Blissfully’s 2020 SaaS Trends Report, Part 1 — Trends in Growth, Waste, and a breakdown of Top Apps by Funding, Location, and Market vs. Spend Share
📖 Introduction: About this Report
At Blissfully, we’re focused on the ways companies use software-as-a-service (SaaS) to power business productivity, growth, and success. Each year, we release Blissfully SaaS Trends Reports based on proprietary data from thousands of companies around the world.
SaaS is now the gold standard for businesses, from old-school accounting firms to bleeding-edge artificial intelligence startups, and from small family-owned shops to large multinational corporations. The usage of and demand for SaaS products has grown dramatically over the years, and we see this trend continuing in 2020 and beyond.
Our 2019 annual report uncovered two key trends: that app turnover was higher than employee turnover, with 39 percent of typical mid-size companies swapping apps between 2017–2018; and that the selection of SaaS apps was increasingly decentralized across departments.
Our 2020 annual report analyzes over 10 years of SaaS spend and usage data from over 1,000 companies. We found that app usage across companies of all sizes is up around 30 percent year over year from 2018 to 2019. We also uncovered that the number of apps being used is up by around 30 percent. As app usage increases, so too has waste — duplicate subscriptions have increased by 80 percent, while orphaned app subscriptions are up almost 100% across companies of all sizes. These numbers indicate not only that SaaS continues to proliferate, but that proper SaaS management is still lagging and badly needed.
Read on to dive deeper into our key findings for 2020, an inside look at how small, medium, and large organizations are using SaaS apps, and core takeaways for SaaS builders, consumers, and investors to consider this year.
About The Cohort of Companies
Blissfully tracks billions of dollars in SaaS spend across thousands of companies, from small businesses to large enterprises.
Blissfully’s users tend to be tech-forward, SaaS-first companies and early adopters, but we believe nearly all companies will look like this within the next five to 10 years. In fact, according to our 2019 compliance report, in 2019, 68% of organizations said they are mostly or all SaaS-driven at this point, with nearly 23% saying they operate solely using SaaS apps today.
The companies in this year’s report represent a sampling of Blissfully’s customers across three different organization sizes:
- Small Business (AKA SMB), defined as a company with 1–100 employees
- Mid-Market (AKA MM), defined as a company with 101–1000 employees, and
- Enterprise, defined as having 1,000+ employees
📈 Overall Trends in SaaS Spend and Usage
Compared to 2018, Blissfully found that overall spend per company on SaaS products is up 50%, which is impressive. However, it’s also worth noting that the growth rate appears to be slowing. This is not too surprising, given that the cohort represented here-early adopters of Blissfully-is likely maturing in their SaaS adoption and solidifying how they use it to run their businesses.
However, we think there’s still a lot of room for growth outside of these early adopters as well. As a result, we do expect that all companies will eventually be as invested in SaaS as this early adopter cohort.
Diving deeper, the unique number of apps in usage per company is up about 30% year over year, with companies averaging 137 in 2019 vs. 2018. The average small business uses 102 different apps, while each mid-market business uses an average of 137 apps. Enterprises have, on average, 288 different SaaS apps in usage across their businesses.
Interestingly, spending growth is outpacing the number of unique apps, suggesting that companies are spending more with their existing vendors-adding more users, upgrading features, tacking on service plans, etc. This makes sense as businesses both deepen their internal usage of SaaS and vendors raise prices over time.
We suspect this price increase is also due to consolidation in vendors (for example, when one vendor buys another), which causes spending on a specific vendor to go up, while reducing the total number of vendors in use. There’s a lot of M&A going on in the world of SaaS.
Increased spending on SaaS is further emphasized by the churn rate: Companies are churning through more than 30% of their apps every year at this point in time. Over time, many apps offer more and more features, whether through acquisitions or internal expansion. This includes both big platforms like Salesforce and HubSpot and smaller apps like Notion that offer enough flexibility in the workflow that they may eat into market share for things like Google Docs, wikis, Kanban boards, and project management tools.
As Jim Barksdale has said, “There are two ways to make money in business: You can unbundle, or you can bundle.”
The pendulum may be swinging back for SaaS early adopters, as they adopt more new products making their way to market, increasing the sheer number of apps in use. But we expect plenty of consolidation going forward, too.
🤝 The SaaS Graph: A Better Way to Understand the SaaS Data Model
When looking at the number of SaaS apps per company, the numbers seem manageable. For example, a mid-market company (101–999 employees) uses 185 apps, while an enterprise company (1,000+ employees) uses 288. But when you consider app-to-person connections, that number expands greatly-to 4,406 for mid-market and 21,580 enterprise companies, respectively.
It’s clear that the bigger a company becomes, the more complex app-to-person connections become.
The SaaS Graph shows the ways in which app-to-person connections flow and grow across organizations. Every line on the graph represents the relationship between one employee and one SaaS app.
Each of these app-to-person relationships needs to be carefully and securely managed. Every single instance that an employee signs up for or uses an app-whether it’s paid or free-introduces the possibility of:
- weak passwords
- loose security settings
- account sharing
- other security risks.
It also means that when employees leave an organization, revoking email access and deactivating RFID badges is just the beginning of the close-out process; each app that employee logged into needs to have that user deactivated, too. Companies need to make sure they aren’t leaving the door open for a security breach, and they also need to ensure they’re not wasting money on empty seats.
Additionally, companies operate in an increasingly-regulated landscape-globally, nationally, and regionally. Whether it’s national regulations like SOC 2, international regulations like GDPR or local regulations like CCPA, companies of all sizes are beholden to new requirements around data privacy. Poorly-managed SaaS apps can quickly become a vector for legal, reputational, and/or security risks.
To mitigate risk, companies need to track app-to-user connections, understand how those connections relate to data, and create proper security protocols.
🗑 SaaS Waste: Nearly Doubling Year over Year
Paid apps add up quickly-and with so many apps available, it’s easier than ever to waste money on duplicate or orphaned apps. That’s especially true if companies grow fast and add SaaS apps without a strategic plan, a set of protocols for app sign-ups, or visibility into overlap between apps.
For example, an employee might sign up and pay for an app their company already uses, duplicating the subscription and payment. Or, in the event an employee who owned a certain app leaves the company, a company might forget to reassign ownership of the app-resulting in an orphaned subscription that no one is accountable for.
Our 2020 report data shows that waste on both duplicate and orphaned apps is growing year over year. This year’s report indicates that duplicate app subscriptions increased by 80 percent from 2018 to 2019. The average number of duplicate apps per company is 3.6 . Enterprise companies have the highest average number of duplicate apps at 7.6, while small businesses show the least redundancy with just 2.3 duplicates on average.
Similarly, orphaned app subscriptions are up almost 100% across companies of all sizes. This is up from 1.4 apps in our 2019 report to 2.6 in our 2020 report. Enterprise companies, again, have the highest number of orphaned subscriptions at 7.1, while mid-market companies follow at 4.3 and small businesses at 1.4.
Duplicate and orphaned SaaS app subscriptions are not only costly, but they also create security risks. It’s true that mistakes like these crop up when companies are moving fast, but we shouldn’t necessarily accept wasted spend as an inevitable consequence. In 2020, companies large and small should analyze their app usage, ensure they have an overarching strategy around which apps are used for what tasks, and enforce policies around employee app usage during and after their tenure.
🔬 Breaking Down the Top 100 Apps
When it comes to where these apps are being built, SaaS is even more concentrated in the U.S. than tech as a larger category. We took a deeper dive, looking at the most common apps by spend and market share, and breaking them down by different categories.
As the graph illustrates, almost two-thirds of the top 100 apps located in the U.S. are headquartered in Silicon Valley, CA, with about 80% of all top 100 SaaS apps located in the U.S. vs. other locations globally. This isn’t overly surprising, although the concentration is even higher than many realize.
By Market vs. Spend Share
Looking at the graph below, we can see the top 100 apps broken down by market share vs. spend share. We’ve broken it down into four quadrants, and tend to think of them as:
- Top-left — High Potential
- Top-right — Leaders
- Bottom-right — Mature
- Bottom-left — New entrants and legacy products
The graph below shows the amount of funding the top 100 SaaS apps have received to date. Nearly half of the top 100 apps are products from public companies (so the funding amounts look small on the graph, because they are not funded by VCs or other traditional private arrangements), while the other half are built by private companies. In other words, there is still a lot of room for private investors to participate in rounds of successful SaaS companies that have a lot of room for growth. On average, private funding for the top 100 SaaS apps is more than $100 million.
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Originally published at https://www.blissfully.com.