Software as a Service (SaaS) has been around since the 1960s. Believe it or not, but it has only recently entered the lexicon of most people. SaaS, AKA “cloud computing,” is a business model, in which customers pay to use software hosted by its vendor on a remote server.
That is, the software itself and all data, connected to it, are stored on the cloud and updated wirelessly and automatically. In addition, SaaS solutions do not require downloading any additional apps or spending much time maintaining them.
SaaS is one of the fastest-growing segments of the IT market and one of the most scalable business models. So let’s take a look at where it’s headed in 2022. If people don’t understand what your product does, how to use it, the best option in this area will probably be creating explainer videos.
More than 20% of new SaaS companies entered the market from 2018 to 2020. And these numbers are projected to grow by 30% by 2023.
According to Information Age, the SaaS market will be about $121 million in 2021. But it’s not just about big numbers. In order to fully assess its potential for business, we need to understand the main vectors of SaaS.
There are 2 main types of SaaS solutions:
- Vertical SaaS. This type of cloud-based software is developed for one industry, its unique goals/needs. Such solutions are designed for certain business processes to satisfy niche user segments. An example would be any application that works for one specific industry, such as SaaS for healthcare or a fintech startup (e.g. Veeva (cloud platform for life science and pharma), Guidewire (insurance industry SaaS solution), etc.); Cloudways managed cloud hosting for Magento, PHP, WordPress, and all other apps.
- Horizontal SaaS. These solutions are like Swiss army knives – they fit most types of businesses in any industry, solving common problems across a larger market. These can be accounting apps, customer relationship management solutions, ad campaign management apps, marketing automation software, or any other solutions to help process automation (e.g. HubSpot, Office 365, Salesforce, QuickBooks, etc.).
Horizontal SaaS includes CRMs (Customer Relation Management), ERPs (Enterprise Resource Planning), PM (Project Management) solutions, SaaS billing solutions and payment gateways, collaboration/communication SaaS solutions (like SMSGlobal), accounting solutions, HR SaaS solutions (recruiting, analytics, performance management, etc.),
Web hosting services and eCommerce solutions, etc. Some CRM software platforms, e.g. Salesforce, are delivered as PaaS (Platform-as-a-Service).
AI is trending everywhere and always, so it’s relevant to SaaS. According to Gartner, about 40% of companies are ready to implement the technology into their workflow by 2024, and the projected growth of cloud AI in 2023 is five times higher than in 2019.
Cloud storage, AI chatbots, and automated analytics capabilities could change the entire world and every industry. That’s why AI is one of the most popular solutions for optimizing cloud platforms. So even though this technology is still innovative and, as some would say, unstable, companies are willing to take a risk and work with this model today. And it’s totally worth it if you ask us.
The best use of AI in SaaS is predicting customer behavior by analyzing their previous actions in the app. It can also be used to automate support services, pricing, and other purposes.
AI in SaaS can also improve the security of digital user identification. With this technology, faults, data breaches, fraud, and even cyberattacks can now be detected.
Ways to use AI in SaaS apps:
- Creating ultra-personalized apps. AI can improve the level of customization of SaaS software for each user. For example, place frequently used features in more convenient parts of the page, changing the interface depending on the user’s behavior in the app;
- Purchase prediction. AI can predict, which products will be most popular among different customer segments;
- Customer value prediction. The ability to predict customer behavior and value using analytics algorithms can greatly increase overall profits and help set up targeting correctly.
One of the reasons AI is so popular in SaaS is its growing demand among large enterprises. Trends are always set by infrastructure players, product management software, and SaaS with AI is used by market giants like IBM, Google, and Salesforce.
Growth of Micro-SaaS
Micro-SaaS is an extension of larger SaaS platforms. Such products can be seen almost everywhere: on retail platforms (e.g., Amazon Assistant for comparing products), in grammar checker apps (Grammarly). Some of them are delivered as browser extensions.
By working with a vertical type of SaaS, a company has a better chance of getting its target audience (TA) interested in the unique features of the app. They focus on a particular market segment, which gives them the ability to customize the interface to the needs of their customers.
In addition, the horizontal SaaS market is crowded with competitors. The more competitors, the harder it is to fit into the market. According to Crunchbase, there are more than 15.5k SaaS companies worldwide, and about 60% of them are into horizontal SaaS solutions.
Finances Online reports that the vertical SaaS market has nearly tripled in the last decade, and it will continue to expand in 2021.
This trend probably has the most understandable reason for existing. According to CNBC https://www.cnbc.com/2019/01/24/smartphones-72percent-of-people-will-use-only-mobile-for-internet-by-2025.html, 72.6 percent of people will use smartphones to communicate and work online by 2025.
“Flexible” Serverless Computing
“Cloud serverless computing is a technique for implementing functions in the cloud on an as-needed basis. Enterprises rely on serverless computing because they get the ability to work with the underlying product without having to operate or manage servers.” Satya Nadella, CEO at Microsoft, advocates the use of cloud servers.
Not only can serverless computing be flexible and focused on in-house computing but it can also be the inevitable future of distributed computing.
This trend should be a major one in the new decade. The serverless method appeared not so long ago but it has already gained a lot of attention from experts around the world. Such technology allows infrastructure functions to be implemented on an as-needed basis in the cloud.
Many businesses are moving to serverless computing as it greatly simplifies the work process.
This technology allows infrastructure to be as flexible as possible while maintaining its functionality and resiliency. Experts believe that in 2021, serverless platforms could change corporate preferences and lead to the adoption of the cloud concept even in government industries.
Increasingly, IT infrastructure is being built by combining multiple cloud services. Hybrid cloud is based on a combination of public and private storage, allowing the company to perform various business tasks in both local and remote environments.
According to experts, the hybrid cloud model is used by most companies that have firsthand knowledge of cloud technologies. There are a number of advantages here:
- First of all, it has to do with security issues – using the hybrid model, a company can fully control the hybrid cloud and optimize it for its own range of tasks;
- Hybrid cloud technologies have high data transfer rates, which is an important criterion for many companies.
By the end of the year, the hybrid market is expected to grow 15-17% and exceed $266 billion.
Three years ago, the hybrid cloud model was used by no more than half of cloud providers’ clients. Today, according to experts, almost 80% of organizations have adopted this solution.
The demand is due to a number of advantages of the solution:
- Security and control. Firms can control a hybrid cloud and optimize it for their needs while maintaining a high level of reliability and security;
- High speed. Hybrid cloud technology increases data transfer speeds, ensuring that information gets to the user quickly;
- Resiliency. Using both private and public cloud storage helps virtually eliminate the risk of infrastructure downtime and keep databases secure.
Many enterprises are adopting hybrid cloud technology because it allows them to control the security of private networks and still use the tools/apps of the universal cloud.
Another relatively recent trend is the simultaneous building of infrastructure on cloud solutions from multiple vendors.
The use of multiple clouds at once is a trend in recent years. Experts claim that this will lead to the elimination of barriers between providers. Previously, large cloud services (e.g., Amazon, Microsoft, or Google) created “barriers” with respect to the services provided.
That is, users could only utilize certain tools and apps from a certain provider. As a result, this made it difficult for components of IT infrastructure to work together.
However, today, more people are talking about building a single universal business model. This model is expected to cover all the requirements/expectations of companies in the cloud technology and computing field.
As a result, providers need to create “bridges” between their platforms to ensure that multi-cloud environments work correctly.
This may well lead to overselling cloud capacity or additional tools to scale customer infrastructures. However, with a single “collaborative” business model, users will be able to use the cloud more efficiently.
With this model, a company can build its infrastructure on cloud solutions from several vendors at once. This allows for more efficient use of the cloud, preventing the provider from creating barriers to the provision of different services.
Experts expect that in 2021 there will be a “boom” of startups aimed at combining different cloud platforms. However, it’s too early to talk about any changes in this area.
Virtual Cloud Desktops
The year 2020 has shown that most employees successfully work remotely, so the trend of switching to such a mode will continue to grow in the future. Essentially, the entire familiar work environment can be delivered to any PC using cloud services.
It is assumed that users will be able to subscribe to certain hours and work from anywhere in the world. This approach will help reduce the cost of upgrading equipment and optimize work processes.
The solution is considered to be quite secure, as all devices are centrally controlled and each element in the network is carefully monitored.
Most likely, by the end of the year, we will notice a significant increase in the popularity of such a solution.
It is assumed that in the future, almost all firms in the IT field will switch to remote work using virtual desktops.
However, today, it is too early to claim the benefits of cloud services in companies. In 2020, only 5% of organizations managed to achieve a significant increase in consistency between complex projects.
However, experts insist that the main result of the introduction of new solutions will be noticeable after 1-2 years. Moreover, almost 98% of respondents say that the introduction of cloud solutions has helped to simplify the work of developers and increase employee efficiency.
The global public cloud infrastructure market will reach $120 billion.
According to Forrester, “the pandemic turbocharged the market by mid-2020, and Forrester now predicts that the global public cloud infrastructure market will grow 35% to $120 billion in 2021,” as the cloud remains “central” to overcoming the pandemic.
Before the pandemic, few companies protected data and workloads in the public cloud. In 2021, we predict that an additional 20 percent of enterprises will shift DR operations to the public cloud – and won’t look back,” Forrester points out in its 2021 forecast. Previously, in 2020, the resource predicted the public cloud infrastructure market to grow 28%, up to $113.1 billion.
The share of global IT spending on the cloud will continue to grow. Gartner predicts that global end-user spending on the public cloud will grow 18% to $304.9 billion in 2021 from $257.5 billion in 2020.
“The pandemic validated cloud’s value proposition,” said Sid Nag, research vice president at Gartner. “The ability to use on-demand, scalable cloud models to achieve cost efficiency and business continuity is providing the impetus for organizations to rapidly accelerate their digital business transformation plans.
The increased use of public cloud services has reinforced cloud adoption to be the ‘new normal,’ now more than ever.”
The SaaS segment will continue to be the largest cloud spending by end-users – forecasted by Gartner to grow approximately 16% to $117.8 billion – and the fastest-growing segment will be the Infrastructure as a Service (IaaS), growing 26.6% to approximately $55.5 billion.
The driver of this growth in the segment will be the continued need for remote workers to access high-performance and scalable infrastructure through modernized and cloud-based applications.
According to a report by Future Processing, scalability had the most positive sentiment as a benefit of the cloud, with 96% positive responses.
“The emergence of the cloud has helped us to migrate away from those physical servers and their associated commitments; we changed our cost model by taking advantage of the granularity of resources and began paying for resources based on actual consumption.
Servers and racks were retired, and businesses were left to focus their on-prem infrastructure on the last piece of the puzzle – connectivity. Our business leaders loved us – shifting from large cash outlays, based on estimated usage models, to a consumption-based model that directly reflected resources that were used within the last billing period,” said George Burns III, senior cloud operations consultant for SPR, a Chicago-based IT modernization company.
Cloud system infrastructure services (IaaS) spending is projected to increase by 26.9% to $65.3 billion, according to Gartner.
The Shift in Top Three
2021 will see a shift in the top three public cloud providers, with China’s Alibaba Cloud displacing Google Cloud to become the No. 3 global public cloud infrastructure provider by revenue, behind Amazon Web Services (#1) and Microsoft Azure (#2), Forrester forecasts.
Alibaba’s cloud revenue grew 59% year over year to $2.19 billion in the quarter ended Sept. 30, according to Forrester. The leap is the result of an acceleration in the digitalization of a wide variety of industries and companies in China.
The Internet, financial services, and retail sectors were the main growth drivers.
Google Cloud revenue, which includes sales of Google Cloud Platform (GCP), Google Workspace (formerly G Suite) office applications, and other enterprise cloud services, rose to $3.44 billion from $2.38 billion in the same quarter last year.
“Google (Cloud) establishes itself as an enterprise-friendly cloud as the work it has put into ERP (enterprise resource planning) workloads, analytics and account management pay off in 2021,” Hyoun Park believes, general manager and principal analyst at Amalgam Insights (consulting firm).
He expects Google Cloud to achieve more than 40% growth next year.
“Google Cloud’s CEO, Thomas Kurian, has been successfully growing the business for two years, turning Google technology into specific enterprise products, services, and relationships,” Park said.
According to Amalgam Insights, AWS currently has more revenue than the next three biggest players, but in 2021, AWS will grow less than Google Cloud and Microsoft Azure combined.
The cloud services market has finally become competitive, not “Amazon vs. the pawns.” AWS will develop the provision of operations management services beyond communication, messaging, and production services, such as Amazon Chime, Amazon Simple Queue Service, AWS Chatbot, and AWS RoboMaker.
AWS provides technology that is easy to scale, and “mighty” Amazon combines processes, operations, and logistics that have paved the way for its rapid growth. So AWS has an opportunity to offer more of Amazon’s key developments in the form of services and software to further expand its business.
Park also believes that Microsoft’s revenue from Azure’s cloud business will exceed $25 billion in fiscal 2021, thanks to sustained demand for the cloud and “partner confidence that Amazon and Google can’t match.” And the company will finally report Azure’s contribution in its annual report.
Edge Computing is the New Cloud
Smart edge networking technologies are the new face of the cloud, and new vendors of these technologies will drag down 5% of public cloud growth next year.
In 2021, we will see the arrival of new business models pushing edge technologies, growing competition for cloud platforms, and the development of AI and 5G leading to the adoption of edge computing.
Major vendors – Dell, HPE, IBM, and Intel – are targeting the edge, offering cloud solutions that can be deployed anywhere. In their turn, content delivery chains and data center colocation providers offer edge computing services at hundreds or thousands of local entry points.
Over the next three years, customers will refocus their cloud strategies on intelligent edge computing to leverage all of these innovations and increase integration with the Internet.
Public clouds will still play a role, but we don’t think they will be predominant. This is because they involve powerful data centers and tight control over the architecture – the exact opposite of what companies need to serve customers locally.
The centralized cloud isn’t going anywhere, but the continued evolution of serverless computing models and the creation of cloud-based distributed service layers allow for new IT applications that work in real-time.
Organizations are turning to smart edge network technologies to ‘bridge’ between the centralized cloud and end-users and deliver applications and content with low latency to all users, wherever they are.
Integrating a distributed network edge strategy into wider cloud computing initiatives is a necessary point of continued innovation in 2021. A network edge environment that scales as needed, is instantly available, and consumed as a service, forms a central point in this new paradigm.
By integrating network edge technologies into their cloud strategy, developers are able to easily deploy services at the edge, without worrying about the overhead of managing the entire infrastructure.
With integrated development and deployment processes, they can move application services and functions from the cloud to the network edge. This will help create more dynamic and responsive applications.
2021 will see a greater focus on security at the edge of the enterprise network and protecting users, services, applications, and data as organizations move to distributed application environments.
Achieving a high level of security across the edge, with coverage of the ‘last mile’ of the distributed environment, will be a major challenge for organizations. It will be addressed by network security services at the intelligent network edge.
Experts believe that in the near future, there will be many startups aimed at “building bridges” between different cloud platforms.
It’s worth noting that the use of hybrid cloud technologies is still more popular among large companies. Smaller companies often only need one public cloud to operate efficiently.
Many companies admit that the transition to remote work has helped to significantly reduce costs. At the same time, with proper organization and planning, the efficiency of work did not suffer. However, all this would be impossible to achieve without the use of cloud technologies.
With cloud services, the entire familiar work environment can be delivered to any PC. This allows you to work at any time and from anywhere in the world. At the same time, you do not have to worry about security, because all devices are managed in a centralized way.