementioned Veeva, a vertical SaaS company from the life sciences industry. It’s now one of the leading global providers of cloud-based software that has won global recognition:
- Veeva was included in Inc.’s Best-Led Companies of 2021, obtaining 10th place among 250 companies in the rating.
- Fortune ranked Veeva Systems one of the Fastest-Growing Companies in 2021 — for the fifth year in a row.
- In May 2022, Forbes presented its Global 2000 rating, where companies are ranked based on their sales, profits, assets, and market value. With $1.85 billion in sales, $427.4 million in profits, $3.82 million in assets, and $28.4 billion in market value, Veeva Systems achieved 1,857th place.
Veeva has achieved that much success because it studied the specifics of its target industry, delivering high-demand solutions that horizontal services could not offer.
-
Less competitive market
Vertical SaaS businesses have a narrow audience with distinct needs and, therefore, face lower competition than horizontal SaaS businesses. For example, if you create a SaaS app to manage a lawn care services workflow, you will likely have no strong competitors; if you choose to build a project management SaaS platform, you will have to outperform dozens of well-established players.
Vertical SaaS became one of the notable SaaS trends since it gives founders more chances to establish a leading position in a specific industry or, at the very least, successfully enter the market by choosing a certain niche.
4. Open API
An application programming interface, or API, is code that connects two software products. In other words, it allows your SaaS product to be integrated with other software.
But what is the value of an API for users? First of all, APIs allow users to integrate your product with their existing system. Secondly, users can sync their databases without needing to transfer all data manually. In addition, APIs allow users to have all the tools they use in a single program so they don’t have to open multiple tabs.
For example, you can use the HubSpot API to integrate the HubSpot CRM into your enterprise resource planning system instead of using HubSpot in a separate browser tab. Following the example of HubSpot, you can let your users expand the functionality of their software instead of adding another web app to the list of programs they use in their work.
By creating APIs, you make the life of your target users much easier and can get a significant advantage over SaaS developers that don’t release APIs.
Conclusion
As you can see, the SaaS model is becoming ubiquitous. You can consider the SaaS trends and statistics we’ve described to make a final decision in favor of SaaS and start building a product today while your competitors are still hesitating.
