Businesses once relied solely on on-premise software to operate; however, more and more companies are switching to on-demand web-based solutions. They’re also shifting from single platform–based SaaS to solution-specific products. These factors have fueled explosive growth in the SaaS industry.
In fact, 64 percent of small and medium businesses today rely on cloud-based technology to drive growth and boost workflow efficiency, according to research from BSCG. And 78 percent of businesses indicate that they plan to expand the number of SaaS platforms they use over the next three years, raising the average number of applications used from three to seven.
To gain valuable insights into the SaaS industry amidst these notable trends, we analyzed various data about consumer spending, job listings and salaries, and top SaaS companies and company types. To discover where the industry has been as well as where it’s headed, read on for a big-picture view of the state of SaaS.
ACTUAL AND PROJECTED SAAS EXPENDITURES
SaaS spending is on the rise – and predicted to increase at an exponential rate. In 2015, the market saw an expenditure of $8 billion on SaaS products. Research analysts forecast a growth to $12 billion in 2016, a jump to $16 billion in 2017, and continued growth year over year to an estimated $55 billion by 2026.
What’s bolstering this expansive growth? Shifts in technology, particularly mobile devices and reliance on digital, according to tech research giant Gartner. Subscription models now account for more than 50 percent of new software implementations over traditional on-premise licenses. The research firm estimates that by 2020, about a quarter of organizations in emerging regions will be running their core CRM systems via SaaS, a 10 percent increase over 2012. And according to research by Intuit, 85 percent of small business executives are willing to invest more in SaaS solutions over the next five years.
SUPERSTARS OF THE SAAS WORLD
The surge in startups has taken a large volume of market share from major competitors like Adobe, Cisco, IBM, and even Salesforce. New SaaS offerings and startups are rising at a rate of more than 1,400 over the last five years among various sectors. Larger organizations like Salesforce will need to learn to pivot and execute faster to keep up.
Additionally, over the last decade, there’s been a focus on horizontal SaaS development: products that focus on software categories (marketing, sales, developer tools, HR) but were industry agnostic. Salesforce and Slack are examples of these. However, the recent growth trends are showing a consistent shift toward vertical SaaS adoption.
Companies are beginning to look for software that answers needs more specific to an industry rather than utilizing enterprise level SaaS that offer a more “platform” approach, like Salesforce. With this shift, SaaS companies are seeing interesting changes in the marketplace. Vertical-specific software represented the largest segment of the software market in 2014, with $114 billion in revenue.And subscription growth in business intelligence, security, IT, and enterprise vertical applications continue to rise.
SAAS JOB LISTINGS ACROSS THE COUNTRY
While SaaS growth continues on a global level, the United States continues to hold more than half the market share. Based on recent job listing data from Indeed, top states for growth and job opportunities include Massachusetts, Maryland, Washington, Virginia, and Colorado. These results are a stark contrast to the Silicon Valley booms of the last 20 years that had tech development dominating the West Coast.
According to Transparency Market Research, the U.S. continues to dominate in the development of cloud applications for mobile devices including smartphones, tablets, and even Chromebooks. This aligns with data from Intuit, revealing that while 67 percent of business owners utilize desktops, nearly half (43 percent) of small business owners use mobile devices as the primary device for running their operations.
That demand for mobile SaaS will continue to rise as the market grows, due in part to the increasing number of individuals in the mobile workforce. The Cisco VNI Mobile 2015 report forecasts that 90 percent of mobile data traffic will be generated by cloud solutions/SaaS by 2019 – a jump from 81 percent just two years ago.
SaaS is set to become the most disruptive technology by 2020. Cloud computing – grouping together SaaS, IaaS (infrastructure), and PaaS (platforms) – will comprise 11 percent of overall technological disruption that enables “the next indispensable consumer technology,” according to KPMG’s 2015 Global Innovation Survey.
KPMG also states that cloud computing will “drive business transformation in enterprises over the next several years in the US,” alongside data, analytics, and cyber security. It’s clear that we can expect SaaS to have a significant impact on job creation and demand over the next decade.
RECENT GROWTH IN SAAS COMPANY TYPES
In the last five years, more than 1,400 SaaS companies were founded across more than a half-dozen sectors. Among every industry, marketing comprised nearly 4 in 10 of these relatively recent SaaS startups. Business operations made up around 15 percent of launches, while management comprised just over 12 percent. Several CRM, data, loyalty, and e-commerce companies were also founded.
Other types of SaaS startups comprised around 18 percent of launches. These ranged from companies in talent management (such as cloud-based recruitment solution Vultus) to web development solutions (like drag-and-drop site and app builder Codiqua). This growth has already fueled a tremendous increase in job openings and a dramatic shift in compensation as companies attempt to lure top talent.
TRACKING THE INCREASING POPULARITY OF SAAS
This video tracks the growth of SaaS companies in various sectors since their inceptions. You can see that between the 1841 and today, growth has exploded – particularly in the last decade. Of course, the 1800s and early 1900s predate the age of computing; however, over the decades, these companies’ services have evolved.
Businesses rely on SaaS vendors for various solutions. Some software is industry-specific, geared toward users in specific fields such as finance or health care. Other software is solution-based, with offerings including human resources management systems (HRMS), business intelligence, payroll, document management, and collaboration.
The first company on our GIF, Dun & Bradstreet was founded in 1841 with the goal of creating a network of correspondents to serve as a source of reliable, objective credit information. Over the years, the company evolved and expanded – and today it’s a leading provider of insights about businesses, with a global database covering over 240 million businesses worldwide.
But some SaaS companies are brand-new: Take Moodwire, which was founded in 2015. The company’s focus: deriving actionable insights from billions of Web pages, social posts, documents, and more. Moodwire products incorporate industry-leading analytics (including relevancy of text to a domain and sentiment analysis) to provide customers with insights enabling them to navigate today’s social marketplace.
WAGES IN THE SAAS INDUSTRY
According to Indeed, the SaaS industry is luring the best and brightest around the world by offering wages near double the national average. Several employment categories (including SAP, Salesforce, and Adobe engineers) are now averaging six-figure salaries. These are far above the national average of nearly $46,500 for most engineer positions – and as much as $15K higher than even Microsoft engineers.
It’s not just engineers seeing the benefit of SaaS market growth. Companies need a variety of talent to compete in the crowded marketplace, which has led to tremendous growth in SaaS-related job listings in the last year from traditional sectors as well. That includes analysts, administrative assistants, web developers, customer service, marketing, and more.
ANALYZING IN-DEMAND SAAS TOOLS
Analyzing Indeed.com job postings that mention SaaS products yields a snapshot of which ones are in demand – and who’s using them. Analyst jobs by far require the most familiarity with SaaS tools.Administrative assistants, project managers, and sales development representatives also have better luck at getting hired if they have experience with SaaS products.
Of course, certain SaaS tools are more applicable to specific job titles. For analysts, experience with analysis tools is key: specifically, Domo (data visualization and business intelligence tools), Moz (marketing analytics solutions), and Stata (statistical and data analysis software).
Administrative assistants should be familiar with tools like DocuSign (for getting digital signatures), CVent (online event management software), and ConstantContact (email marketing software). For customer service reps, experience with CRM software like Act! and collaboration-focused tools like Slack and InVision can help snag job offers.
The industry will continue to trend toward vertical-specific SaaS solutions, micro-targeting business needs and development tools; in turn, this will effectively unbundle the concept of the traditional SaaS platform and continue to generate adoption in the mobile space.
In 2015, the most successful mobile SaaS companies were either industry-specific products targeting workforce mobility with a vertical approach or productivity tools (to-do, team communication, marketing, project management, and video) aligned with horizontal SaaS.
That mobile trend will continue through 2016 and the coming years, as we already see mobile productivity and vertical SaaS development dominating VC funding. This trend will also greatly influence the type (and need) of support and development jobs to appear over the next five years as new verticals including legal, banking, government, manufacturing, and more begin to emerge.
Additionally, SaaS providers are finding that fewer customers require education on the benefits of SaaS versus on-premise solutions as more SMBs are used to working with SaaS. This has forced SaaS providers to shift their focus from customer education to nurturing and maintaining customer relationships to keep them and minimize loss to growing competition.
We combined companies listed in the Marketing Technology Landscape Supergraphic and companies listed on the BetterBuys website and came up with a total list of over 4,027 companies. Next, we researched the founding dates of all 4,027 companies and categorized each company based on their product offerings.
Next, we scraped Indeed.com for mentions of Software as a Service products from our list and performed a text analysis on our findings to determine which software products are being mentioned most, under which job titles, and where in the country those jobs are being offered most frequently.
Salary information was also gathered from Indeed.com data, SaaS Spending was determined from Forbes, and Market Share data were compiled by Wikibon.
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