SaaS (Software as a Service) is a positive development that has seen continuous traction in the last 2 decades. At one stage it looked like a fad similar to so many technology products that have caught the imagination of the market for a while and then disappeared without a trace. For skeptics, the very basis of SaaS, that is the concept of putting personal and private data on a server you have no control over was a sure indicator of failure for long term growth and adoption for the market. The larger companies who always like to experiment with new technologies as a means to improve their ROI were to a great extent early adopters of SaaS. But the SMEs who contribute 80% of every nations economy did not look at SaaS seriously. The General Public were not in the equation at all. But ironically, as in so many cases, the route to success for SaaS systems did not come from the corporate world but from the public.
SaaS Version 1.0
The early adoption of SaaS was very much an instinctive public initiative. Hotmail was the first great example of a SaaS product that connected virally. It was extremely convenient, efficient, user friendly and most important – free. Skeptics of email said that people would not like their personal thoughts on a remote server. But the sheer convenience of an email offering instant delivery and a quick reply compared to a 5 day postal delivery and a 10-15 day postal turnaround time was just too good to be true. In less than 2 decades, there are 3.8 billion email users in the world today, which is around 60% of the world’s population. Email has removed attitudinal barriers to SaaS. From email, SaaS moved into storage where you could store your files and information (Amazon, Google, Microsoft), subscribe to music (iTunes), Subscribe or buy books (Kindle), and, subscribe to movies (Netflix, Prime). Most of these services are free, though Netflix, Prime, iTunes and Kindle have membership fees if you want access to music, books or movies outside your library. So the General Public was a pathbreaker yet again in adoption of SaaS.
The corporate world, though many steps behind is slowing realising the importance of adopting of SaaS. According to Forbes, 75% of companies worldwide are expected to move to the cloud. If you look at the BVP (Bessemer Venture Partners) Cloud index, Cloud companies in the last 6 years have grown 400% compared to other companies on the NASDAQ and Dow Jones who have grown less than 100%. The largest cloud companies (this list does not include Google, Amazon and Microsoft) are Salesforce at 72 billion, workday at 20 billion, Servicenow at 19 billion, and Shopify at 10 billion. But the path to get here has been very difficult.
Salesforce made a profit only in 2017 after decades of losses, but high growth. Amazon had the same problem till a few years ago. And, the SaaS market is expected to grow from 48 billion to 260 billion by 2020. But, there is still a long way to go for the SME market. To explain this further, when it comes to SaaS you have the Private, Public and Hybrid cloud. In a nutshell, Private Clouds are servers in-premise or totally under the company’s control. Public clouds are the opposite like Google, Amazon and Dropbox. Hybrid is a combination of both. Data from companies surveyed indicates that in almost all countries in the world, Hybrid clouds are over 60% of cloud usage. This is why the companies in contrast to the public, are yet again behind in SaaS adoption,
SaaS Version 1.5
Present developments are at an intermediate stage, or SaaS version 1.5 which is the direction everyone is going towards at present. Unsurprisingly, the same pattern emerges as before. The public is in the forefront of SaaS Version 1.5. Progress in SaaS 1.5 is dependent on the development of IOT (internet of things) and automated technologies like self driving cars and others. The Internet of things is the connection of all devices from phones, computers, televisions, watches, home appliances, and internet portals.
The large companies are devoting enormous resources on this. IoT is already in the market to some extent and Google Assistant, Apple’s Siri, and Amazon’s Alexa are rudimentary examples of how IOT works. They can connect to music, devices, games, televisions, mobile phones, washing machines, laptops, and watches. Almost anything that has software on it can connect to the IOT if it is made to do so. IOT Analytics research shows that in 2015, around 3.8 billion devices worldwide were connected to the IOT. It sounds like a large number, but at almost 14 billion devices in the market, this was less than 30% of market penetration. In a span of 3 years in 2018, the IOT connected devices have gone to 7 billion which is around 40% of all connected devices worldwide. By 2025, the world is expected to have around 35 billion devices and over 60% of them will be IOT enabled devices. This means that the march of IOT and automation is irreversible and it is only a matter of time when everything will be connected. This is where the future of SaaS becomes exciting.
SaaS Version 2.0
As IoT becomes the norm, companies will be forced to adopt. Concepts of hybrid clouds will become irrelevant. If you want to ensure efficiencies with improved ROI, you have to have IOT systems which take you forward. The corporate market has not even adopted SaaS version 1.5, in spite of it having huge market potential. The IOT market is at 151 billion today and is expected to grow to 1.5 trillion by 2025. The major obstacle to adoption is cost. A market survey done in 2017 on IOT found that 62% of companies found cost to be a major hurdle in adoption of IOT. Another big concern was ROI, with many being uncertain on the returns of implementing IOT which could be expensive as many of the existing devices and infrastructure have to be changed.
This begs the question: what is the time frame for a SaaS version 2.0?
A reasonable estimate is 2030, if we look at the present rate of progress on IOT and SaaS systems. Again the early adopters will be the public who will use the products faster and work out the benefits quickly. From what we have seen from the history of SaaS adoption, the corporates will not move as quickly as the public. In the case of SaaS Version 2.0, the financial investments needed are high. The level of automation will be so much that many companies will have to spend a lot of money on re-engineering their products.
As this is a mammoth task, many of them will no do it until it is too late and risk the danger of becoming redundant or face closure. There will be a host of new players who will try and disrupt present systems, and with a 1.5 trillion market, there is room for a lot of innovation. It is also interesting to speculate on what will happen to the large tech companies that dominate the market today. Some of them like Google, Amazon, Microsoft and Apple are spending billions on IOT, AI, and Automation. Apple is even trying to build its own car. There are very good reasons for the others to follow as well, but just as Yahoo lost out in the internet space, a lot of the iconic companies we know today will fall by the wayside due to non-adoption or late adoption of the SaaS and IOT market
But one thing is certain. Exciting times are coming in the technology space and the SaaS companies who adopt and create will be the forefront of innovation and success.
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