he software as a service (SAAS) market is one of the fastest growing digital markets. The sector, which offers software and services online, has seen revenues grow by more than $20 billion over the last five years. These companies provide subscription-based services over the Internet and are generally considered to be a ‘software’ company rather than an ‘internet’ company. This is because they offer their software directly to customers via the internet as a service rather than selling it directly from their website or e-commerce store as downloadable software. Despite its rapid growth, SAAS valuations have been dropping for some time now. In fact, there are several reasons why this trend will continue. Read on to learn about three of them.
The skills gap is growing and will continue to grow for the next decade. The adoption of cloud computing and software as a service has led to a dramatic increase in demand for certain skillsets. The most significant change to the labor market has been the rise of the need for data scientists. This has led to a significant rise in salaries for this skill set. Another skill set that has seen a rise in demand is that of SaaS product management. Product management is responsible for the development of product strategy, creating business models and managing the product roadmap. Despite being a key managerial role in the product lifecycle, the role is not one that has traditionally been highly paid. However, with the increased need for data scientists to understand customer insights and design products with those insights in mind, product management has become more important than ever. This has naturally led to greater demand for product managers, driving up salaries for this skill set. The skills gap will continue to grow for the next decade as demand for data scientists and product managers continues to increase. This will lead to slower growth and higher valuations for SAAS companies. Consolidation will continue, and it’s making valuations drop. The rise in demand for data scientists and product managers has led to a dramatic increase in hiring rates. This has led to an increase in the cost of hiring top talent. Hiring data scientists and product managers has become more difficult and expensive, putting pressure on SAAS companies’ growth. This has led to companies choosing to consolidate their position in the market. This has led to a dramatic increase in mergers and acquisitions (M&A) activity in the SAAS sector. The overall M&A activity in the SaaS sector saw a marked increase in 2017. As companies invest in growing market share, this has led to a drop in valuations for SAAS companies. As the consolidation continues, expect a continued drop in SAAS valuations. ## Lack of innovation and new use cases for SAAS. The SAAS sector is not just growing, it also has the potential to change the way we work. Many modern businesses depend on SAAS platforms to run their day-to-day operations. While SAAS has plenty of use cases, such as accounting software or HR software, the sector has failed to expand and adopt new technologies. This has led to a lack of innovation in the sector, with little new functionality being developed. Many SAAS companies, such as accounting software providers, have focused on improving their product, optimizing their operations and expanding their user base. Despite this, the sector has failed to adopt new technologies, such as artificial intelligence, which have the potential to change the way SAAS companies operate. As a result, the sector has failed to expand its functionality. This has led to little new functionality being developed and adopted by SAAS companies. So, while the sector has grown rapidly, it has done so by focusing on optimizing existing operations and increasing revenues. This has led to a dramatic drop in valuations in the sector. ## Lack of innovation and new use cases for SAAS. The SAAS sector is not just growing, it also has the potential to change the way we work. Many modern businesses depend on SAAS platforms to run their day-to-day operations. While SAAS has plenty of use cases, such as accounting software or HR software, the sector has failed to expand and adopt new technologies. This has led to a lack of innovation in the sector, with little new functionality being developed. Many SAAS companies, such as accounting software providers, have focused on improving their product, optimizing their operations and expanding their user base. Despite this, the sector has failed to adopt new technologies, such as artificial intelligence, which have the potential to change the way SAAS companies operate. As a result, the sector has failed to expand its functionality. This has led to little new functionality being developed and adopted by SAAS companies. So, while the sector has grown rapidly, it has done so by focusing on optimizing existing operations and increasing revenues. This has led to a dramatic drop in valuations in the sector. ## Lack of innovation and new use cases for SAAS. The SAAS sector is not just growing, it also has the potential to change the way we work. Many modern businesses depend on SAAS platforms to run their day-to-day operations. While SAAS has plenty of use cases, such as accounting software or HR software, the sector has failed to expand and adopt new technologies. This has led to a lack of innovation in the sector, with little new functionality being developed. Many SAAS companies, such as accounting software providers, have focused on improving their product, optimizing their operations and expanding their user base. Despite this, the sector has failed to adopt new technologies, such as artificial intelligence, which have the potential to change the way SAAS companies operate. As a result, the sector has failed to expand its functionality. This has led to little new functionality being developed and adopted by SAAS companies. So, while the sector has grown rapidly, it has done so by focusing on optimizing existing operations and increasing revenues. This has led to a dramatic drop in valuations in the sector. ## Lack of innovation and new use cases for SAAS. The SAAS sector is not just growing, it also has the potential to change the way we work. Many modern businesses depend on SAAS platforms to run their day-to-day operations. While SAAS has plenty of use cases, such as accounting software or HR software, the sector has failed to expand and adopt new technologies. This has led to a lack of innovation in the sector, with little new functionality being developed. Many SAAS companies, such as accounting software providers, have focused on improving their product, optimizing their operations and expanding their user base. Despite this, the sector has failed to adopt new technologies, such as artificial intelligence, which have the potential to change the way SAAS companies operate. As a result, the sector has failed to expand its functionality. This has led to little new functionality being developed and adopted by SAAS companies. So, while the sector has grown rapidly, it has done so by focusing on optimizing existing operations and increasing revenues. This has led to a dramatic drop in valuations in the sector. ## Conclusion The software as a service (SAAS) market is one of the fastest growing digital markets. The sector, which offers software and services online, has seen revenues grow by more than $20 billion over the last five years. These companies provide subscription-based services over the Internet and are generally considered to be a ‘software’ company rather than an ‘internet’ company. This is because they offer their software directly to customers via the internet as a service rather than selling it directly from their website or e-commerce store as downloadable software. This article has outlined three reasons why SAAS valuations have been dropping. These include the skills gap that has been growing and will continue to grow for the next decade, consolidation will continue, making valuations drop and the sector failing to innovate and adopt new technologies.
