Key SaaS Stats and Facts
- The SaaS industry is predicted to have a market volume of $344 billion by 2027
- 99% of companies will be using at least one SaaS solution by the end of 2024
- Over 80% of businesses use at least one SaaS application in their operations
- SaaS start-ups received over $30 billion in VC investment in 2022
- 70% of Chief Information Officers (CIOs) look to SaaS thanks to its agility and scalability
- SaaS companies have an average customer churn rate of around 5%
In today's digital era, the Software-as-a-Service industry (SaaS) is witnessing unprecedented growth and transformation. Spanning productivity-boosting communication and collaboration platforms, through practical customer support and engagement tools, to powerful data analytics and business intelligence technologies, SaaS apps now offer businesses wide ranging solutions to the challenges of the Internet age—and its applications look set to grow and expand into new and exciting territory over the coming years.
The earliest iterations of Software as a Service date back to the 1960s, however, it wasn’t until the widespread adoption of cloud computing that the SaaS market really began to make waves. This sea change in the way businesses and individuals access the tools they need to function in the digital era has seen a huge shift in consumer behavior, and it’s no exaggeration to suggest that the SaaS market is fast replacing that of traditional software.
So, with 2024 set to deliver game-changing innovations and breakthroughs, here, we asked our team of SaaS industry experts to dive down into the latest industry trends, statistics, and facts, giving you all of the information you need to stay ahead of this developing industry. Read on to discover how SaaS solutions can transform your business and what to expect in 2024.
SaaS Industry Growth
According to Statista, the projected global revenue for 2023 is set to reach $253.90bn, with an annual growth rate of 7.89% leaving little doubt that the SaaS star is on the rise. But how else is the industry growing, and what can SaaS providers and consumers expect in the coming years? Here, we look at the latest facts and figures that provide a deeper insight into SaaS trends today and in the future.
- 2024 looks set to be a bumper year for SaaS businesses, and figures for the next few years look even more promising, with a predicted market volume of $344 billion by 2027. This equates to an average spend per employee of $72.94 in 2023, with that figure growing significantly over the next five years.
- Since 2018, The annual growth rate of the SaaS industry has eclipsed what many thought possible, with a massive 18.7% revenue change.
- Perhaps unsurprisingly, the US accounts for the largest SaaS market revenue with around $135 billion in 2023. However, technologically advanced regions such as Europe and Australia can expect a growth rate of 5% over the next five years, and technically emerging regions in Asia and Africa can expect more than 10% in the same time frame.
- The US has approximately 17,000 SaaS companies (the most of any country), followed by the UK, Canada, Germany and France
- Today, Microsoft holds a whopping 10% market share of global revenue, with other big tech names such as IBM, Salesforce, Oracle, Adobe, and Google following close behind.
- SaaS adoption within the banking, financial, and insurance services services is expected to grow from $54 billion in 2022 to more than $130 billion in 2027.
- Within the retail and ecommerce sector over the same period (2022-2027), the SaaS market is predicted to grow from $48.1 billion to 138.9 billion.
- Up to 99% of companies will be using at least one SaaS solution by the end of 2023, with growth underpinned by a number of factors, including cost-effectiveness and scalability, accessibility and mobility, rapid innovation and updates, simplified implementation and integration, and increased focus on customer experience.
- As the industry continues to grow, SaaS companies face various challenges as they expand into new territories. Intense competition between SaaS offerings remains a driving force for innovation and development, however, this means that issues such as data security and privacy, maintaining service reliability and uptime, managing customer churn rates and retention, integrating with existing IT infrastructure, adapting to evolving customer needs, and complying with regulatory requirements are all the more pressing.
SaaS Usage and Adoption
With the rise in remote work over the past few years, cloud services that streamline online collaboration have seen continued growth. SaaS products fall into this category, giving companies within all types of industry the ability to access and use software applications through the internet without the need for on-premises infrastructure. Here are some key statistics and trends related to SaaS usage and adoption:
- CRM alone is predicted to have a market share of $60 billion by 2025, with accounting, CMS (content management system), and CRM (customer relationship management) apps among the most popular SaaS apps used.
- Technology, marketing and advertising, healthcare, education, financial services, retail and e-commerce, and manufacturing are among the industries with the highest SaaS adoption rates.
- Globally, it is estimated that there are around 14 billion users of SaaS products.
- As companies transition to remote work, the productivity segment is expected to grow by 10.6% CAGR from 2022 to 2028.
- Enterprise software holds a massive 70% of market revenue within the SaaS sector, with growth related to an increase in cloud-based offices.
SaaS Company Metrics
We typically work with founders who have been in business for a while, used sweat equity to get there, and suddenly, somewhere, they stalled at an invisible ceiling—frequently it’s around $25,000 in MRR (but we see it even at $100k and above).
- SaaS Academy has brought nearly 50 companies to their perfect exit
- SaaS Academy clients increase MRR by 209% within their first 6 months
- On average, SaaS Academy clients see 9x increase in conversion rate, 32% drop in churn, and 57% increase in customer acquisition
SaaS Pricing Statistics
SaaS companies implement a variety of payment options for organizations and individual users. These can be roughly broken down into three core pricing structures, Freemium, Usage-Based, and Variable. Below, we look at how people are paying for their SaaS services and the kinds of payment structures that are most popular.
- Up to 64% of businesses are looking to change their pricing options to a new method.
- Around 46% of SaaS companies use multiple pricing pages that are directed at different service types or market segments.
VC Funding of SaaS Companies
Naturally, SaaS growth is inherently bound up with VC funding, and with the increase in end-user spending over the past few years, there’s plenty of excitement within the world of finance. Below, we look at some key figures for anyone seeking VC funding.
- Investors kept giving more and more cash, which reached its insane climax in 2020 when investors gave a record-breaking $48.5 billion to 2,600, which, of course, beat the record set in the previous year... by $5 billion.
- SaaS start-ups received over $30 billion in VC investment in 2022. With up to 45% of all venture capital invested in start-ups with some kind of SaaS business model.
- In 2021, there were more than 337 unicorn companies worldwide, and 15 decacorns ($10 billion and over).
- While figures are hard to come by, it is estimated that only around 0.6 – 0.9% of companies applying for VC funding actually receive it, with SaaS company figures probably slightly lower due to the fierce nature of this fast-moving industry. This highlights the importance of having a solid business plan and demonstrating strong growth potential in order to stand out in a crowded market.
- Venture funding becomes more expensive due to common liquidation preferences, reintroducing debt-like risk to founders, potentially resulting in them walking away with nothing in a liquidity event, as seen with Rand Fishkin.
- Google, Amazon and Facebook all raised less than 250m combined before IPOs. Capital efficiency has always been in style and correlates to better outcomes.
- We’ve distilled hundreds of years of established business principles, thrown in our observations of thousands of SaaS founders, coupled that without collective first-hand experience of founding, growing, and scaling SaaS companies, then applied all that knowledge to creating SaaS-specific methods, strategies, and tactics you can use immediately.
SaaS Stats from Countries Other Than the US
While the US is leading the way in a crowded SaaS market, there’s plenty of buzz in other countries and on other continents too. Here are a few growth statistics that highlight SaaS adoption in the rest of the world.
- India has emerged as a major player in the SaaS industry, with a revenue of $2.15 billion in 2023. The country is also home to a growing number of SaaS startups, with over 10,000 companies in the sector as of 2021.
- China is another country with a rapidly growing SaaS industry, fueled by government support and a large pool of tech talent. The country's SaaS market is expected to reach €15.92bn in 2023.
- In Europe, the UK and Germany are two of the largest SaaS markets, and the continent as a whole is predicted to reach revenues of around $61.04 billion in 2023. Other European countries with significant SaaS industries include France, Spain, and Italy.
- Australia is also seeing strong growth in its SaaS sector, revenue projected to reach $4.43bn in 2023. The country is home to a number of successful SaaS startups, including Atlassian and Canva, and has a thriving tech ecosystem centered around major cities like Sydney and Melbourne.
The Benefits of SaaS
The benefits of SaaS across all industries are reflected in adoption rates and a growing number of SaaS apps available. However, for those still unsure about the comprehensive range of benefits SaaS can bring to your business, here we look at some of those key benefits in numbers.
- 70% of Chief Information Officers (CIOs) stated that they look to SaaS thanks to its agility and scalability.
- Employee engagement is another benefit that ranks high on the list, with 86% of businesses reporting positive employee experiences.
- Companies using SaaS have reported that they can deploy new services or products up to 40% faster.
Challenges of SaaS
While the benefits of SaaS tools are clear, there remain a number of challenges to both organizations that adopt SaaS products and those that create them. Here, we look at some of the major challenges within the SaaS industry and how they impact SaaS organizations and end-users.
- The average customer churn rate of SaaS companies is around 5%, higher than the 3% found in most industries. Ensuring customers stick around is a major concern of most SaaS companies.
- There’s an absurdly linear relationship between specialization and perceived value. The tighter the messaging, the tighter the prospect, the higher the perceived value. A solid 95 percent of what we do at SaaS Academy isn’t helping founders start new things. It’s preventing them from doing more.
- Security incidents continue to challenge SaaS companies worldwide, with misconfiguration a leading cause. 43% of SaaS companies say they have dealt with security issues for this reason.
- Monitoring SaaS environments is another security concern, with only 18% of IT departments properly checking data leaks.
- For companies adopting SaaS solutions, unauthorized third-party access is a real concern, with 56% citing this type of security breach as a major challenge.
- Offboarding staff remains an issue for those already using SaaS applications, with companies reporting that it can take up to 7 hours per user.
Conclusion
SaaS (Software as a Service) is thriving as a popular and transformative model for software delivery, and growth continues to be driven by factors such as remote work trends, increased collaboration needs, and the scalability and cost-effectiveness it offers to businesses. However, alongside the numerous benefits, there are challenges to be addressed.
Addressing these challenges is important for businesses who wish to fully leverage the advantages of SaaS, including scalability, cost savings, flexibility, and accessibility. However, it is crucial to approach SaaS adoption with a well-defined strategy, collaboration with SaaS providers, and ongoing evaluation to optimize the benefits and mitigate potential risks.
As the SaaS industry continues to evolve, businesses must also stay informed about the latest trends, best practices, and innovations in order to make informed decisions and adapt to the changing landscape. SaaS offers tremendous potential for businesses to drive efficiency, productivity, and growth, and by navigating the challenges effectively, organizations can unlock the full potential of SaaS for their success.