Thoughts On B2b Saas

posted on 4 Apr 2023

The rise of SaaS : From rarity to omni-presence.

Back in the day, when personal computing had just started becoming affordable and more commonplace, majority of software came installed on the machine as part of a purchased license. And, if you wanted a different software other than what was installed, you had to purchase it separately, install and run it on your computer. Any update to this software had to be installed manually. Organisations that provided personal computers to employees for business use had to manage the hardware and software installations, security patches and upgrades etc. This was inefficient at scale and proved to be a major overhead for IT teams. The companies making and selling software had lower margins because of the high cost of distribution of software on disks/drives and managing it for individual customers.

All of it seems archaic if compared to how we consume software today. SaaS or Software-as-a-service, a term which was relatively unheard of 20 years ago is now the de facto standard of software distribution and consumption. Typically, SaaS means that the software is hosted by a third party provider and is made available to users through the internet for a subscription fee. Users do not have to download and install the software and can simply access the software via applications that connect to the internet which in most cases is a web browser. The updates to the software are taken care of by the application provider and users almost always access the latest version of the software. The rise of internet paved the way for cloud computing which enabled software to be hosted in some remote location, unbeknownst to even the application developer, usually managed by a third party. This made SaaS a cost effective model of building software that is easy to scale and distribute.

Today, there are continuous improvements made to they way software is built and deployed. All these improvements are geared towards reducing the development costs and building robust and scalable software that is easy to use. All of these advancements along with the increased availability of Internet over the past decade have led to massive adoption of SaaS and have made SaaS ubiquitous.

B2B SaaS : Unlocking the potential of SaaS

SaaS has proved to be a boon for businesses - both that build software and the ones that use them. In SaaS, B2B companies or companies that build software for use by other businesses found a great way to reduce their costs, increase their margins and cater to a variety of needs of the businesses they serve. Likewise, with SaaS, businesses that consumed this software do not have to make significant investments in hardware, software licenses and resources for maintenance.

Another benefit that SaaS unlocked for B2B companies is the enhanced productivity. Since the software is accessible from anywhere over the internet, it has led to trends like remote work and real time collaboration. Also, since unlike traditional software, there isn’t human required to install the software and get started, typically B2B SaaS solutions are designed to be intuitive and user-friendly making it easy for employees to adopt to the new software.

B2B SaaS offers businesses increased scalability. With the kind of business models B2B SaaS follows, businesses don’t have to commit to certain usage right from the beginning and they get the flexibility to scale their software usage up and down depending upon their needs.

B2B SaaS market

In the recent years, more and more businesses have accelerated their digital transformation journey. This acceleration has led to an increase in spend on SaaS solutions that help businesses streamline their operations. In fact, Gartner has projected SaaS spending to reach $195 billion by the end of 2023, up nearly 17% compared with 2022. A major chunk of this spend is on CRM , collaboration and operations management softwares. However, there are other business areas like analytics, organisation of development, tasks, employee and company artifacts, productivity which will likely see a boost in SaaS spend.

Fully remote or hybrid work models, asynchronous work, enhanced online collaboration are some of the realities compelled by the pandemic. This has driven businesses to invest in SaaS solutions to accommodate these realities and ensure business continuity in terms of crisis.

The immediate future

The advancements in Artificial Intelligence have shifted gears and AI is now being made available to general public. We are already seeing a lot of businesses jump on to the AI bandwagon and trying to incorporate AI into their products and services. As AI adoption increases, the technology is expected to become cheaper and more accurate. Through adoption of AI, B2B SaaS solutions will be able to provide hyperpersonalized user experiences, automated workflows and faster processes to further streamline business operations.

A study showed that the average number of B2B SaaS apps used by companies has gone up from 8 in 2015 to over 110 in 2021 and the number continues to grow. If there are multiple SaaS solutions that are targeted towards one user persona, there is bound to be some overlap of functionalities. The emergence of industry specific vertical SaaS products and micro-SaaS solutions that address very specific needs of a very specific user persona will introduce a SaaS fatigue at some point. As a consequence of this, there will be a lot of opportunity, especially for large companies to consolidate the market. B2B SaaS applications that bundle features and functionality to address the end to end requirements for at least one function/sub-function in a company have a great chance of disruption in the B2B SaaS space.