Where are the opportunities for new SaaS ventures?

Almost four years ago, I wrote a post that argues that SaaS will eventually win over on-premise software. At the time, Larry Ellison, Oracle CEO, still argued that SaaS was a fad.

Now, in 2015, it’s clear that SaaS has won the “delivery”. What’s more, SaaS has also created new markets, penetrating customer segments for which an on-premise software solution was cost prohibitive in the past. Dozens if not hundreds of successful SaaS vendors are hitting the market and seem to be covering every single business need in every vertical.

Are there still opportunities for new SaaS ventures?

I recently examined the SaaS landscape and below are some ways to slice the pie and see which areas might still have room for innovaction:

Departments within the Business

Some successful SaaS businesses address the needs of specific departments within the organization. For example, Workday (discussed in a previous post) provides a solution that addresses the needs of businesses’ HR department. Xero is an accounting software that—like the better-known QuickBooks—addresses the needs of the Finance department. JIRA—now generally repositioned as a SaaS vendor—addresses the needs of R&D departments.

Are there additional departments for which an exhaustive solution does not exist?

Processes within the Business

While some SaaS vendors address specific departments, other address specific processes, which might span more than one department. For example, Workable, which just raised another $5m this week, addresses the recruitment process. While mostly an HR process, the recruitment process touches additional staff members and departments. Similarly, Expensify provides an online expense management service for businesses. While, again, mostly a Finance department process, expense reports represent a process that spans many more staff members within the organization.

Are there additional processes for which an exhaustive solution does not exist?

Specialized Vertical Solutions

As a business, one can build its software infrastructure based on generic tools (e.g., NetSuite ERP, Salesforce.com CRM, etc.), integrated and adapted to its needs. Alternatively, some SaaS vendors offer integrated solutions for a specific vertical market. For example, Dealertrack provides a SaaS solution for the auto industry. Similarly, MindBody provides a SaaS solution for studios (Yoga, Pilates and similar). Such solutions are typically unknown beyond their market segment, but often become a de-facto standard within the vertical and enable businesses in this vertical to manage their business end-to-end without the need for “horizontal” software.

Are there additional vertical markets for which an exhaustive solution does not exist?

Solutions for Smaller Businesses

Software solutions for large enterprises have existed for decades. Many such solutions did not have equivalents for smaller businesses because the cost-of-sale to such businesses made it prohibitive to address such markets.

With SaaS (as a delivery model) and online customer acquisition (as a distribution model), many services can scale down to smaller businesses. For example, ZenDesk provides customer support solutions that are used by Fortune 500 companies but also by small businesses. Box provides cloud storage solutions that are used by Fortune 100 companies but also by tiny businesses. In many cases, a solution that is simple and affordable enough can provide smaller businesses a benefit that is similar to that achieved by large enterprises. What’s more, solutions designed for small businesses (in terms of simplicity) can often scale up pretty nicely for larger businesses and help vendors dominate bigger markets.

Are there additional enterprise solutions that were not yet transformed to smaller businesses?

New Solutions enabled by New Technologies

As the technology world changes, approaches that were not technically feasible before become accessible. When such an opportunity arises, a market can be disrupted.

For example, the move of telephony away from custom networking stacks (used by traditional carriers) into IP telephony has enabled companies such as Twilio (telephony infrastructure as a service) and Invoca (call center infrastructure as a service) to thrive.

Similarly, the emergence of cloud storage technology has enabled companies such as Box, Dropbox, and to a lesser degree Google and Microsoft to provide file management and sharing as a service, and grow up to be a SaaS behemoths.

Are there additional technology “waves” that open up opportunities for new SaaS vendors?

New Solutions enabled by Habit Changes

Often a result of technology changes, people’s habits (home and work related) often change to accommodate the changing world.

For example, communication costs have gone down dramatically over the last decade, making remote and virtual employment more commonplace. This change has brought about the need for new tools for the mobile workforce (e.g., BaseCRM and Close.io both provide a CRM-like solution that focuses on phone sales). New tools for crowdsourcing open the opportunity to temporary buy and sell remote services. Arguably, even collaboration tools like Yammer the now-hyped Slack have gained traction from habit changes associated with using Facebook and other social networks in workers’ personal life.

Are there new habit changes that open the door to new SaaS solutions?

New Solutions needed by Departments in Transformation

With the changing set of technologies, some departments are changing their day-to-day roles and responsibilities.

Most notably, marketing is increasingly changing to focus on digital marketing. Traditional mails have been replaced by emails. User groups have been replaced by online surveys. In-store analytics have been replaced by web and mobile analytics. Traditional advertisement is gradually moving towards digital advertisement on the web and on mobile devices. The marketing department is becoming more digital and more technology-driven.

As changes in a department’s behavior occur, the need for new solutions arises. In the marketing arena alone, companies such as Marketo, Eloqua and HubSpot have built a business on “inbound marketing”. Companies such as ConstantContact, MailChimp and ExactTarget have built a business on email marketing. Companies such as Coremetrics, Omniture and Mixpanel have built a business on web analytics. Companies such as Marin Software, Kenshoo and Acquisio have built a business on ad campaign management. And many more.

Are there additional departments that are expected to transform soon, and for which new solutions are needed?

Are there new areas within the now-transforming marketing department that require solutions and automation?


 

The list of “categories” above is by no way complete. In fact, it’s not unlikely that new emerging SaaS ventures will be based on innovative ways to dissect the marketplace. Either way, I’m convinced that many more SaaS opportunities are out there waiting to be launched, we’ll have to wait and see which ones end up being the next industry unicorns.

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