New Trends in the Service as a System (SaaS) Tech Industry to Sustain its Dynamic Growth

Global consulting company Boston Consulting Group (BCG), projects the strong growth momentum in the global SaaS market to continue in the coming years, bolstered by AI and other tech innovations.

In a presentation at the recent SaaScon Philippine conference, Anthony Oundjian, BCG managing Director, said he expects the SaaS industry to reach $908 billion by 2030, from just $203 billion in 2023, which will be driven by heightened SaaS utilization and the transition to cloud-based solutions. At present, 71% of businesses already rely on SaaS, while 85% of business apps will be SaaS by 2026.

BCG noted that the development of the SaaS industry will be influenced by six main trends: the massive adoption of Artificial Intelligence (AI), focus on SaaS security and compliance, market consolidation, multi-integration of SaaS applications, segment-specific SaaS products, and the rise of low code solutions.

Massive Adoption of AI

Businesses are quickly adapting AI to improve their operations.  Based on BCG’s survey, 44% of businesses are integrating AI into their business processes, with 14% reporting a boost in productivity from it, while 48% are using AI to maintain error-free data.

“We see a high growth in the AI software market as software capabilities are improved by AI,” said Oundjian.

SaaS Security and Compliance

But with the growth, challenges in cybersecurity also increase and become more complex. Oundjian explained that businesses are now using a broader range of application and providers, yet SaaS cybersecurity has lagged behind. Because of this, more companies have committed to give increased focus on cybersecurity this year and have included it as one of their top three priorities in 2024.

Market Consolidation and Multi-Integration of SaaS Applications

High Merger and Acquisition (M&A) activities among SaaS companies will broaden the offerings and expand their reach as consolidation helps firms stay competitive through cost savings, enhanced offerings, and wider audience reach. With the market consolidation, SaaS “superapps” will also emerge.

As businesses adopt multiple platforms to serve their customers better, they are also increasingly seeking integrated SaaS apps. BCG explained that businesses grapple with data fragmentation as a result of having multiple platforms. Their study showed that 9% of working hours is spent just toggling between applications. This highlights the need for SaaS applications that can consolidate data in one location. An e-commerce business, for instance, can consolidate its operations into one platform that shows sales, payment systems, shipping, and logistics.

Segment-Specific SaaS Products

As the market matures, customer segments are becoming more defined and are seeking more targeted solutions. According to BCG’s study, 84% of respondents found their needs to be industry-specific and majority (78%) felt limited by generic solutions. Because of this, more companies are investing in Vertical SaaS, or applications that focus on specific industries.

The industry is also seeing the emergence of Micro SaaS, which provide niche solutions at low costs. They address a highly specific problem, is operated by a small team, and provide a user-centric design and experience.  “Segment-specific SaaS is becoming highly competitive because they efficiently meet customer specific needs,” emphasized Oundjian.

Rise of Low Code Solutions

The growth of low code solutions is enabling businesses to launch products or features with less resources and expertise. According to BCG, low code solutions shortens deployment time and lowers the barrier for software development. Their study noted that 80% of tech products will be developed by non-tech professionals by 2024. However, this also highlights the need to address a shortage in software developers, estimated to reach four million globally by 2025.

Best Time for the Industry

With the industry’s rapid growth and high demand, Oundjian encourages tech companies and developers to take advantage of the opportunities. “It has never been a better time for the industry,” he said.

BCG recommends four key principles to navigate the fast changing SaaS Horizon: Embrace AI at scale across the organization, bring customer-centricity and personalization to the next level, prioritize security and compliance, and stay flexible and agile.