Council Post: What To Expect From The Rapidly Growing (And Evolving) Software As A Service Market In 2021

By Andrew Butt, Co-founder and CEO at Enable, a modern, cloud-based software solution for business-to-business rebate management.

When software as a service (SaaS) was introduced at the turn of this century, it established a market that would explode over the next two decades. SaaS solutions are irresistible to many companies for their reliability, accessibility and cost-effectiveness, with cost spread over the period where value is received. By providing a centralized platform that connects users across a company to a suite of services on the cloud, companies can get applications running with minimal time wasted on burdensome startup and maintenance processes. 

Many IT departments have been slow to adopt SaaS, preferring to use on-premises solutions, but this model may soon all but disappear. At a time when Covid-19 has put a massive strain on budgets and SaaS is becoming more powerful, user-friendly and affordable, many companies are going to be increasingly focused on growing SaaS as a part of their operating expenditures instead of making the capital investments required to implement cumbersome legacy systems. Expect surging SaaS growth to continue in the post-Covid-19 era. 

I also predict we’ll see the rapid evolution of the SaaS model — companies will demand even greater flexibility, more robust onboarding services and support, increased functionality, and more user accessibility from SaaS providers. While I believe SaaS has emerged as the dominant model for digital productivity and communication tools, the market is becoming increasingly competitive. The innovations this competition produces will be the story for SaaS in 2021 and beyond. 

Why SaaS Is Taking Over

Covid-19 and the resulting economic contraction have been reminders that companies need to be as adaptable and resilient as possible. A recent PwC report outlines the implications of the past year for tech adoption: “COVID-19 has acted as a catalyst for trends we expected to see later in the future. As a result, many companies are shifting to remote work for the longer term and need to pivot to SaaS-based offerings.”

All the advantages of SaaS have been magnified by Covid-19 – companies need turnkey digital solutions that allow all employees to communicate and collaborate in a consistent way while minimizing upfront and ongoing costs. Companies also want to be capable of switching to a different provider at any time — SaaS allows them to avoid rigid contracts and other bureaucratic headaches at a time when flexibility is vital. 

The trend toward SaaS adoption was well underway before Covid-19 hit. In 2018, Gartner predicted that by 2020, 80% of historical vendors would “offer subscription-based business models, regardless of where the software resides.” Gartner also noted that “many traditional enterprise software providers have been forced to make the shift to SaaS.” While it’s clear that SaaS is only going to become more popular in the coming years, SaaS providers will also have to keep pace with ever-changing consumer expectations if they want to remain competitive.

The Era Of The User

Although companies will continue investing in SaaS in 2021, they will be more selective about which providers they choose to do business with. For one thing, the surging SaaS market gives them plenty of options to choose from — according to BCC Research, the market is in the process of increasing from $44.4 billion in 2017 to $94.9 billion by 2022. In other words, competition within the SaaS space is becoming more intense all the time. 

In a saturated market, users have a lot of leverage. This is why the SaaS providers that offer more flexibility, high-quality onboarding support, responsive customer service, improved user-friendliness and expanded functionality will capture a larger share of that market. Because virtually all SaaS selling, onboarding and support took place online for most of 2020, providers were able to save money and streamline their digital processes. Considering the consumer-driven SaaS market, expect providers to maintain the size of their teams and invest these savings in improved onboarding and support services, as well as better user experiences. 

SaaS providers are always innovating, but the most successful SaaS products are the ones that provide and enhance the essential features users are looking for: low cost of entry, flexible contracts and fees, strong customer support and a powerful, intuitive digital platform that can help employees collaborate and get the job done from anywhere. 

Convergence Between B2C And B2B

Business-to-consumer (B2C) has long been the space where the most dynamic and innovative applications are developed and distributed. Just as consumer automotive technology often comes from motorsports and civilian aviation technology often comes from the military, business-to-business (B2B) inherits these innovations and puts them to use in a different environment. However, we have good reasons to believe that this status quo isn’t going to last forever. 

The widespread adoption of SaaS is contributing to the consumerization of business software products. Companies are more aware than ever of the advantages offered by SaaS, which is leading the vendors of legacy business applications to either emulate SaaS providers or adopt their model entirely. User expectations in the B2B space have been driven by the availability of effective and agile B2C products. This means B2B applications are moving toward real multitenancy, versatile and user-friendly product offerings and open-ended service agreements. 

To take just one example of shifting priorities and demands driven by B2C innovation, consider the significant growth of the supply chain management software market, in which cloud revenue grew two and a half times faster than the rest of the market.

SaaS has permanently reshaped the way companies use technology. As the digital transformation continues to accelerate, SaaS will be one of the most significant engines of productivity and innovation for companies across industries and sectors.