What are the top SaaS market trends that we can expect to see in 2020?

Well, SaaS itself is trending. 

As we can see from this Google Trends report, search queries for “SaaS” are going up and up.

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 $157 billion in 2020, and is forecasted to gain $60 billion between the years 2019 and 2023. 

With all of this growth comes a few core trends: innovation in untapped markets, expansion in primed markets, and a striving for simplicity in mature markets experiencing overwhelm with their current SaaS solutions. 

Let’s explore all of the key SaaS market trends for 2020:

  • The untapped potential is still enormous
  • More vertical-specific SaaS applications emerge to serve individual niches
  • All-in-one is making a comeback, for the sake of simplicity
  • Best-in-breed applications win in complex industries
  • 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
  • AI and machine learning has more practical applications
  • Product marketing spreads even to SaaS apps that are sold via demo

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. 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. 

4. 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. 

5. 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. 

6. 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. 

7. 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.

8. 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. 

9. 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.

10. 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. 

11. 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. 

Key takeaways

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.