5 game-changing SaaS trends that will shape the future of business

As digital evolution and reliance on SaaS continue to surge, Vendr has kept a close eye on the industry. By processing tens of thousands of SaaS purchases, we have gained a unique perspective on the challenges and opportunities that SaaS buying trends show us. In addition, we have a front-row seat to observe how SaaS investments change over time and how these changes impact the entire business landscape.

Whether you're a software buyer, product manager, investor, or enthusiast, gaining quantitative insights is essential for informed decision-making and a better market understanding. Moreover, if you want to stay ahead of the game, understanding these insights is crucial as they help you benchmark your position against competitors as you build out your toolset to give you and your team an edge.

Our Q1 trend report highlighted important trends that will shape the future of the SaaS industry. Here, we will delve deeper into five emerging trends and explain how these learnings can provide valuable insights for your business operations in the coming year.

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There’s no beating ‘sticky’ software driving revenue.

Investing in sales and revenue-generating software is a persistent trend that will be around for a while, especially in the case of Salesforce.

Due to the range of Salesforce-adjacent products companies have come to rely on, the probability of customers churning or switching to a Salesforce competitor or alternative is low. Instead, businesses are increasing their investment in Salesforce's suite of products, which is a testament to its value and stickiness.

On top of creating a mission-critical product suite, Salesforce has made pivotal investments in its customer success function, which they credit for decreasing its churn rate to less than 10 percent.

Salesforce leads the CRM software market with a 69 percent share of CRM transactions through Vendr. This cloud-based CRM solution is flexible and scalable, making it a popular choice for companies of all sizes. Combining its product suite with over 5,000 apps available on its AppExchange marketplace, we predict Salesforce will remain at the top of Vendr’s list of most purchased products throughout 2023.

What this means for your business:

Even if you’re signing a one-year contract, investing in a product like Salesforce is much, much stickier than just 12 months. You’re investing in business processes, apps, and integrations that will be with you for many years, so make sure you’re ready for a long-term commitment.

What’s popular is not always right.

Big names like Salesforce and Slack may dominate the SaaS market, but there's still enormous potential for all sizes of SaaS companies to grow their market share. In addition, as companies seek to solve a range of problems with SaaS tools, there's immense value in creating a unique suite of SaaS products for each company.

According to Vendr's analysis of almost 3,000 transactions in the first three months of 2023, popular products such as Salesforce, Slack, and DocuSign only accounted for 13.4 percent attributed to the top 10 suppliers. In contrast, 86.6 percent of transactions were for one of the 19,000+ other products in Vendr's catalog.

This data shows that customers prefer various options and are not limited to just a few big names in the SaaS market. Vendr's data-driven SaaS marketplace and recommendations enable customers to find the best-fit product for their needs beyond just the market leaders. As Vendr's co-founder and CEO Ryan Neu pointed out, ‘the long tail of SaaS is really long,’ with almost 1,000 different products purchased on Vendr in Q1 alone.

What this means for your business:

The fact that something is popular does not necessarily mean it is the best option for everyone. While it is true that popular software as a service (SaaS) solutions are in demand for a reason, they can often be expensive and challenging to integrate and onboard. Moreover, other factors may make them unsuitable for your specific needs.

Ensure that you find the best product for your requirements by working with experts and exploring the marketplace of available options. By doing so, you can identify the most suitable product for you rather than simply selecting the most popular one on the market, which may not necessarily fit your organization.

Companies need to balance growing fast with staying secure.

With the arrival of 2023, companies faced a challenge. They want to expand their operations and acquire new clients but also must guarantee their systems remain secure and compliant. This focus on cybersecurity is critical after 2022’s 1,800 data breaches, exposing the personal information of around 400 million individuals. As a result, companies must balance growth opportunities and safeguard their data and systems from potential threats.

Investment in security tools such as 1Password and Crowdstrike has increased as companies recognize the growing financial threat of security breaches. In 2022, the average cost of a data breach increased by 80 percent. Compliance with standards like SOC 2 and GDPR has also become increasingly important, with companies turning to tools such as Vanta, Drata, and Avalara.

It's worth noting that companies growing fast — especially small and mid-sized businesses — need to be even more conscious of their security needs. While acquiring new business is crucial for growth, ignoring cybersecurity can harm a company's reputation and bottom line. As such, companies are investing heavily in both business growth and cybersecurity to maintain a balance between the two.

What this means for your business:

Growth and security: you can’t pick just one. Whenever your company invests in a software product to improve sales efficiency, you must also consider any potential security vulnerabilities that may arise. It's crucial to evaluate every new SaaS product you bring on and ensure that it meets your security standards. By paying close attention to IT security, you can create a safe and secure environment that allows your business to grow sustainably. Investing in IT security is as essential as investing in sales to achieve long-term success. By balancing sales and security, you can ensure your company is well-positioned for growth and profitability.

The AI purchase surge is already happening.

Like everyone, we’re paying attention to the proliferation of AI tools this year. However, we see that the uptick in AI adoption is primarily due to existing products in your tech stack incorporating AI features. Furthermore, there’s a correlation between companies offering these features in 2023 and seeing an increase in their sales from 2022.

In Q1, 41 percent of purchased tools had some form of AI feature, a four percent increase compared to the previous quarter. Five percent of these purchases included AI-powered tools with native GPT or other AI functionality, primarily related to revenue and data security categories.

The emerging trends surrounding AI adoption raise a critical question: Will AI become a standard feature in all products, resulting in a gradual evolution of existing offerings?

Industry leaders like Microsoft, Notion, and Google are already integrating AI into their products. With global spending on AI expected to reach $557 billion by 2024, up from an estimated $363 billion in 2019, we can expect a surge of purchases for products in this category throughout 2023.

What this means for your business:

AI will power your SaaS stack — if it isn’t already. Adopting these AI tools is not going to be a choice, but instead, be an integral part of how you and your team use SaaS to do their jobs. This shift may throttle current offerings and transform how you work.

Inflation and volatility are impacting pricing – and will impact buying.

As previously predicted, 2023 is the year of SaaS price hikes. Several factors contribute to this trend, including the share of wallet, the hardening economic climate, and increasing inflation. As a result, we expect Google, AWS, and LinkedIn to increase their prices, eating up Gartner's projected 11.3% software budget increase for this year.

Furthermore, inflationary pressures, particularly in tech hubs like Silicon Valley, have contributed to the rising prices of software products as companies face higher expenses for salaries, benefits, and other operational costs.

Based on the Q1 2023 data, the average contract value (ACV) for SaaS purchases is increasing year-on-year. The ACV for Q1 2023 was $137k, representing a 23 percent increase compared to the ACV for all transactions in 2022, which was $111k. Additionally, the ACV for Q1 2022 was $101k, indicating a 3% YoY increase from 2021.

The four percentage points rise in federal interest rates between March 2022 and March 2023 mirrors the consistent increase in the ACV of SaaS purchases over the past 12 months. Economic factors and externalities that impact the rising interest rates have likely contributed to the upward trend in SaaS prices.

What this means for your business:

Your SaaS budget might be increasing, but SaaS prices are too. Assess whether the increased cost is justifiable, and consider any more cost-effective alternatives. It's essential to evaluate the contract price, the total cost of ownership, and any costs associated with switching products. If the price increase is reasonable, negotiate a new contract with the vendor to secure the best possible terms. Alternatively, explore other SaaS products that offer similar functionality at a more reasonable price. Taking a thorough and strategic approach to managing your SaaS costs can ensure that you make informed decisions and maximize the value of your investments.

How Vendr can keep you ahead of the trends

In today's rapidly evolving SaaS landscape, staying ahead of the trends is essential for businesses seeking to remain competitive and achieve long-term success. Fortunately, Vendr's Q1 SaaS trends report provides valuable insights and analysis that can help businesses navigate this complex and ever-changing market.

By reading this report, you can better understand the latest trends and make more informed decisions about which SaaS products will work best for your business.

Working with the Vendr team can help you stay ahead of the curve while navigating the SaaS landscape. So whether you're looking to optimize your current SaaS portfolio or explore new solutions to drive growth and innovation, Vendr is here to help.