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How will SaaS fare in 2024?

We all start the year trying to figure out the future prospects for our particular industry and I’m no exception.

My industry is Software-as-a-Service, SaaS. It’s a global market that research firm Gartner reckons will reach spending levels of US$232.3bn in 2024, which compares with US$197.3bn in 2023 and US$167.3bn in 2022.

Healthy figures, which don’t really reflect the tough times we’ve experienced last year which was, to say the least, challenging for all industries, not just SaaS. The lingering effects of Covid, wars and inflationary pressures have made it a much harder place to do business in the UK, Europe and the US.

To be fair, the SaaS market does enjoy a degree of natural momentum because it is still comparatively new. We can all remember when all software was loaded onto our local server, or computer via downloads - the move to the cloud has been a relatively recent practice.

And as more goes to the cloud, the SaaS market will be the obvious beneficiary. It’s forecasted that North America, Europe and Australia should deliver steady yearly growth at around 5%. But its parts of Asia and Africa are where the real growth will come from, likely around 10%, as technologically emerging countries demand similar services.

So, in macroeconomic terms, things don’t look so bad, even though there’s only so much comfort to be gleaned from that, as market value forecasts are notoriously full of broad brushstrokes and it comes down to how individual companies are faring in a given market.

One way to get a good steer is to look at the ‘OG’ of the industry and see where they are heading. In this industry, it's Salesforce, whose CRM platform is the most popular and widely used, keeping over 150,000 customers busy.

It acts as a kind of bellwether for the industry, for a busy Salesforce means its customers are busy, and that’s a good thing.

If we look at its stock price, you can see that it suffered its biggest falls just after the 2008 financial crisis, when it plummeted 72% and then again, post Covid, when it fell 59%. Looking at its current price, it has bounced back comfortably and is not far off its all time highs.

With that many customers, Salesforce has the ability to upsell as it drives technological innovation. It is said that the CRM landscape is being reshaped, and companies are having to drive transformation, enabling seamless customer experiences.

A prime example of this is AI, which has already made a huge impact across many industries and is set to continue over the coming years. For example, AI allows teams to build personalised customer experiences, centred on such areas as predictive lead scoring and tailored product recommendations. In short, this means better processes and results for less effort. It’s a proposition that Salesforce clients will find hard to resist and the upsell counter will keep clicking.

Most see Salesforce being around for a long time yet, happy that it is exploiting its dominant position. It has a number of plus points, including the ability to deliver consistent growth, tap sticky software and take advantage of long-term customer contracts.

Market share is around 20%, hugely impressive for a single company operating in a competitive market place. And although other players are gaining traction, it will be some time before they start to really threaten the advantage that Salesforce has built up.

So, all looks good for Salesforce and by extension, many of the sales teams it supports.

Back to the industry in general and as well as the momentum it has achieved over the last few years, it is the fact that technology will rapidly shape and drive the industry in the future that is creating the buzz.

Sid Nag, Vice President Analyst at Gartner, said in a recent report that the cloud is driving business transformation through emerging technologies, including generative AI. He said: “Providers are facing demands to redesign SaaS offerings for increased productivity, leveraging cloud-native capabilities, embedded AI and composability – particularly as budgets are increasingly driven and owned by business technologists. This change will ignite a wave of innovation and replacement in the cloud platform and application markets.”

So yes, it would be fair to say that things are looking good for the SaaS industry over the coming years. The market is growing, there is customer demand for products and services, and technology is keeping everyone looking forward and pressing for innovation.

Arguably, SaaS had only just begun to tap its potential and yes, this year and the next, there might be a few choppy seas around as the business world struggles to shake free of geo-political brakes, but the future looks very promising indeed. We are just at the start of a very long and exciting journey ahead.

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