The growth of the Software as a Service (SaaS) market continues unabated and shows no signs of slowing anytime soon.
SaaS by the Numbers
According to Gartner: “Software as a Service (SaaS) remains the largest segment of the cloud market, with revenue expected to grow 22.2 percent to reach $73.6 billion in 2018. Gartner expects SaaS to reach 45 percent of total application software spending by 2021.”
BetterCloud, a SaaS Operations Management platform provider, has also produced some interesting statistics on the explosive growth of the SaaS market. In its survey of more than 1,800 IT professionals, 73% percent said that nearly all (80%+) of their apps will be SaaS by 2020.
To drive home their point, BetterCloud created the graphic below, illustrating how the rise in SaaS applications has disrupted the traditional on-premise software business.
SaaS Checks All the Boxes
So what’s driving this rapid evolution away from traditional licensing and toward SaaS applications?
According to the blog ComputationHub, the meteoric rise in SaaS adoption can be attributed to the following advantages:
- Lower Total Cost of Ownership
- Enhanced Security
- No Downtime for Software Updates
- Instant App Availability on Any Device
- No Specific Hardware/Server Requirements
SaaS Means Business
At the same time adoption rates are rising, so too are the number of SaaS providers. Today, there are over 50 publicly-traded SaaS companies and more than 10,000 that are privately held, according to The SaaS Report.
This prevalence of SaaS companies, combined with customers’ ability to switch from one SaaS provider to another relatively easily, makes customer experience more important than ever.
As one Forbes columnist put it, “In a SaaS or subscription environment, there’s almost nothing more important than the quality of the customer service…or ‘the customer experience.’”
A poor customer experience can lead to higher customer churn. Losing a customer hurts for any business, but it’s a bigger hit to the bottom line of SaaS companies because of their subscription revenue models.
Interestingly, though, not all churn is created equal. When measuring the impact of churn on the overall health of the business, it’s smart to think about both customer churn and revenue churn.
Customer churn is simply the total number of customers that left a business. Revenue churn, on the other hand, is calculated by adding the monthly or yearly spend of each customer that left the business. The total dollar figure of that lost spend is the business’s revenue churn. When measuring the company’s overall health, it’s more important to focus on revenue churn than pure customer churn.
Of course, all SaaS providers would like to limit both types of churn by providing a better customer experience, and many are working to do just that.
In fact, “Gartner predicts that by 2018, more than 50 percent of organizations will implement significant business model changes in their efforts to improve customer experience.”
SaaS Providers Must Double-Down on Customer Experience
Customers are continuing to flock to SaaS applications vs. traditional licensing, which presents a great opportunity for providers. But to prevent customers from defecting once they’ve signed up, it’s critical for SaaS companies to deliver a superior customer experience.
Consider all the ways in which your organization interacts with customers and think of each as an opportunity to set the customer experience bar even higher. Your customers and your bottom line will thank you.