What are the top SaaS market trends that we can expect to see in 2021?
Well, SaaS itself is trending.
As we can see from this Google Trends report, search queries for “SaaS” are going up and up. According to Google Trends, interest in the term has grown steadily since 2004.
The top trends driving SaaS market growth
SaaS industry growth isn’t slowing. Companies spend an average of $2,884 per employee on SaaS (more than they spend on laptops or computer for employees), and as more industries adopt SaaS, that number is rising.
The SaaS market size is expected to reach USD 307 billion by 2026.
All of this growth is being driven by three core trends:
AI-powered SaaS products luring business buyers with the promise of increased efficiency and reduced manual work
Increase in mobile, tablet, and laptop device usage around the world
Traditional businesses being ready for cloud software that all staff (office and boot on the ground) can access from anywhere
13 SaaS market trends and opportunities you need to know about
All of that market growth is exciting. But how do you tap into it? What types of SaaS products should you build or invest in in 2021? We've got the answers.
Here are the top SaaS market trends for 2021:
The untapped potential is still enormous
More vertical-specific SaaS applications emerge to serve individual niches
AI and machine learning has more practical applications
All-in-one is making a comeback, for the sake of simplicity
Best-in-breed applications win in complex industries
The growth of employee apps in traditional industries is massive
New players have the power to disrupt the original disruptors
Top-notch APIs and Zapier-integrations are a deciding factor for buyers
SaaS serves as a platform for buying services
There are more profitable SaaS companies run by small teams
Mature companies fight to win early and late majority buyers
Overdue B2B categories and niches will be disrupted
Product marketing spreads even to SaaS apps that are sold via demo
These SaaS opportunities are ripe for technical founders, entrepreneurs, job seekers, and investers.
1. The untapped potential is still enormous
It’s a fact: there is still so much untapped potential for SaaS companies. One SaaS investor believes there’s so much potential, that there should be 100 times more SaaS companies than are currently on the market.
This isn’t unbridled optimism.
There’s still a lot of unsolved pain points in SaaS, and businesses pay money to have their problems solved. Just talk to your friends and family members with jobs. You won’t have to chat for too long to find processes, tasks, and even entire roles that are manual, time-consuming, or otherwise unoptimized.
2. More vertical-specific SaaS applications emerge
Ever heard the saying “the riches are in the niches?” With SaaS, that’s true. Vertical-specific SaaS companies represent the largest portion of the overall SaaS market, and these types of companies tend to experience faster growth than horizontal companies too.
In case you’re unaware of this lingo: a vertical niche is intended for a specific type of business (such as appointment software for dental offices), while a horizontal niche is for a specific use case needed by any type of business (such as email marketing software).
Business owners and employees alike enjoy using tools that were designed specifically for the needs of their industry. Vertical-specific SaaS apps can be easier to market as well. For these reasons (and because of the untapped potential), we’ll see even more of these companies emerge.
3. AI and machine learning has even more practical applications
Knowing the top use cases for AI and machine learning and actually using these technologies in your daily life are two very different things.
While plenty of B2B employees and small business owners are utilizing SaaS solutions at work, very few are regularly using SaaS products that are powered by AI and machine learning.
Entrepreneurs will take advantage of the application gap and create more products that rely on AI and machine learning for marketing personalization, security and fraud detection, healthcare automation and more.
4. All-in-one is making a comeback, for the sake of simplicity
Surprised by this SaaS market trend?
I’m a big believer that “all in one” is not the right product approach or marketing message for a lot of the companies that are using it.
However, there are industries and use cases where “all in one” will thrive like it hasn’t in years.
A few years ago, people didn’t want the jack of all trades, master of none product anymore. They wanted multiple best-in-breed applications that they could integrate together. (This trend will continue, as we’ll see next.)
But in oversaturated markets, “all in one” is a real benefit. It actually has value. Especially for solopreneurs or small businesses, simplicity is a huge win.
For example, Simplero makes it easy for coaches and course creators to create and sell programs in one place (instead of using 8 - 12 different software).
Meanwhile, GoSquared is building additional functionality to help small teams make use of their website analytics. Having everything in one place means it’s easier to setup marketing automation.
In 2020, smart SaaS entrepreneurs will continue to explore the value of “all in one” especially for small businesses, when so many SaaS companies are still focused on building one tool that integrates with others.
5. Best-in-breed applications win in complex industries
While “all-in-one” products will make a comeback with some business types and use cases, there are plenty more where the “best-in-breed” trend will dominate.
A best-in-breed SaaS company isn’t trying to build a large platform that satisfies endless use cases. A good example of this is how Expensify didn’t build a business travel booking platform, even though it falls within the travel and expense category.
Unlike its legacy software predecessors, Expensify focused on building the best expensing solution and on directly integrating with business travel booking platforms.
There are certain SaaS products that are enormously expensive and complicated to build. In these cases, we’ll see more companies emerge with the goal of working far better than legacy competitors—but for one core use case.
6. The growth of employee apps in traditional industries is massive
Workvivo has raised $16.6M in funding over the past couple years to grow the user base of its employee app, among other features. Traditional companies with front-line workers, such as in the hospitality, health, and food & beverage industries, are flocking to human capital management (HCM) solutions.
HCM technology is an elevated form of HR technology. The difference is that HR tech is typically focused on helping HR get things done. On the other hand HCM helps employees get things done, interface with HR, and reduce manual work for HR by doing things themselves.
An HCM employee app might include some of the following features:
Request time off
Process a payout to get paid ahead of the next pay cycle
Get paid at the end of every day for that day's work (like with Dayforce Wallet)
Check their schedule
See and share company news
Interact with other employees
Message their manager
In 2021 and 2022, HCM will continue to be one of the fastest growing SaaS industries.
7. New players have the power to disrupt the original disruptors
Don't sleep on the job!
New distruptors can come and take a big piece of the pie. What better example is there than ClickUp, everyone's favorite project management disruptor? Despite apps like Asana and Trello and Basecamp having been around for over a decade, ClickUp joined a seemingly crowded market. The company boasts a $1 billion valuation and grew 900% in the past year.
Perhaps its precisely the fact that Asana was founded in 2008 that paved the path for disruption? Afterall, TravelPerk and other business travel software disrupted the 90s market.
Maybe we're at the beginning of a wave of SaaS products that going to slay the companies that were founded in the early aughts. They might jump into the market with better UX, more powerful features, more useful AI, and cooler branding.
Take a look at the big SaaS companies that were created some time between 2005 and 2012. Which ones have been the same for too long? Which ones don't satisfy users' needs as well as they could? Whatever you discover might be your billion dollar SaaS idea.
8. Top-notch APIs and integrations are a deciding factor for buyers
There is a rising need for API connections. Whether a SaaS company considers itself “all in one” or “best of breed,” there are going to be plenty of reasons for integrations.
SaaS companies need to offer some or all of the following:
Direct integrations with popular industry tools
A SaaS API that allows customers to make better use of the product
A Zapier integration so that 1500+ integrations are available to customers
As companies strive for efficiency and better data utilization and management, SaaS products will need to prioritize integrations and APIs or they will risk losing customers to competitors who do.
9. SaaS serves as a platform for buying services
We’re fully in the era of service + tech.
In January of 2007, the first iPhone was released. In March of 2009, Uber was launched. Uber was one of the first examples of people utilizing mobile technology to acquire a service. Now, of course we have Doordash, Priv, and many others.
Similarly, there are many SaaS products that are being built in order to acquire a service. Here are some examples:
FreeeUp - The FreeeUp software was built so entrepreneurs and small business owners could get paired up with freelancers in the Philippines and US, and manage their payments.
Showdigs - Showdigs is a web app that lets busy property managers request that nearby real estate agents handle vacancy showings for them. The real estate agents get notified of new showings with prospective renters via a mobile app.
SocialBee - In addition to the robust social media scheduling features, SocialBee also allows you to purchase social media management service from their network.
Penji - For a flat monthly fee, their platform lets you request images from a graphic designer and review and comment on designs.
Services are a great, reliable business model. In 2020, even more entrepreneurs will innovate new ways to build scalable service companies inside of easy-to-use SaaS platforms.
10. There are more profitable SaaS companies run by small teams
Ever heard of a little thing called micro-SaaS? This is simply a software as a service company that is owned and operated by a single person or a small team.
There are thousands of small business SaaS companies that are bootstrapped and profitable. In 2020, even more entrepreneurs will realize that a SaaS company doesn’t have to have a billion dollar valuation or VC-backing in order to be a great business.
These entrepreneurs will aim to build a company that covers salaries and expenses, provides a generous profit, and has the potential for a favorable exit.
11. Mature companies fight to win early and late majority buyers
Who wants to be the next Salesforce?
Salesforce was founded in 1999, and now it owns a whopping 19% of CRM market share despite having hundreds of competitors.
Mature companies will continue to fight in order to win the early majority and late majority buyers (the big chunk of B2B buyers between the early adopters and laggards).
Profitable, established SaaS businesses will build additional features and pricing tiers that allow them to move upmarket and win bigger fish.
While winning early and late majority buyers doesn’t always mean going upmarket, this is often the case, because bigger companies are harder to sell to. They have more requirements and more decision makers, and they are less likely to take a chance on a younger company. In 2020, going upmarket and gaining market share will be a huge SaaS industry trend. So expect to see a lot of changes in the marketing approach for companies that you were an early adopter of.
12. Overdue B2B categories and niches will be disrupted
This SaaS trend is never going away: a painful process is discovered, and dozens of companies emerge to fix it.
The hottest SaaS opportunities are those that serve businesses and industries who are long overdue for innovation.
Ten years ago, legal tech had an enormous boom, with so many law firms going digital for the first time.
In 2019 and 2020, some of the top opportunities for disruption are in business travel software, property management software, real estate software, OKR and KPI tracking, and other underserved, overly manual industries such as early education and medical.
Do you know of an old-school industry that’s ready for innovation? We can help you with SaaS development.
13. Product marketing spreads even to SaaS apps that are sold via demo
By now, we’re all well aware that SaaS buyers want to test out and play with products before they buy them. Product-led growth marketing means using the product as a key acquisition channel. Freemium plans and free trials let users experience the product, and they may later convert to a paying customer.
But what about SaaS products that are exclusively sold via demo?
These B2B buyers still want to explore the product. To satisfy this desire, more SaaS companies (that have inside sales teams) will create interactive product demos or small side-project apps to bring in curious leads and later convert them.
As the SaaS market grows, the trends will change. In 2020, we expect to see smaller businesses choosing simplicity and ease-of-use. Enterprises will prioritize ways to gain a cutting edge, while expecting user-friendly product design. These trends will affect how SaaS entrepreneurs build products that capitalize on untapped potential.
Overall, the future of SaaS technology is looking bright.