In 2022, the fastest growing section of IT solutions is Software as a Service (SaaS). SaaS models are becoming the ideal solutions for many because of flexibility and affordability. Functioning on a subscription basis and centrally located on a remote cloud network helps facilitate the companies needs.
Of course, with the pandemic requiring more remote work employment, the need for SaaS will only increase. In this article, we gathered the top trends and growth statistics surrounding SaaS solutions for 2022. Let's take a look.
Recommended Reading; B2B SaaS Terms
SaaS vs. overall IT spending
Although many global businesses and economies suffered during the pandemic, cloud growth continued to observe continued growth.
Brandon Medford, a senior principal analyst at Gartner, had insight into what he observed in 2021. According to Brandon, organizations advanced overall digital business initiatives and modernized their work environments. These advances supported hybrid work models and addressed other new realities presented by the pandemic.
Forecasts expect end-user spending to grow to $482 billion for public cloud services in 2022. Public cloud services in 2021 increased by 21.7% to reach $396 billion in 2021
Henrique Cecci, senior research director at Gartner, believes the societal impacts of the pandemic will continue. Digital innovation and adoption of cloud services will help stabilize the economy, software, and overall organization.
Online software availability will continue to provide the tools necessary for collaboration with remote workers.
Cloud Growth: SaaS vs. Other Services
Among cloud options, SaaS has arguably the brightest outlook. The SaaS industry's overall growth will remain consistent. Through the years, more companies will continue to adopt SaaS solutions. Various business functions extend far beyond the initial SaaS territories of core engineering and sales applications.
SaaS has a substantial lead on other cloud services as the first cloud service to take off truly. Gartner estimates SaaS will continue to maintain this dominance well into 2022:
However, the SaaS growth rate is beginning to be slightly slow. This is particularly true when likened to other cloud services like platform as a service (PaaS) and infrastructure as a service (IaaS). Both PaaS and IaaS are projected to double in 2022.
Related reading; IaaS vs Paas vs SaaS
Largest SaaS companies
We can also observe the SaaS success regarding the companies that make those products. In the first part of 2021, the ten largest publicly owned SaaS companies per market cap were:
Compared to similar numbers from 2020, these companies have experienced astronomical growth.
- Salesforce grew from $161 billion in January 2020 to $251 billion in September 2021.
- Similarly, Shopify was evaluated to earn $52.1 billion in early 2020 in comparison to more than $185 billion today
- Salesforce growth increased by 52% and Shopify by 225% in 20 months.
Prominent industry giants missing from this list include Microsoft and Oracle. However, it's essential to realize that a significant portion of their revenue comes from selling on-premises Software—so while they are giant tech companies, calling them SaaS providers is a misnomer.
However, this demand for subscription-based pricing models spurs legacy companies to migrate their software solutions to a SaaS consumption model rapidly.
However, this suggests that SaaS products have a strong potential for growth in the coming years. The Total Cost of Ownership (TCO) will begin to match the offerings of on-premise software deployment models.
The dominating organizations in the enterprise software space—IBM, Oracle, Microsoft, and SAP will likely maintain their market share. A growing number of customers will begin to acquire similar products from SaaS options. The subscription-based pricing model will be a popular option for large and small SaaS companies.
SaaS Acquisitions & IPOs
Of course, SaaS development does not stop with revenue projections. SaaS acquisitions feel like they're happening daily as more prominent companies look for the next big SaaS thing. The economy's stability has encouraged investors' interest in scalable cloud solutions. Entrepreneurs, innovators, and enterprises have continued to develop new SaaS solutions these past couple of years.
SaaS acquisitions in 2021
The first half of 2021 included some notable SaaS acquisitions:
- Dropbox acquired Docsend for $165 million. The SaaS allows customers to share and track documents using secure links.
- Kenna Security was purchased by the networking hardware titan Cisco. Kenna Security is a market leader in risk-based vulnerability management.
- In July, Chorus.ai, a conversation intelligence leader, was acquired by ZoomInfo for $575 million.
- The Panasonic Corporation acquired Blue Yonder. Blue Yonder was the leading end-to-end digital fulfillment platform provider.
Recent SaaS IPOs
Industry leaders continue to rely upon SaaS solutions in the workplace landscape. As business growth increased, a clear path for multiple SaaS companies to IPO was generated in 2021. The number of IPOed companies specializing in SaaS in 2021 has increased 125% compared to the same period in 2020.
Cybersecurity firm SentinelOne on its June 30 debut, closed at $42.50 per share. The company is valued at $10 billion. The company uses machine learning (ML) to combat cyber-attacks with specialized endpoint security.
Software developer Sprinklr is well known for its media management. Advertising and content marketing tools used occurred by some of the biggest brands in the world. Sprinkler opened up at $16 per share at its June IPO and was valued at ~$4 billion.
Confluent launched its IPO on June 23 and ended the day at $36 per share. The company is now valued at $9 billion. They deliver a unique enterprise version of the popular open-source Kafka streaming data platform.
Couchbase, a NoSQL database specialist, debuted on the market at $33.25 a share on its first day. They saw a price jump of 39%, and the company is valued at over $1 billion.
SaaS adoption & workforce size
SaaS growth can also be measured in terms of adoption. If we answer the question, "Are customers using more, less, or the same number of SaaS products?" we can observe the overall number of end-users.
The demographic and the number of SaaS products users has recently rapidly increased. However, the initial observation positioned SaaS products as ideal for SMBs and startups. Although, companies of all shapes and sizes find SaaS a palatable, affordable solution empowering an agile and digital business transformation.
Recent research observed these findings:
- On average, growth by 18% in the SaaS market occurs each year.
- In 2021, 99% of organizations will use at least one or more SaaS solutions.
- SaaS products were implemented in nearly 78% of small businesses.
- The healthcare industry continues to adopt SaaS solutions. SaaS healthcare-focused solutions grow 20% each year.
- Agility and scalability are the top two motivators for using SaaS applications, according to claims of CIOs.
The attribution of SaaS adoption to workforce size ratio occurs by several factors:
- Small businesses require a limited set of tools to complete specific projects. As a result, the number of products needed from a small workforce is limited. As an organization grows, the total number of teams also increases. Thus, users working on different projects may need various SaaS tools for their requirements.
- Avoiding issues created by hackers can be difficult for IT managers. Installing unapproved Software at the workplace can become costly and present security risks. Large corporations make the process easier by provisioning necessary SaaS resources.
- The large-scale project's complexity at the enterprise level means no single SaaS solution delivers all necessary functionality. Some users may rely upon multiple SaaS solutions. As a result, businesses require various SaaS companies to address their technology needs. The same target audience may adopt several products designed for a specific application.
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Why is SaaS so popular?
Customers are increasingly embracing the subscription-based pricing model to satisfy growing IT needs. SMBs and startups have found SaaS extremely useful despite a limited IT budget. Established enterprises are not looking down at SaaS either, despite their size.
Instead, the companies fully embrace SaaS to satisfy their diverse needs with agile, modern solutions.
The result is a suitable business environment facilitating healthy competition among SaaS vendors while increasing market demand increases exponentially.
Starting in 2012, we found that, on average, three SaaS firms were starting up. Looking back over the past decade, every SaaS startup faces competition in every SaaS market industry.
SaaS marketing solutions, for example, have increased the product numbers from 500 to 8,500 between 2007 and 2017.
SaaS growth rates, IPOs, and acquisitions indicate the end of this trend will not occur anytime soon.
Customer Benefits from SaaS
SaaS products offer a variety of benefits from a customer perspective:
- SaaS provides higher strategic value versus on-premise software deployments. Software deployment time has been reduced from several weeks and days to a few minutes with a SaaS model.
- The wealth of enterprise SaaS solutions available provides users with diverse workplace resources. As employees' job descriptions expand, so make the varying demands on these employees. As a result, when organizations implement SaaS solutions, they observe higher levels of employee engagement. SaaS solutions provide a feature-rich environment designed for an improved employee experience.
- SaaS vendors can also push feature improvements, bug fixes, and security updates on the fly. These capabilities with on-premise deployments were stalled by middle management. No longer is it necessary for several layers of governance to ok these improvements for end-users
SaaS technologies have produced a more straightforward method for implementation. Enterprises and Software vendors can effectively deliver the necessary features and functionality to end-users. As a result, SaaS effectiveness and popularity have contributed to the increasing observance in the workplace.
SaaS Trends in 2022
Overall, we believe we will continue to see the rise of Software as a service solution. Small and large businesses continue to utilize SaaS in some form or another. As these options continue to expand, we believe the percentage will increase.
The popularity of implementing SaaS products is still increasing in popularity. The popularity remains high because the tools provide high-quality benefits to customers. The adoption of SaaS tools also helps facilitate an agile workforce.
SaaS acquisitions & IPOs also indicate that this model is precious. When people are putting money where their mouth is, this is a good sign that the trends and growth of the SaaS industry are moving in the right direction.
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