Software as a Service (SaaS) comes with more scalability and accessibility for businesses. They usually cater to a specific niche. As your team grows, you add more SaaS products to keep your operations efficient. Before you realize it, your IT team ends up managing numerous SaaS programs simultaneously. The more SaaS you add, the higher the costs.
You need to properly manage these subscriptions to keep your SaaS spending optimal. G2 Track helps you reduce SaaS spend and efficiently use the resources at your disposal.
Explore the statistics below to understand how companies spend on SaaS and the market size of SaaS products.
General software spending statistics
SaaS spending is on the rise, with many companies already investing in it. Below are some general stats to give you a lay of the land. Read these statistics to understand the present SaaS market and how it could trend in the near future.
- While businesses use an average of over 300 SaaS products, 53% of SaaS licenses remain unused.
- There are approximately 72,000 SaaS companies globally.
- In 60% of cases, the cloud cost exceeds the company’s budget by a significant amount.
- SaaS accounts for around 30% of global public cloud end user spending.
- 85% of all business apps will be SaaS-based by the end of 2025.
- 119 SaaS businesses were funded between January and May of 2023.
91%
of participants in a survey think SaaS will help them implement new technology and increase revenue.
Source: FinancesOnline
- By 2024, the SaaS market is expected to reach $232 billion.
- SaaS vendors can save $349 million if they negotiate their contracts..
- End users spent over 33% more on SaaS in 2023 than in 2021.
- In the next five years, 50% of companies using multiple SaaS apps plan to consolidate them for better management.
- According to 72% of IT experts, zero-touch SaaS automation is what's coming next.
Software usage and spending statistics
Businesses are increasing their SaaS spending, but their IT department or security teams don’t approve or vet every product in use. Shadow IT has grown tremendously among users, and businesses need robust measures to control it. Shadow IT refers to systems and software employees use in a company without the approval of leadership or other stakeholders.
The statistics below discuss SaaS spending growth and some facts about widespread shadow IT in enterprises and mid-market companies.
- 73% of businesses planned to use SaaS apps for their work in 2021.
- Businesses don’t use 53% of SaaS licenses they purchase.
- Shadow IT accounts for up to 51% of SaaS applications in an enterprise.
- 93% of SaaS app consumption is attributed to IT and security.
- The median annual recurring revenue (ARR) growth rate of companies ranges between 40% and 60%.
- Customer experience (CX) will be more important than SaaS pricing and products over the next five years, according to nearly half of 1,920 business executives surveyed.
56%
of enterprise organizations report software usage that wasn’t adequately vetted by IT or security.
Source: G2 Track
- 58% of mid-market software users confess to using unapproved SaaS apps.
- Platform and infrastructure spending increased by 23% in 2023.
- 55% of organizations were expected to increase SaaS spending in 2022. However, 46% of organizations actually did increase their spending.
SaaS market statistics: revealing key opportunities
Small companies love accessing comprehensive software products without significant upfront investments. Large organizations find it easy to manage SaaS products. They can access it on the cloud from anywhere without setting up on-premise hardware.
The flexibility and scalability open up a huge market for software as a service. Below are some insights to help you gain opportunities in the growing space.
- Public cloud end-user spending is forecasted to reach $725 billion in 2024. SaaS will contribute 30% of the total spending.
- Tools for collaboration and productivity dominate more than 50% of the SaaS market.
- The SaaS sectors in China, India, and Brazil are expected to double in size between 2020 and 2025.
- The largest market is Germany, where the SaaS industry is expected to increase from €6.85 billion to €16.3 billion.
- In 2020, 41% of Brazilian startups were SaaS-based.
- By 2024, the SaaS industry in China is projected to have grown to a compound annual growth rate (CAGR) of 34% from $7 billion in 2020.
85%
of all company software will be SaaS solutions by 2025.
Source: BetterCloud
- 85% of all company software will be SaaS solutions by 2025. Source: BetterCloud
- Today's median valuation of public SaaS companies is 15 times their anticipated revenue.
- The horizontal category includes 40% of SaaS companies.
- Businesses can launch new features onto the market 20%-40% more quickly with SaaS.
- The growth rate of annualized spend on SaaS on company size is 58%
- 71% of companies use cloud-based SaaS to expedite the delivery of IT services.
- After implementing SaaS, 63% of the companies want more flexibility.
Spend consciously
SaaS spending can quickly explode beyond control if you don’t make a conscious effort to budget efficiently. After all, it’s not just an expense but an investment you make to improve business operations.
Make use of SaaS spend management software to regularly audit the licenses you’ve purchased. If they’re underused, you can remove them to save on costs. Negotiate contracts wherever you can. For example, consider taking a long-term subscription if your team cannot do without a particular SaaS tool. Negotiate on the pricing to get yourself a good deal.
Above all, check if your SaaS spending aligns with your business goals. See to it that you can achieve these business objectives with SaaS tools at your side. Optimizing SaaS spending isn’t a one-time thing or something you do at the start or end of a financial year. It’s a continuous process.
Want to take control of your SaaS spending? Discover the strategies Chief Finance Officers (CFOs) use to reduce SaaS spend.
by Mara Calvello
