Software as a Service (SaaS) is a digital solution licensed to users on a subscription basis. Instead of buying a software product outright, users pay subscription fees to access and use it as a web application or installed software. Popular examples of SaaS software are Atlassian, Slack, Hubspot, Mailchimp, Google Workspace, and Zoom.
The SaaS business model has witnessed increasing success since its inception and revolutionized how many businesses operate. Why are so many businesses adopting SaaS software? They are attracted to its simple and convenient features, such as flexible payment options, accessibility, scalability, security, update consistency, and collaboration ease. These attributes help SaaS users run more productive businesses and easily scale as their companies grow.
While the SaaS market is big now, it’ll become even bigger in the coming years. In 2023, the SaaS market is already worth about $197 billion, and forecasts indicate it will hit a staggering $232 billion by 2024.
What more can we expect from SaaS in 2024?
We’ll answer this question by exploring SaaS statistics and trends for 2024. These stats and trends will help you understand SaaS as an industry, how it affects companies of all sizes, and where opportunities await.
The state of the SaaS industry
As we said, the SaaS market is booming, and more and more companies are choosing SaaS to be a long-term part of their business.
78% of organizations store sensitive data in SaaS applications, and 54% of companies choose SaaS tools to increase productivity.
Around 85% of business apps will be SaaS-based by 2025.
73% of corporate representatives use SaaS products to meet their business goals.
Gartner predicts 2023’s $200 billion SaaS spending will rise by 18% in 2024.
86% of businesses that use SaaS experience higher employee engagement.
North America is the most mature SaaS market in terms of adoption.
99% of businesses use at least one SaaS solution.
SaaS growth statistics
There is no question that the SaaS industry is growing globally and across platforms.
SaaS organizations operate in over 100 countries.
The U.S. has 17,000 SaaS companies in 2023 (more than any other country), with about 59 billion customers worldwide that have generated $401.6 billion in revenue.
In 2023, Italian SaaS businesses generated $41.5 billion, while U.K., Australian, Indian, and German SaaS companies generated $26.6 billion, $16 billion, $15.1 billion, and $13.8 billion, respectively.
The global SaaS market is projected to grow from $273.55 billion in 2023 to $908.21 billion by 2030 at a CAGR of 18.7%.
Forecasts indicate that the United States SaaS industry will grow to $225 billion by the end of 2025 – a 100% increase from 2020 to 2025.
The average number of SaaS applications used by companies rose from 80 in 2020 to 130 in 2022.
This market growth is due to improved SaaS capabilities, but keep an eye out for outside conditions that could hinder this growth in 2024.
Improved SaaS automation, faster deployment, and agility are fueling SaaS market growth.
However, cyber-attacks and a lack of skilled workers could hinder market growth. For instance, Cloud Security Alliance CSA states that SaaS misconfigurations caused 63% of security incidents.
Lack of data security may cause fears that hinder SaaS market growth. Organizations store 61% of their sensitive data with SaaS applications, and most have experienced at least one cybersecurity breach.
Key Takeaway: To stay competitive, companies are looking to SaaS organizations. They are increasingly using or planning to use SaaS due to its accessibility, scalability, and low barrier to entry.
Pricing statistics for SaaS
SaaS businesses employ various pricing strategies to serve their customers better.
Annual subscription plans are the most popular SaaS billing option (42%), followed by monthly (36%) and quarterly (11%) plans.
42% of SaaS companies offer monthly and annual subscriptions, while 26% of companies offer only monthly plans and 18% only yearly pricing plans.
40% of SaaS businesses offer a yearly discount, and 48% offer free plans.
Three out of five SaaS companies provide some form of usage-based pricing, and forecasts indicate that 74% of SaaS businesses will offer usage-based pricing by the end of 2023.
Another study showed that 39% of SaaS companies prefer value-based pricing, while 38% prefer usage-based pricing.
29% of SaaS companies say they do very little discounting, while 39% offer discounts occasionally (10 to 25% off deals).
More than 50,000 SaaS vendors offer 30% off discounts or more to their customers.
The average SaaS free trial lasts 14 days, but some industries offer shorter or longer trial periods. For instance, financial applications typically have 30-day free trials, while social media management SaaS tools offer 7-day trial periods.
Most SaaS businesses offer three subscription tiers or subscription plans, and 93% of startups list their pricing plans from the cheapest to the priciest.
Key Takeaway: SaaS companies choose pricing strategies relative to their customers. Weigh these three factors to determine your model: number of users, perceived value of your software, and how often customers use it.
Adoption of SaaS
A majority of companies plan to adopt cloud SaaS in 2024, and most use multiple applications when they do.
Customer onboarding takes less than a day for 40.43% of SaaS businesses, fast-tracking time to value.
The average SaaS company has about 36,000 customers, but public SaaS companies that sell to mostly SMBs have over 85,000 users.
73% of organizations believe that SaaS is key to achieving their business goals.
Organizations use 371 SaaS applications on average, meaning SaaS usage has grown by 32% since 2021.
The average SaaS spend per employee is $9,643, with SMBs spending more than larger enterprises.
Cloud workloads took up 86% of data center workloads in 2017. By 2021, this number reached 94%.
Cloud SaaS adoption growth includes government agencies.
Over 50% of U.S. government organizations are now using the cloud.
In 2019, 51% of government IT leaders had developed a cloud migration strategy, and recent surveys show 53% have implemented cloud applications and services.
Government cloud spending has increased over the years, and in 2022 alone, NASA, SSA, and Treasury spent $257M, $191M, and $398M, respectively.
More and more organizations are becoming proficient in using cloud technology.
SaaS application usage in 2022 was higher than in 2021 by 18%.
50% of a 2022 study’s respondents planned to increase the number of cloud providers they use within the next two years.
68% of enterprise companies consider themselves “intermediate” or “advanced.”
16% of enterprise companies are at the beginner stage.
12% of companies are observing the cloud industry but have not made the first step to participate or learn.
The 2020 Data Attack Surface Report predicts that 50% of the entire world’s digital data will be cloud-stored by 2025.
Companies and CIOs are attracted to cloud-based SaaS for its characteristics.
70% of CIOs are attracted to cloud-based SaaS for its agility and scalability. Another driver for SaaS adoption is the expectation that most apps will soon be cloud-based.
38% of companies adopt cloud-based systems to enhance disaster recovery.
37% of companies adopt cloud-based systems for their flexibility.
Companies are making SaaS a part of their yearly budgets for specific reasons.
SaaS spending is less than 15% of total enterprise spending.
12% of a business's SaaS budget is for operating systems.
10% of a business's SaaS budget is for security software.
10% of a business's SaaS budget is for productivity.
Key Takeaway: SaaS’s malleability makes it an attractive business tool for private enterprises and government organizations. More so than ever before, executives are carving out space in spending budgets for SaaS services in hopes of accommodating it for specific, niche needs.
Churn statistics in SaaS
Churn happens in every industry, but varies drastically for SaaS businesses depending on who their primary customer base is. With that said, there is an industry standard.
The yearly churn rate for SaaS businesses serving large organizations varies from 6-10%.
The yearly churn rate for SaaS companies targeting SMBs is 58%.
The SaaS churn rate for companies that offer month-to-month contracts is 14%, while SaaS companies that offer 1 to 1.5-year contracts are 15%.
89% of SaaS companies prioritize new customer acquisitions, while 59% prioritize customer renewals.
Medium SaaS companies lose 5% of revenue to churn annually.
Companies that have larger contracts and earn more annually have less churn.
The median annual churn rate of SaaS businesses that make less than $10 million annually is 20%.
SaaS businesses with contracts lasting two years or more are more likely to report lower churn (8 to 12.2%).
The best SaaS companies have less churn and more revenue, allowing them to grow faster.
The revenue retention rate of the best SaaS companies is 100%, and the median net revenue retention rate across all SaaS companies was 102% in 2022.
A 2022 survey revealed that 54% of respondents believe company leaders and decision-makers adopted SaaS applications more willfully after the COVID-19 pandemic.
SaaS companies that increase user retention by 5% can experience profit boosts from 25 to 95%.
Key Takeaway: SaaS business churn varies incredibly between companies, and customer base is the leading determinant of churn rate. SMBs have a high churn rate and low contract cost. Large organizations have much higher retention. These deals involve larger contracts and, in turn, more revenue.
SaaS sales and marketing statistics
Sales contract length and time frames vary among companies.
Contract or subscription plan lengths vary between SaaS companies, with some offering monthly, yearly, or multi-year plans.
Multi-year contracts of 2.5 years or more have an average churn rate of 8.5%, but only about 11% of SaaS companies offer such multi-year contracts.
Month-to-month contracts are more common (13% of SaaS companies) but have a higher average churn rate of over 16%.
48% of companies have an average of one-year SaaS contracts.
SaaS companies use free trials to speed up the consumer decision process, and those with the most success are not making their customers commit right away.
Companies that do not ask for credit card info when signing up users for free trials generate 2x as many paying customers.
Sales teams making the sales process, tools, and software more personal are converting more leads.
Leads who speak with a sales representative on the phone are 70% more likely to become paying customers.
SaaS companies are creating less technical jargon and more creative, thought-provoking content.
85% of the largest SaaS companies have a blog.
18% of the top SaaS companies have their own podcasts.
36% of SaaS companies use their blogs to share educational content.
North America remains an important market for SaaS companies from other geographical areas.
The U.S. has the largest and most mature and profitable SaaS software market.
From 2022 to 2025, the Asia Pacific region is expected to grow at the highest rate.
Key Takeaway: SaaS companies are looking to modernize marketing to attract customers. Those who educate customers with demos and don’t aggressively try to sell at the first touchpoint are most successful.
7 SaaS trends for 2024
The SaaS market is booming and, as we can see from the above statistics, the industry is learning. The continuous evolution has paved the way for advancements in how SaaS companies develop and sell digital products. These are the top SaaS trends to watch for in 2024.
1. Artificial intelligence
Artificial intelligence (AI) technology is becoming more widespread and could contribute $15.7 trillion to the global economy by 2030. What does this have to do with SaaS?
AI is positioned to disrupt and improve the SaaS market in various ways. When combined with AI, SaaS products can process data faster to provide valuable and up-to-date insights to businesses. SaaS products powered by AI can also better automate and personalize services, helping users work faster and more securely to achieve better results.
In what ways are SaaS products using artificial intelligence to optimize solutions and operations in 2023? The two most commonly seen AI trends in today’s SaaS products are generative AI and automation (automating workflows).
Generative AI is now baked into several products to help users fast-track producing content, including text, imagery, and audio content. For example, Grammarly, a writing assistant, now offers an AI tool (Grammarly Go) that can identify writing errors and generate text to rectify them.
Another example is StoryChief’s AI Power Chat, which lets you chat and brainstorm ideas with a robot to generate your desired content. StoryChief also has an AI tool that can write content based on the instructions you provide.
Most SaaS applications now offer tools for automating various tasks, such as predictive analysis, personalization, cross-platform database updating, communication, and more. For example, Hubspot (a customer relationship management tool) simplifies connecting with customers by offering marketing automation. You can automate workflows and marketing campaigns, including routine tasks such as email generation, personalization, and sending.
Another example is the use of AI-powered chatbots for customer support to answer customer queries faster and more efficiently. Automating repetitive tasks allows users to complete processes faster and easier. SaaS products that offer such benefits are more attractive because they allow users to experience benefits quicker and with less effort. It also minimizes human error by eliminating the need to manually perform error-prone tasks, such as manual data entry.
Key takeaway: Tech pioneers are paving the way for SaaS companies with AI and automation. In fact, AI and automation have helped several businesses streamline operations and improve scalability, leading to hyper-optimized service delivery. Also, AI technology allows SaaS companies to evolve at a record pace without extra manpower. Currently, 35% of businesses run SaaS services with AI, and forecasts indicate that SaaS AI may increase to 42% in the near future.
2. Vertical SaaS
Vertical SaaS is business-specific, offering solutions to the unique problems of a specific industry. Such SaaS solutions support extensive customization to meet the exact needs of each user. It’s unlike horizontal SaaS solutions, which serve users from various industries, such as CRM, project management, or accounting software.
Vertical SaaS solutions are gaining popularity in 2023, and more are coming in 2024 because users want more specialized and cost-effective options. SaaS businesses providing vertical solutions can be more profitable because their audience-specific products have better conversion rates. Converting more prospects ensures higher revenue generation and lower cost of acquisition, leading to a more profitable business.
Vertical SaaS is held to a high standard, but it allows SaaS providers to adapt the features to client demand and industry as well as meet the needs of their customer niche. The greater flexibility, lower customer acquisition costs, and other factors we’ve mentioned combine to guarantee that the vertical SaaS trend will continue through 2024 and beyond.
Key Takeaway: Vertical SaaS solutions accommodate niche needs. Companies looking to optimize a specific part of their supply chain will utilize this model.
3. Going mobile
Mobile devices generated 58.33% of global web traffic in the first quarter of 2023. The number of mobile internet users has steadily increased over recent years, and the trend will continue past 2024. Smart SaaS businesses have noticed this and begun taking a mobile-first approach to building their products. Users can now access their favorite SaaS products via mobile apps or iOS and Android browsers.
However, it’s not enough to create a SaaS product that users can access via mobile devices. The product also requires optimization to ensure users experience the same value as when using a computer to access SaaS software.
Key Takeaway: SaaS businesses are taking a mobile-first approach to creating software. Doing so keeps them competitive in a world where people are relying on mobile devices more than ever to complete various tasks.
4. Integration capabilities
In the past, SaaS companies would direct users to a third-party provider or platform to assist in integrating their products with other systems. Now, more and more SaaS developers and companies are seeing the value of adding integration capabilities directly to their products to properly meet customer expectations.
The current trend sees SaaS businesses offering integrated APIs out of the box to fast-track connecting their software products. The integrated software can seamlessly exchange data with connected systems to update databases and automate various processes. The trend will definitely continue into and beyond 2024 as users expect every SaaS software to come with integrated APIs that simplify creating an interconnected organization ecosystem.
Key Takeaway: The most successful and reliable SaaS companies take integration into their own hands. This bolsters client trust and ensures a unique offering for each partner enterprise.
5. Pricing changes
Studies have shown that 98% of SaaS businesses earned positive results from making core changes to their pricing policy.
Traditionally, SaaS companies have offered flexible pricing structures, which their business models are based on. However, with tough competition, industry saturation, and the rapid evolution of SaaS platforms, many are starting to reinvent their pricing models according to the needs of their clients or customers. So, expect pricing changes, especially specialized changes based on business intelligence and analytics, to be a big trend in 2024.
Key Takeaway: Keep pricing elastic. Responsive pricing methods based on analytical reports are the most successful models in SaaS companies.
6. Thought leadership and branding
Thought leadership and branding will play a prominent role in the SaaS landscape in 2024. We mentioned earlier that fewer SaaS companies are focused on producing technical content and instead produce creative, thought-provoking content. This includes videos, blog content, interactive applications or landing pages, eBooks, and more.
Today’s audiences are looking to be inspired and educated. So, new SaaS companies and established ones are looking to be more competitive by grabbing their target market’s attention with eye-catching and valuable content. Consistently publishing such content can turn a SaaS brand into the go-to source of inspiration and education for potential and existing users.
The same goes for branding. To be competitive and differentiate themselves from competitors, SaaS companies must remain true to their mission. They must also establish and communicate their core set of values with inspiring visuals personalized to engage their audience.
Key Takeaway: Be a brand as well as a service. The most successful SaaS companies are providing a holistic experience to their customers. From e-education tutorials to engaging UX, SaaS branding is reflecting the “swipe-for-more” society.
Today's SaaS companies should never get too comfortable. There are always lighter, smoother, cooler, more powerful, and easier solutions being developed by competitors.
For example, Zoom is a major success story. It appeared out of seemingly nowhere to tackle Skype, Google Meet, and other older project management tools by providing users with more online collaboration features in one place.
Key Takeaway: If you're a new SaaS founder, don't just look for opportunities to disrupt markets that haven't gone digital yet. Look at the potential to disrupt the comfortable companies that emerged in 2005 - 2010.
Concluding Thoughts for 2024
To summarize our 2024 SaaS statistics and trends compilation, the S as a Service industry is growing and more and more businesses are adopting SaaS.
SaaS offers many ways to remain on budget and competitive in your given field. This is due to the unique characteristics of SaaS itself. Since the SaaS market is still growing, now is as good a time as any to break into it and cash out. Fortunately, the SaaS field is wide, providing you with a variety of opportunities to capitalize on.
Are you looking tocreate the next big thing and need a team of top-notch developers right now? If so, DevSquad is here. Take a look atour process and learn how we can support you to bring your dream SaaS product to life.