When it comes to SaaS, Covid-19 threw fuel on a fire that was already burning brightly, to begin with. Businesses that were in the midst of a digital transformation (or considering it) had little choice but to flock towards cloud-based software solutions in order to keep their businesses running with employees working from home.
So in 2020 and into 2021, the subscription-based business model unsurprisingly experienced a huge, pandemic-fueled boom.
But as we surge into 2022 it appears global conditions are shifting once again into a state of pre-pandemic normalcy. What comes next for the thriving software and subscription business model?
We know the players, we know the game, and we have a trove of hints as to how the future of these business models may play out.
The key players, and how they’ve shaped the subscription business model
2021 was a big year for the world of SaaS, with industry-leading subscription services seeing significant growth for their brands. Salesforce, for example, increased revenue by nearly $1 billion while Zoom saw revenue growth of $1.5 billion.
In fact, a glance at any top 10 list of 2021 SaaS companies is a reintroduction to familiar businesses with a long history of industry domination. However, this isn’t to say the presence of familiar players means the game hasn’t changed.
Granted, many future SaaS shifts will be based on specific customer demands.
For example, AI is forecasted to grow by up to 50% going into 2022, driven by an industry-wide emphasis on agility and the need to process large data sets. So as businesses look for software solutions with enhanced AI and data integration features, there will be an inevitable industry-wide shift to meet those needs.
However, other 2022 trends for the subscription model may have less to do with the software product and more to do with the business’s ability to solve its customers’ problems…even if exactly what those problems are changes unexpectedly.
Consider the case of Zoom.
While it’s tempting to say that the teleconferencing company was simply offering the right technology at the right time, there’s more to it than that.
Zoom was built from the ground up with customer experience in mind. As founder Eric Yuan puts it: “From the moment we founded Zoom, our main focus has been to provide a cloud video communications solution that would make customers happy. That focus has continued to guide all our innovations, partnerships, and other initiatives.”
And at the start of the pandemic, Zoom put its money where its mouth was.
The business immediately pivoted into user-friendly features that were more suited to the at-home work environment. It also offered free subscription pricing for schools and other high-need institutions, which helped the product to be used as widely as possible.
The result? Zoom nearly doubled its recurring revenue, and, in doing so, turned its name into a verb. In supersaturated markets, product quality and price are no longer the only key brand differentiators. Going forward, businesses wishing to stand out will need to prove they can pivot at a moment’s notice to continue satisfying market demands.
SaaS in a post(ish)-covid world
With broad vaccine access and waning restrictions, working from home is no longer the necessity that it was a year and a half ago. What does this mean for the world of B2B subscription models in 2022?
First, it’s worth noting that the mass office exodus of 2020 is not likely to experience a full reversal anytime soon. Current forecasts suggest that up to 30% of the workforce will continue to work from home at least some of the time.
Business travel is not likely to make a full recovery either. A recent survey conducted by Deloitte saw that, relative to pre-pandemic conditions, the vast majority of businesses will reduce their travel budget by 25% going forward.
These factors combine to hint at a ‘post’-covid world that still has a significant need for the SaaS-based solutions that saw businesses through the height of the pandemic. Indeed, the SaaS industry grew at 18.4% in 2021 and is expected to account for up to 14% of IT spending as a whole by the year 2024.
Businesses may have moved towards cloud-based solutions out of necessity, but they can be counted on to stick with them for enhanced flexibility, collaboration, and operational efficiency.
The subscription universe
In the last several years the world of the subscription business has experienced significant growth—the industry is now far more than just subscription boxes. In 2022, subscription business models are expected to bring more than half of all software revenue, but SaaS is only the tip of the iceberg.
With subscription businesses offering anything from dinner to elevators for a monthly fee, it’s safe to say the popularity of the subscription business model isn’t slowing down any time soon.
Going into 2022, what does this supersaturation mean for the industry as a whole?
Competition in the subscription business space has always been tight, and it’s only about to get more intense. To stay ahead of your competitors, consider:
- Scalability: As subscription businesses grow, manual billing quickly becomes a complicated, often error-filled process that can lead to unhappy existing customers and leaking of monthly recurring revenue. Automated subscription billing software solutions reduce time spent billing by up to 80% while also patching revenue leaks caused by human error. To compete at the highest possible level in 2022, businesses must be able to operate at peak efficiency, even during periods of fast growth. The right tech stack goes a long way towards making this possible.
- Niching down: While tools like Slack, which can be used by almost any business, have their space, subscription-based businesses in 2022 may find more success in narrowing their focus, developing into what’s known as ‘vertical SaaS’ business models. By providing very specific industries with clear solutions for their problems, these vertical subscription business models are more likely to benefit from lower customer acquisition costs and a higher customer lifetime value than more generalized tools enjoy.
- Crypto?: While it’s safe to say that cryptocurrency has been received with a degree of hesitancy, it’s equally apparent that it’s not going anywhere. In fact, some estimates indicate that up to 40% of sellers will be accepting crypto in the next several years. Payment flexibility is key, not only for the purposes of collecting the customer’s monthly fee but also for operational efficiency as a whole.
Adaptability never goes out of style
The subscription model is a crowded highway filled with fast-moving cars. As the popularity of the subscription business model continues to surge ahead at full throttle, adaptability will be as much a brand differentiator as any other factor.
Think Zoom swerving into business class offerings, or IBM adapting into IT consultations.
‘Trends’ by their very nature are a product of the moment. Agility and adaptability, however, are of constant importance, providing subscription business leaders with the ability to lean into trends and to respond quickly and effectively to anything else that comes their way.
Or, as Amazon’s Jeff Bezos puts it, “The only sustainable advantage you can have over others is agility, that’s it. Because nothing else is sustainable, everything else you create, somebody else will replicate.”
Be ready for anything, and you can handle everything.