The SaaS Market Size: Exploring Opportunities in Emerging Business Models
According to Gartner, the global SaaS market size is estimated to be approximately $195 billion, and projected to reach $883,34 billion by 2029. What’s more, in only seven years the market has increased by over 5 times. Sounds amazing, don’t you think?
Why is the SaaS industry growth so tremendous? First, the SaaS model offers businesses better flexibility. Compared to traditional software, companies can easily scale their solutions to meet customers’ needs.
Second, the SaaS model is more cost-effective from both client and business perspectives. While users can pay for the subscription to use the software and cancel it at any time, enterprises get a stable source of income, which is a clear win-win. That’s why more and more businesses opt for the SaaS model and the SaaS market share continues to grow.
So, how does the SaaS market size look today, and what are the most promising verticals for you to consider? I will cover that further down, so keep reading.
Overview of the global SaaS market size
As mentioned, the SaaS market is skyrocketing and does not show any signs of slowing down. But is it worth the candle to join a market filled with such fierce competition? To answer this and similar questions, let’s look at some key elements of the global SaaS market. To provide you with reliable business data, my further SaaS industry overview will be based on personal research and some latest Statista reports.
According to Statista, the SaaS market grew by 21% in 2020, with revenues exceeding $100 billion for the first time. The global SaaS market share in 2021 was 69,4%. Impressive, but what has contributed to this sudden growth? The main factor that fueled the SaaS market growth was the COVID-19 pandemic. This is the case when they say, there would be a blessing in disguise. The pandemic and a series of lockdowns caused many businesses to reconsider their work models, and SaaS solutions came to the stage to support this full shift to remote working. Even after the pandemic ended, many companies understood the benefits the SaaS model brings to the table and didn’t want to abandon it.
Statista reports that in 2021, the average SaaS company revenue was a bit over $161,000. This figure is a bit smaller compared to 2020, but the main reason behind this slowdown is once again our “beloved” COVID-19 and its consequences. As many businesses had to stay afloat instead of investing in further growth, this could not but affect the SaaS market share as well. Still, it is important to note that the decrease was not significant and reached even less than 1%. For comparison, revenues of the IT industry decreased by almost 2%.
When talking about country segmentation, North America, Europe, and the Asia-Pacific regions are where SaaS businesses prosper.
This region is the most advanced SaaS market, with the largest SaaS companies like Adobe, Microsoft, and Google having headquarters there. According to Statista, in 2022, there were 17,000 SaaS companies registered in the US, which is 60% of the world's SaaS market. Combined, U.S. SaaS companies have around 59 billion customers globally. The demand is there, so when you’re planning to build a SaaS product, North America might be a good location to consider.
The European SaaS market is the second most growing one. There are 5,469 European SaaS companies in Europe, with Zendesk, Anaplan, Intercom, and Typeform being the most remarkable ones. Though the number of SaaS companies is not as big as in North America, Europe shows a noticeable increase in revenues. For example, the UK has a leading position in the European market by the number of SaaS companies (2000) and managed to generate more than $10 billion in revenue in 2021. So, Europe might be a perfect spot for you to take into account, as well.
During 2022-2028, in Asia Pacific, the SaaS market growth is expected to reach 12% with China and India being the region’s leaders. The number of SaaS companies here is almost 1,700, while Zoho, VWO, CloudCherry, Kingdee, and Weimob are the most recognized companies in the Asia-Pacific SaaS market. The growing demand for SaaS products and not-so-intense rivalry when we look at Europe and North America makes the Asia-Pacific region attractive for young SaaS startups.
Talking about the SaaS market, it’s also worth taking the industry’s big players into account. So let’s look at them in more detail.
Webflow is one of the top SaaS companies that offers website creation and hosting services. In 2022, Webflow hit a $4 billion valuation and $100 million came only from subscriptions.
GitHub is another example of a successful SaaS company that provides repository services for engineers and software developers. Following a SaaS model, the company has recently reported to have an annual recurring revenue of $1 billion, compared to $200 to $300 million in 2018, and more than 90 million active users.
One more famous name, Slack is a channel-based messaging platform used by companies for building effective communication and organizing teams. In 2021, the company made a revenue of around $902 million and was reported to have 156,000 paying customers.
Analysis of the SaaS market by industry verticals
Currently, the biggest verticals in the SaaS market are business & productivity, transportation & logistics, and circular economy. Let’s analyze them, focusing on the current market size, trends, and main industry challenges.
Business & productivity
Market size. The market size of the business & productivity sector is around $47,33 billion and is expected to reach $149 billion by 2030. The growth rate in this vertical is 13%.
Trends. Recently, the development of AI chatbots has become a huge industry trend to drive user engagement. For example, Zoom has developed an AI-based conversational chatbot, Zoom Virtual Agent, to deliver its customers a better user experience. Another SaaS startup, Notion, has recently launched Notion AI, to help users automate their tedious work tasks.
At Wetelo, we also had a chance to participate in the creation of a conversational bot. We helped our client build a GPT-3 chatbot that offers automated coaching to employees and prevents possible risks associated with employee burnout and turnover. From our perspective, AI chatbot is a positive tendency in the SaaS industry, especially in terms of customer and employee support.
Challenge. Data breaches can challenge the business & productivity vertical, especially if the AI-based solution is expected to collect and process large amounts of data. This prompts the need for companies to additionally invest in security to protect their users’ data.
Prediction. According to Statista, the SaaS business & productivity vertical is expected to grow by more than 12% during 2020-2030.
Transportation & logistics
Market size. The market size of transportation & logistics grew from $15 billion in 2022 to $16 billion. The growth rate of the industry is 5,5%. The impact of the COVID-19 pandemic and the Russo-Ukrainian war restrained the rapid growth of this industry.
Trend. Blockchain is a big trend in transportation & logistics that increases security, safeguards sensitive data like financial transactions, and leads to smarter inventory management. For example, Kuehne & Nagel uses blockchain to optimize the operation of its logistics portal Verified Gross Mass. Thanks to blockchain, the company ensures the safety of more than 800,000 transactions per month.
Challenge. Despite blockchain’s efficiency in managing transactions, the ability to manage a large number of transactions at the same time remains a dilemma that businesses are trying to solve.
Prediction. The transportation & logistics vertical is projected to grow by 11% during 2022-2030.
Market size. The market size of the circular economy is around $339 billion and is expected to increase by 7,8% by 2027.
Trend. The use of machine learning (ML) tools for data analysis is probably the biggest industry trend right now. Thanks to ML-driven analytics, businesses can save time and effort on scanning large volumes of complex data on sustainability and pollution, and make more informed decisions.
Challenge. Though it’s indisputable that ML tools can analyze data much faster than any human being, such systems still leave room for errors, since they’re learning from specific databases. This causes the need to double-check some crucial data manually to avoid bias.
Prediction. The industry vertical is expected to grow, with more innovative circular solutions contributing to better waste management. An on-point example here would be one of our latest projects. We helped our client develop a SaaS app that matches people willing to get rid of broken appliances with companies that can recycle them. This application makes a match based on the type of product to be recycled and its location.
It’s safe to say that the future looks bright for the SaaS market. And if you’re still in doubt whether it’s a good idea to opt for the SaaS model or not, we can confidently say yes, it’s 100% worth it. The only thing you need to do is to choose the right niche and build an advanced solution that will help you make it to the top. Hopefully, this Saas industry overview allowed you to get some ideas for your next project.
If you are looking to learn how to build a successful SaaS product, contact us and we’ll get back to you as soon as possible. Having expertise in such SaaS verticals as the business & productivity industry, transportation & logistics, and circular economy industry, is crucial nowadays. We can become your reliable partner and turn your idea into a stunning SaaS solution.
Frequently Asked Questions
How big is the SaaS market?
In 2022, the global SaaS market size was valued at $195 billion, and it is expected to reach $883 billion by 2029. The biggest SaaS markets are in the USA, the UK, and Canada.
How large is the B2B SaaS market?
In 2021, the value of the global B2B market was valued at $195 billion. Its growth rate is expected to be 11% during 2021-2028.
What is the market size and growth of SaaS?
Since 2015, the SaaS market size has increased from $31 billion to $195 billion. Only in seven years, the market size has increased over 5 times.
What is the SaaS market size for 2030?
The SaaS market size is expected to reach $702,19 billion by the end of 2023. The growth rate is predicted to be 18,82%.