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As of 2023, the SaaS space is worth around $195 billion. Thanks to its promises of (semi) passive income, a low barrier to entry, and a world of possibilities, SaaS is very attractive for investors and founders. However, it’s not all rainbows and unicorns.
The advent of AI, the massive layoffs in the tech sector, and the loss of investor trust in high startup valuations - are just some of the many tumultuous changes in the world of SaaS in recent months and years.
But with every change comes opportunity. SaaS companies that adapt to a changing market will thrive. But what exactly does the future hold for SaaS products? Let’s investigate some of the most important SaaS market trends in 2025, so you can play your cards right.
When ChatGPT was released in November 2022, the world noticed and paid attention. The excitement over AI grew in the SaaS industry, for two reasons.
On the one hand, there were businesses afraid that AI would replace their product. On the other hand, there were SaaS businesses hoping to use AI for automation and make their products even more useful.
And about a year later, it seems like the latter group had the right gut feeling.
Generative AI is increasingly used in SaaS solutions and in 2024, it’s hard to think of a SaaS tool that does not have some AI capabilities for different use cases and workflows.
For example, Canva and Visme launched their AI image generator that allows anyone to turn text into an image. Just tell Canva what you want designed and it delivers a new design in mere seconds.
Notion was already one of the most versatile SaaS platforms out there, but with AI added on top, it became even more useful. With Notion AI, you can ask questions and get answers from your wikis, projects, and documents, as well as suggestions on how to improve your writing.
AI can do a lot: predictive analytics, text analysis, interpret data and much more.
At Luzmo, we launched an AI functionality that allows you to automatically generate charts based on your data.
It’s safe to say that AI is going to radically change the SaaS market, and not just with new features. Artificial intelligence will allow SaaS providers to automate back-end processes so that they can focus on providing more value to their end-users.
AI is not going to be the death of the SaaS industry. However, companies not using AI and machine learning will be left behind.
Main takeaway: SaaS companies that look for opportunities to use AI can lighten their workload, speed up their processes, improve user experience and in general, create a more valuable product. Although there’s no need to prioritize AI just for the sake of it, using AI the right way is the ultimate way to stay competitive.
Thanks to a worldwide lingering inflation in 2023, many businesses in different industries are hit. Budgets are shrinking and the average business can have thousands locked up in subscriptions per month. When the time gets tough, businesses cut losses by dropping every SaaS subscription that is unnecessary - which is a trend we’ve been seeing ever since the pandemic.
This resulted in massive churn for many SaaS companies in the last year. On the other hand, many SaaS companies increased their prices to adjust to inflation and achieve some profitability. Needless to say, things were not looking good for the SaaS model.
The customer acquisition cost for new customers is currently 5x higher than the cost of retaining an existing customer. This means that SaaS businesses will focus more on customer retention than acquisition.
Upselling and retention will be the name of the game in 2025, as well as choosing a pricing strategy that make this business model more sustainable in a volatile economy.
One way to do that is to drive expansion revenue - and offer add-on features that provide a better customer experience. For example, adding an embedded analytics dashboard with a tool like Luzmo gives customers an easy way to see how much value your product provides, in real-time.
In fact, a growing number of SaaS tools are adding dashboards so they can show key metrics to their users in real-time. This can give your cloud-based software a competitive edge because you can solve actual customer needs - and give them data about their product usage.
And thanks to visualization tools, dashboards can be very cost-effective too! Take a data-driven approach to understanding customer behavior with Luzmo!
You could also upsell customers based on usage. For example, Airtable offers 50,000 records per base in its cheapest plan at $20 per month. The moment you go to 50,001, you need to purchase their next tier at $45/month.
Main takeaway: do not take your pricing for granted. Keep experimenting to find new ways to decrease your CAC and retain more existing customers in the coming years.
There are giants in the world of SaaS that dominate entire categories by offering a suite of tools. For example, Hubspot offers an entire toolset for marketing and sales. Besides the CRM, there is a CMS that you can use to run your website and send leads to that CRM.
For newcomers in the field, it’s hard to compete with players such as Hubspot, Zoho, Salesforce, Tableau, and others.
To stay competitive, focus on building a best-of-breed tool that solves a highly specific problem rather than trying to cram all features into one. Unless you have the marketing and software development budget of Hubspot or Slack, you’re bound to fail.
For example, you could create a niche tool that does e-commerce analytics or project management for boutique fashion brands. The framework is already there, but you can build a tool that better solves a niche problem and grab a market share that no one is yet fighting for.
You can do this in several ways.
Main takeaway: SaaS businesses that niche down and focus on solving problems for a specific audience will thrive. By adding new value on a specific level, they will be able to compete on their own terms instead of going against giants offering broad toolsets.
On the flip side, with many SaaS tools specializing in one area, your tech stack can suffer fragmentation. Businesses often need to use a variety of SaaS tools at once. If those tools can’t play well with each other, this causes poor user experience and less efficiency as it halts advancements.
Perhaps worst of all, if your customer does not find the right functionality in your app, they’re going to shop around for another tool that solves their specific needs. Unless they can rely on a strong API to tie your tool into other systems.
APIs are going to become increasingly important for SaaS-based companies as they allow your customers to connect your tool with others in their stack and streamline their operations.
API-first development will take a leading role among the SaaS industry trends in 2025. In 2023, 11% of software vendors considered themselves API-first leaders. This may not seem like much, but it’s an increase from 8% in the prior two years.
This API-driven trend will continue for multiple reasons, such as:
If you’re ignoring APIs as a connectivity method, 2025 is a good time to change that so you can introduce more scalability in your SaaS.
Main takeaway: SaaS companies that focus on API-first development and good documentation will see improvements across the board. They can ship features more quickly, build better integrations, and keep their developers happy.
No-code platforms have been around for a while and they’re more pervasive than we might think. For example, 43.2% of all websites on the internet are powered by WordPress, a no-code platform for building websites. No more writing code, you can just use drag-and-drop website builders and create apps in a visual way
It’s not just websites. In app development, no-code and low-code have become increasingly popular in the past few years. They certainly won’t replace your favorite WordPress agency, but these technologies lower the barrier to entry for less technical founders and are driving a new digital transformation.
The stats speak for themselves - it is predicted that 70% of new business apps will use no-code and low-code apps by 2025.
The reasons for this widespread use are many. But primarily, there has been a massive need for developers in the past decade. There were not enough developers to fill all the open roles in SaaS companies around the world.
Low-code and no-code apps will create citizen developers who won’t need advanced coding skills to write basic code. Non-technical users will be able to build not just simpler web apps, but also more complex modules, visualizations, and mobile apps. No more writing code, you can just use drag-and-drop builders and create apps in a visual way.
And thanks to AI, this is going to become even easier.
Main takeaway: no-code and low-code tools won’t replace developers, but they will make it significantly easier for citizen developers to build and improve SaaS apps. This will allow them to ship products and features faster while freeing up developer resources.
While the economic downturn and inflation are still looming, the future of SaaS is looking bright. Thanks to artificial intelligence, new pricing strategies, APIs, and no-code and low-code platforms, SaaS applications have a place to thrive in the economy of the future.
And if you want to future-proof your SaaS, the best way to do so is by adding more value for your customers. Why not add an embedded analytics dashboard? With Luzmo, you can do that in a matter of days - not weeks or months.
Get in touch today so we can show you how!
Experience the power of Luzmo. Talk to our product experts for a guided demo or get your hands dirty with a free 10-day trial.
