Nowadays, different kinds of businesses are extensively moving to the cloud. Flexera’s report shows that 89% of the respondent companies use cloud services. In 2022, the software as a service (SaaS) market size value amounts to $242.57 billion and is expected to reach $356.6 billion by 2026. Therefore, SaaS application development looks also like a profitable venture today.
Yet, to stay afloat in the information technologies arena, you need to arm your offering with precise technology and fresh tools. In other words, you need to keep your eye on the future of SaaS to successfully build a SaaS product.
To help you deploy the promptest cloud solutions, in this post, we collected the top SaaS trends for 2023. Let’s take a closer look at them.
SaaS industry trends
The year 2022 has brought significant changes in the global markets. The shifts also influence the cloud industry. So, below we consider how the cloud market changed in 2022 and what defines its trends for 2023.
SaaS trends among other cloud offerings
The popularity of cloud computing exploded in 2020-2021. Why did it happen? Organizations adopted remote work due to the pandemic and focused on delivering digital services. Undoubtedly, the growth of cloud computing will continue in 2023 and beyond.
The future of SaaS depends on the challenging factors that influence economies in general. Inflation due to geopolitical unrest affected the SaaS market as well. Nevertheless, it holds the trends that will help businesses evolve. Companies just reset their priorities to adjust to the changed world situation.
The SaaS industry still includes the companies that hold leading positions in SaaS development. Top SaaS companies as of 2022 include Adobe, Salesforce, and Intuit.
Currently, the increasing number of SaaS makes it the largest cloud service in terms of spending. According to Gartner’s forecast, cloud end-user spending will reach $591.8 billion in 2023. SaaS growth in 2023 is predicted to be 16.8%.
However, it is projected that the fastest growing market with a compound annual growth rate (CAGR) of 20% over the following years will be IaaS.
SaaS industry trends and geopolitical impact
In 2021, the SaaS industry saw unprecedented growth in investments and valuations. However, the pace slowed down in 2022 due to world geopolitical uncertainty. As you can see below, SaaS investments reduced as of June 2022 and are projected to reach $81 billion by the end of the year. This is a move down compared with 2021.
The falling valuation wave can be a win-or-lose situation for SaaS companies. That depends on what business data tell us. As for now, the venture capital world shows a decline in financing.
Obviously, geopolitical and overall market uncertainty have influenced the SaaS market trends. According to the SEG report, the indicators steadily went down over Q1 in 2022.
To this end, the main market indices showed negative YTD (year to date) returns. In particular, the SEG SaaS Index dropped to -31.2% YTD in April.
Yet, the impact of geopolitical events was not only disturbing but also transformational. Cloud providers Box and Zendesk showed 16.9% and 17.0% YTD stock performance.
The least affected SaaS was in the security area. Communications and collaboration SaaS have the sharpest decline as organizations return to the office or hybrid work.
Priorities for SaaS companies in 2023
Despite the declining trends, there is space for an optimistic view. After a crisis, there is a rise. So, 2022 also brought good news for SaaS, promising development in 2023.
According to Paddle, SaaS companies are still focused on revenue metrics and increasing customer engagement. Thus, there are three main trends that form the near future of SaaS. They are:
- Operational efficiency;
- High-quality products;
- Delighted customers.
So, how exactly do SaaS companies plan to survive in the challenging climate?
SaaS companies plan to achieve operational efficiency by relying on key metrics. They are customer acquisition costs and net revenue retention. Also, SaaS companies greatly focus on unit economics and reducing license counts. Moreover, SaaS companies will optimize marketing spending and boost growth rates.
Customer acquisition and retention are also priorities for 2023. Successful companies will aim to reduce the churn rate and raise chances of gaining more profit. SaaS companies will achieve these goals by enhancing the customer experience.
To achieve the above goals and increase the customer retention rate, SaaS companies improve their solutions. Enhancements include simple signups, the absence of hidden costs, and helpful demos and onboarding.
You may also like: Ultimate Guide About Cloud App Development: Features, Cost, Timeline
SaaS adoption trends
For now, cloud apps widely help employees to do their job faster and advance their performance. As a result, people from various divisions deploy SaaS applications in their work. Yet, some business units are adopting cloud products faster than others.
According to Flexera report, during 2022, the fastest growth in cloud apps usage showed:
- Microsoft Azure;
- Google Cloud.
As such, these SaaS trends may result in scaling public cloud adoption, shaping the future opportunities for SaaS.
Also, Flexera reports that respondents tend to locate cloud apps in multi-cloud:
- 89% have a multi-cloud strategy;
- 9% have a single public approach;
- 2% use a single private cloud.
The adoption of the public cloud continues. Currently, 50% of workloads run in a public cloud, and that ratio is expected to grow by 6-7%. The main result here is that respondents are prone to move sensitive data to the public cloud. The issues that impede moving data to the public cloud are app dependencies, technical feasibility, and costs.
The main trends in adopting cloud services also imply a focus on optimizing the usage of existing cloud solutions or migrating to the cloud. The third decides to move from the on-premises solutions to SaaS.
SaaS app development trends
In 2022, software as a service companies chose to spread their services across various providers. This approach is known as the multi-cloud strategy and promises to grow in 2023. It offers many pros, including flexibility and security in running business operations.
Also, the multi-cloud approach helps prevent attachment to one certain ecosystem. Thus you can avoid a situation when cloud service providers change the apps or terminate the app support. Multi-cloud helps create backups. Multi-cloud also decreases system errors or downtime preventing breaks in business operations.
According to the survey, 90% of mid to large enterprises use a multi-cloud solution. Small companies do not adopt multi-cloud solutions due to tight budgets.
If you switch to multi-cloud services, your business is no more dependent on one cloud provider. This means the following advantages:
- Avoiding vendor lock-in and greater flexibility in changing providers if needed;
- Cloud service cost optimization and switching to a different provider if costs are too high;
- Security and ability to move workloads to a public cloud or IaaS platforms in case of DDoS attacks;
- Flexibility in geographies and ability to move data to local providers or data centers.
Regarding the advantages of multi-cloud, it will likely be one of the SaaS trends in 2023.
Seeking inspiration to launch a SaaS project? Discover The Best SaaS Startups in 2023.
In recent years, artificial intelligence (AI) is steadily integrating into different kinds of businesses. In general, companies feel less enthusiastic about AI in the current situation. Still, artificial intelligence projects remain trendy for 37% of respondents.
This catch-all trend expanded to cloud solutions and is predicted to take root in the future of SaaS. Yet, machine learning and natural language processing are already key trends in SaaS technologies. AI-powered technologies use the ability of human speech pattern recognition. Due to that, artificial intelligence enhances automation and security and speeds up data handling.
The most demanded industries to adopt AI methods are social media, education, travel, and healthcare. As a matter of fact, the healthcare cloud computing market, as one of the most prospective fields, is forecasted to reach $51.9 billion by 2024.
Thus, to stay more responsive and flexible among others, be aware of AI, one of the high-level SaaS trends of 2023.
For example, one of the key players in this area is AWS AI Services. AWS offers machine learning for data scientists and developers. Also, the company suggests machine-learning (ML) tools for business predictions. The services include a use case for massive healthcare data and industrial equipment control.
Another example of excellent usage of AI is Salesforce. This SaaS software tracks customer behavior helping businesses to improve their services. The app offers needed adjustments based on the collected data.
Related reading: How to Build an MVP for a SaaS Startup: Practical Tips
Low code/no code cloud services
According to the survey, the low code market will reach $94.75 billion at a compound annual growth rate (CAGR) of 31.6%. Low code and no code tools help to quickly build and deploy projects that do not require complex architecture. Mostly they are used in web development and design. You can even build AI/ML-powered apps with low code/no code tools. So, low-code is one of the most influential SaaS trends you should follow in the development of SaaS apps.
Most low code/no code services are cloud-based. This means that you do not need to operate infrastructure for such tools. The examples of low code platforms are Microsoft Power Apps, Mendix, Figma, Airtable, and Zoho Creator. They help create business apps, design, and spreadsheets.
Such services can be used for creating simple business solutions. Therefore, this SaaS technology trend will likely evolve in 2023. Still, if you have a complex project or need a solution tailored to your business needs, it is advisable to opt for custom software development.
Vertical cloud is another SaaS trend in 2023 and beyond. While horizontal SaaS uses a one-stop-shop approach, the vertical SaaS model aims to meet specific industry needs. That helps you get closer to your customers and offer them the best practices in the field.
Vertical SaaS is also a pretty profitable venture. Actually, it 8x reduces customer acquisition costs compared to horizontal cloud platforms. Likewise, vertical SaaS helps you evade the cutthroat competition of the cloud space. With your unique service, you can carve out your own niche and deliver greater business value.
This tendency is expected to be one of the leading SaaS future trends. Notably, logistics and retail analytics and health BI software are promising spheres to adopt vertical cloud for now.
For example, our team has recently created a custom SaaS platform for the bakery. It is a vertical SaaS that connects cake makers and customers. The solution includes a convenient quote system and a simple messaging feature. Through them, customers can indicate what cake they want, on which occasion, and other parameters.
We also included a calendar for bakers and customers, allowing scheduling orders. Integration with Google Maps API and Google Places API allows for a quick search for bakery locations.
Below is the video to grasp the idea of this SaaS feel and flow.
You may also like: Top SaaS Pricing Models: Pros and Cons of Each Example
The increase of micro-SaaS products is another example of SaaS trends targeted to meet customer needs better. They include add-ons, accessories, and extensions designed to complement other SaaS tools’ functionality.
Micro-SaaS projects usually require small teams and little cost. Also, this model lets you have high margins alongside low risk and location independency. Thus, micro-SaaS enables you to use all the cloud benefits, serving clients in your small market.
For example, the FindMyShift micro-SaaS company helps to allocate and manage labor resources.
However, micro-SaaS products are expected to thrive just in particular areas. They are, for instance, personnel administration, applications for email management, and content management collaboration. So, this one of the top Saas trends can be a gold mine for the niche SaaS business in 2023 and further.
Recommended reading: IaaS vs PaaS vs SaaS: Choosing the Best Cloud Computing Model
Customer experience focus
SaaS industry overview shows that many SaaS platforms suffer from a lack of customer service. Thus, it will become an important issue to solve in 2023.
Unsurprisingly, customers prefer solutions that aren’t too complex and meet their specific needs. Consequently, SaaS providers offer more options to potential customers — improved personalization, white labeling, more ability to customize, APIs, etc.
Furthermore, SaaS providers are increasingly focused on simplifying their services to retain customers. The ease of use is a big advantage, especially for small businesses.
Let's see what different companies say about the importance of customer experience as one of the main SaaS industry trends for 2023:
- 96% of consumers say customer service is important in their choice of loyalty to a brand (Microsoft).
- 83% of companies that believe it’s important to make customers happy also experience growing revenue (HubSpot).
- 90% of global executives report that they improved their ability to deliver a great customer experience (Medium).
So, to sum up, it is worth paying attention to customer experience as one of the Saas trends for 2023.
At Codica, we have been delivering SaaS products since 2015. And customer experience is also one of our priorities. For example, we successfully created real estate SaaS connecting homeowners, agents, and tenants.
A remarkable feature of this platform is 3D tours. They help users view real estate property in detail by scrolling through the imagery. These functions save users time and cost for visiting each property.
This is one of the examples of the projects our experts delivered, please find more in our portfolio.
Recommended article: SaaS Marketing Strategy: How to Promote a SaaS Startup
Let's consider another trend that will be the future of the SaaS industry.
The use of blockchain technology is a novelty in the software-as-a-service market. Certainly, SaaS platforms have to provide transparency and security for users. Nevertheless, SaaS solutions work on centralized databases, which are vulnerable to cyberattacks.
Meanwhile, blockchain technology is a distributed system that regularly verifies new data records. Furthermore, when new records are added, the technology copies the entire blockchain. Hence, blockchain can eliminate the data insecurity problem and be the main of the future technologies in SaaS.
Also, blockchain can help ensure payment security. In one of our projects - an insurance application - we implemented blockchain technology for this particular reason. Thanks to blockchain technology, this progressive web application safely processes payments. This brings more convenience when it comes to receiving insurance.
Many experts consider blockchain can change the cloud industry. As an example, fifty-seven percent of respondents agreed that their organization should adopt blockchain technology to remain competitive in the market.
Supposedly, the integration of blockchain can improve control over the cloud platforms of companies.
Simply put, this is one of the main SaaS industry trends for 2023 you should watch.
Further reading: SaaS Product Development: Why Choose Ruby on Rails Framework?
Undoubtedly, high data protection is the future of the SaaS industry. It is an important issue. The speed and depth of digital transformation not only provide business benefits but also create cyber risks.
For example, according to Gartner's forecast, spending on security risk management will grow 11.3% in 2023, hitting more than $188.3 billion. One of the factors in security spending growth is shifting to cloud solutions and multi-cloud services. SaaS businesses will have to protect themselves and their customers from data leaks. Developers will raise the bar of their products' security.
The rise of security issues is also due to other SaaS trends. For example, the rise of unbundling and micro-SaaS are the sources of unchecked activity. This leads to the need for enhanced protection of SaaS solutions.
Obviously, security and compliance risks are the main barriers to realizing the benefits of the cloud. Definitely, security is a deciding factor in choosing a cloud partner. Hence, it is essential not to render your business vulnerable to cybercriminals and improve data protection.
And now, we will consider another one of the latest SaaS trends for 2023. Here, we will mention the unbundling trend.
Many SaaS companies bundle their software together within their pricing strategy. This leads to giving an enhanced user experience, but at a higher cost, too. As businesses realize this problem, they split their software in separate packages. By unbundling SaaS solutions, SaaS vendors can offer more flexible pricing for customers. This mitigates vendor lock-in problems for customers.
Moreover, the SaaS industry overview shows that unbundled SaaS solutions suit customers' specific needs. Therefore, such apps are preferable.
Therefore, unbundling has become popular and one of the top SaaS trends. Thanks to unbundling, Saas vendors can provide more personalized solutions for customers.
An example of unbundling in SaaS is the products that appeared based on Excel. For example, Salesforce appeared as an advanced version of CRM spreadsheets in Excel. Trello, Jira, and Asana are enhanced project management tools that replaced similar features in Excel.
White labeling is another example of a fast-growing SaaS trend. It enables startups and small businesses to quickly enter the market, avoiding the hassle of the development of SaaS apps.
So, what is white labeling in the cloud industry?
In a nutshell, a supplier sells unbranded cloud solutions to agencies to put their branding and resell them at a profit. The key feature of white-label SaaS solutions is that they are fully customizable to look like it’s yours.
In such a way, companies with different expertise can deliver the desired features for the customer. Besides, this model lets your business scale with little to no overhead costs. As such, you can get higher revenue per client using it.
By the way, social media, email marketing, mobile applications, SEO, and SEM management are thriving fields to use this trend in the future of SaaS.
You may also like: Why SaaS Startups Fail: Most Common Reasons and How to Prevent Them
Traditionally, SaaS providers use a subscription model, which means paying a regular fee monthly or annually. But a new trend shaping the SaaS pricing model is based on the services customers use. Thus, usage-based or consumption-based pricing means paying for the services that users apply.
According to the report by OpenView Venture Partners, the usage-based pricing model:
- Brings companies 120% net dollar retention;
- Shifts projected adoption rate to 56% of companies in 2023 compared to 27% in 2018.
So, what are the main reasons for this SaaS software trend? Due to global macroeconomic challenges, companies conserve and optimize their capital. A company can count on customer loyalty by offering pricing flexibility with the usage-based model. Thus, SaaS companies with the usage-based model will likely survive in the changing economic climate. That is why shifting to the usage-based model can be game-changing in the near future of SaaS.
SaaS companies move to the usage-based model only or combine it with flat fees. For example, the Zocdoc healthcare app applies only the usage-based model. Meanwhile, the Mailgun e-mail delivery service and WordStream marketing platform combine a usage-based approach with fixed fees.
Shaping the future of SaaS: Summary
Today, the industry of SaaS application development is going through the same changes as other domains. Nevertheless, such changes promise new business opportunities for entrepreneurs. Technologies and customer demands are continuously moving on. To win this digital battle, you should know about things happening in this field.
Given the recent trends, we see the future of SaaS in expanding small niche markets being caused by micro-SaaS and vertical SaaS trends. Also, AI, shifting to PaaS, and white-labeling trends lead to more complex and personalized cloud offerings coming into play.
Undoubtedly, improving data security will also be a crucial SaaS challenge in 2023. And furthermore, you should pay attention to customer experience. Finally, a mobile-first mindset is a given while building cloud apps in 2023 and beyond.
We hope our list of the latest trends in the SaaS industry will help you stick out from the crowd and gain an advantage over your rivals. Codica’s expert team is always ready to provide a consultation or help you with SaaS development. Do not hesitate to contact us if you need assistance!