What is actually SaaS and why is it growing so much?

Jul 30, 2020 | Articles

Andrea Burgueño

Andrea Burgueño

Contributor

You are probably surrounded by a sea of SaaS applications that you use on a daily basis, but maybe you have never thought about all these tools as SaaS. It may well be the case that you are not even familiar with the term SaaS. Or that you have seen it somewhere, but you don’t really know what it means. In any case, we are committed to clear all your doubts today. So, let’s go ahead and start by replying to the most important questions. What is actually SaaS and why is it growing so much?

What is SaaS

SaaS means “Software as a Service”. It is a business model that works on subscription basis. By subscribing to it, users don’t need any piece of hardware or any other thing but access to the software, hosted at a data center (in the cloud). If this sounds a bit generic to you, let me give you a few examples. You have probably heard about Zoom or even used it recently, right? Well, Zoom is an example of a SaaS company. Some others would be Microsoft, Dropbox or Google. Think about Gmail, Drive, Hangouts

It is a software distribution model that works as follows: 3rd party providers host applications available to clients online. This means that SaaS can be categorized as cloud computing. Other types of cloud computing are IaaS (Infrastructure as a Service) and PaaS (Platform as a Service).

Key features of SaaS

Usually SaaS products are extremely flexible and adaptable to all kinds of companies and needs. Also in terms of payments, which makes them specially accessible. They are scalable as well, which means that they can always be upgraded depending on business volumes. And because they are constantly being updated to offer new features, they are very secure too.

Another important feature of this type of companies is that they really focus on users’ needs, listen to their feedback, take it into account and even collaborate with other people and organizations in order to constantly improve their products.

SaaS growth in numbers

SaaS seems to be quickly taking over the cloud computing market. According to Gartner, the service-based cloud application industry will be worth $143.7 billion by 2022. Though, Statista forecasts $157 billion already by the end of the year. This would be twice the size of the market in 2014.

In general, all forecasts on current SaaS industry trends come to the same conclusion: the market will keep growing this year. According to Bloomberg, SaaS will grow at a 9% CAGR (Compound Annual Growth Rate) between 2019 and 2023. Also, according to a Betterbuys report, the expenditure in the U.S. SaaS Industry is forecasted to reach $55 billion by 2026. Gartner reveals that the industry will keep growing beyond 2020 too.

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Why is SaaS growing so much

One of the things that makes SaaS businesses focus on constant innovation is the need to beat competitors. It is extremely easy for users to switch they service providers just by cancelling a subscription. So customers need to be happy. For SaaS companies this means extensive, constant research on needs and trends. It also means coming up with new ideas to make processes much easier.

That all requires being in contact with their clients, understanding their needs, listening to them and finding solutions to their potential problems. Anticipation is they key to innovation. But also, this is nothing without an extremely good user experience. Customers don’t just want their problems solved. They want things easy in order to be able to concentrate their efforts on those tasks that really matter to them and their business.

In short, the main reason why SaaS companies are growing so much is because they have been able to listen to their customers, to identify their problems and to understand their needs. Moreover, they have changed the way many companies work, saving them time, money and effort. And companies that make other companies grow, are meant to keep growing too.

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