What the Growth in SaaS Means for Your Customers
By Anna Talerico
Jul 25 2018
Jason Lemkin once theorized there are “…100,000+ SaaS apps out there.”
Seems impossible until you start to consider that there are 6,500+ marketing technology companies alone. And there are about 800 in the sales tech landscape. What must there be in finance, HR, and operations? And education, productivity, BI, ERP and BPM and on and on?
The SaaS Report estimates there are 10,000 private Software-as-a-Service (SaaS) companies and that number seems low when you start to think about it.
What about the SaaS companies we don’t even have on our radar yet? My former business partner Scott Brinker (aka, ChiefMartec) is the mastermind behind the 6,500+ MarTech landscape and hardly a day goes by when someone doesn’t mention to me that his or her marketing tech company isn’t listed on the landscape (“Oh, and by the way, can you let Scott know, because we’d love to be included.”)
The truth is, we don’t really know how many players there are. But we do know it’s big. And getting bigger. According to Christian Owens, Founder of Paddle the SaaS market is predicted to be worth over $116bn this year. So while no one knows the absolute number, there is no doubt that the SaaS landscape is exploding.
Probably trying to determine how many SaaS companies there are is fruitless. Dave Guggenheim says, “There are many ways to examine the SaaS market, and the simple number of firms operating therein is not particularly insightful in terms of gaining a useful perspective. But it does make good water-cooler conversation…”
What an exciting time for all of us to be in SaaS
And what of that water-cooler conversation that Guggenheim mentions? As SaaS investors, founders, executives, and employees, we are all probably slightly amused, excited and fascinated by the exponential growth of the SaaS landscape. It validates our existence. It is our water-cooler fodder. We wait in excited anticipation to see how many marketing SaaS companies will be on Scott’s landscape this year. Or to read the latest benchmarking reports.
We see opportunity all around us. Everything is ripe for SaaS transformation.
But what about the SaaS customers?
We have to consider that it’s not quite as fun for the customers of all these SaaS products.
Yes, we on the inside see opportunity and a better way to provision, use and manage software. But customers see an overwhelming number of choices.
We have to consider that it may not actually be an exciting time to be a SaaS customer right now. It’s overwhelming. It’s confusing. It’s noisy. And it’s stressful when the decisions made about which product to implement is a potential career breaker.
As insiders, we sell, market and buy SaaS solutions. We understand it. We’re excited about it. We can cut through the clutter, understand the market and players with agility. We hear about a product from industry buzz, assess its usefulness to us, and make purchase decisions quickly. After all, we are insiders.
Our customers aren’t. And their experience in evaluating and purchasing SaaS is different than ours.
I ran my first SaaS company through the explosive growth of the MarTech landscape. I saw it go from a handful of players to 500, to 2,500, to…well, you know. It’s actually 6,800 companies as of right now. Living through it, I saw customers grapple with understanding the different categories, subcategories, and vendors.
I also lived through this as a customer of countless number of SaaS products we used to run our business, from sales enablement, billing, HR, marketing and everything in between.
Everyone is saying the same thing.
Here’s the problem. Within a category (let alone a subcategory), we’re mostly all saying the same thing.
Pick any category of SaaS and look objectively at the home pages of 10 different products in that category. Can you tell the difference between them? Can you even tell one from the other? Do you understand what they do and why you would buy one versus the other?
Consider that a sub-category within a software category might have upwards of 100 vendors. That means a customer is staring down 100 potential options. Even when there are only a handful of strong dominant players, those other choices are there, adding to the noise and confusion.
What does the product do? Why would I want to use this product? How will it help me? What can I expect? Does it do X? What about Y? How will it work with Z? These are the questions our potential customers want answers to. But getting to the answer isn’t easy enough.
Put aside that you are a software insider for a moment, and you will see that everyone is saying the same thing. Let me repeat that. Many times. Everyone is saying the same thing.
Being a SaaS customer today means dealing with the paradox of choice. There’s too much to focus on, and many of the options seem the same. There’s decision fatigue before they even get close to a decision.
So while it’s an exciting time for us to be in SaaS, it’s also critical that we have empathy for the customers who are evaluating, recommending, and purchasing SaaS products. It’s critical that we strive to not add to their overwhelm, but instead that we actually find real ways to differentiate, to illuminate our value, to map our features to real business problems.
What’s a SaaS vendor to do?
Nothing in the near term will stem the tide of growth of the SaaS landscape. Nor would we want it to. But we can have empathy with the unprecedented experience our customers are having right now.
What we can do as SaaS vendors is focus on massive differentiation in product, messaging, marketing and brand. And also massive differentiation in our sales teams. Because people don’t buy products, they buy solutions to their problems. And the solution with the best sales team is likely to win this battle right now. The differentiation of the sales experience has never been more important. How our teams get in front of our buyers, gain attention, create relationships, uncover business need and build value has never been more important.