In 2015 during the whole year I’ve run a weekly newsletter exploring the trends which are shaping the SaaS industry and collected many data points (the searchable database is available on saasdatapoints.com).

In this post I’m listing 7 major trends which I think will continue to define the SaaS landscape in the year to come.

Vertical vs Horizontal SaaS Messaging Apps Transitioning to Platforms Mobile First SaaS Software AI and Automation (Bots) Unbundling of SaaS Micro SaaS Businesses SaaS Based Marketplaces

1- Vertical vs Horizontal SaaS

Trends

There are two main ways for SaaS startups to approach the B2B software market:

Vertical SaaS : software which answers the needs of a specific industry (ex: software for the healthcare, agriculture, real estate, finance industries)

: software which answers the needs of a specific industry (ex: software for the healthcare, agriculture, real estate, finance industries) Horizontal SaaS: products which focus on a software category (marketing, sales, developer tools, HR) but are industry agnostic (ex: SalesForce, Slack, Zenefits, Workday)

The maturity of the different SaaS categories in these different industries is not the same and the maturation process is not developing at the same pace everywhere.

Horizontal SaaS: for many categories the “education” phase is behind us and we’ve entered a new phase characterized by:

larger “educated” customer base : no need to educate customers on the benefits of SaaS vs on-premise + many SMBs are now used to buying SaaS. This is why the focus has shifted from “educating” customers to keeping them (the rise of “customer success”)

: no need to educate customers on the benefits of SaaS vs on-premise + many SMBs are now used to buying SaaS. This is why the focus has shifted from “educating” customers to keeping them (the rise of “customer success”) highly competitive landscape : customers have the choice between many good products. In some categories it’s getting really hard to differentiate your product from the competition. New approaches in terms of product are emerging (see the “Unbundling of SaaS” and “Mobile First” sections below)

: customers have the choice between many good products. In some categories it’s getting really hard to differentiate your product from the competition. New approaches in terms of product are emerging (see the “Unbundling of SaaS” and “Mobile First” sections below) more and more “category winners” are now established : SalesForce, Zendesk, Hubspot, GitHub, Slack, Docker… For new entrants it’s almost impossible to dominate these spaces by applying the same playbook, disruption will come with new approaches.

: SalesForce, Zendesk, Hubspot, GitHub, Slack, Docker… For new entrants it’s almost impossible to dominate these spaces by applying the same playbook, disruption will come with new approaches. … some of which are already, or becoming, “platforms”: SalesForce, Slack…

On the other hand the situation for many Vertical SaaS products is the same as what horizontal SaaS faced a couple of years ago (before it reached the the current level of maturity):

market education : a lot of effort has to be done in order to educate the customers and to convince them to migrate from their traditional solutions or to adopt completely new ones.

: a lot of effort has to be done in order to educate the customers and to convince them to migrate from their traditional solutions or to adopt completely new ones. no clear category winners : in many verticals there is no clear category winner and no platform dynamics yet

: in many verticals there is no clear category winner and no platform dynamics yet classical “full featured products” + classical “sales / distribution playbooks” are still what work the best in not, yet, crowded spaces.

In 2016 these two macro trends will continue.

Horizontal SaaS: the product / sales / distribution playbooks that worked well the past years and which are very well documented on the internet are becoming less effective and need to be updated to take into account the changing landscape (ex: effectiveness of traditional inbound marketing which is going down or the emergence of new product paradigms).

Vertical SaaS: more and more industries will get “SaaS-ified (ex: the legal industry), the key is to copy what worked in other industries and to adapt the rest. Execution speed will be crucial.

Data Points

Market maturity evolution:

Vertical Software market:

The SMB segment is also maturing:

2- Messaging Apps Transitioning to Platforms

Trend

In 2015 / 2014 what had started as enterprise chat clients, Slack and Hipchat, transitioned to platforms on which third party SaaS can now build products and interact with users.

Same with consumer messaging apps like Messenger or Whatsapp which are becoming interesting places to interact directly with end users (for customer support or conciergerie apps / smart assistants for example).

2016 will probably see the boom of third party tools and an increasing number of VC rounds to fuel them. That said it’s still uncertain how the messaging platform operators are going to deal with their ecosystem and there’s always a risk that they end up doing what Twitter or LinkedIn did (and kill their ecosystem). Slack seems to be heading the good direction with its dedicated fund though.

Data Point

In 2015 Slack really took off in terms of active users. This platform cannot be ignored by many SaaS startups:

3- Mobile First SaaS

When it comes to mobile I like to distinguish mobile first companies and the others.

In 2015 most of the successful mobile first SaaS companies were either:

“Industry specific” products for which workforce mobility is important: construction, real estate, retail sales… (vertical approach).

for which workforce mobility is important: construction, real estate, retail sales… (vertical approach). Productivity tools in the case of horizontal SaaS: calendar, team communication (messaging, video conference, project management…), expenses etc.

Apart from these two approaches it’s hard for ‘mobile first’ startups to come and compete on broader categories such as marketing, sales or support.

But in 2016 the game might change a bit. The transition of several messaging app to real platforms (Slack, Hipchat, Whatsapp, messenger, see above) might foster the birth of a new breed of mobile SaaS champions.

I’ve covered several interesting ones in the customer support space but I won’t be surprised to see more emerging in other categories (sales, marketing, finance…). Messaging platforms might be the catalyst that many startups needed on mobile.

For non “mobile first” SaaS, mobile experience (web or native apps) will, obviously, still grow in importance.

Data points

The mobile productivity category and vertical apps also dominate VC funding:

An interesting example of a successful “mobile first” company: Expensify (a quick calculation based on the public data they shared gave me an estimate of an ARR of $12M as of mid 2015, details here)

4- Software AI and Automation (bots)

AI and bots were very hot topics in 2015 and it’s sometimes hard to distinguish the real potential behind the hype. The truth is that we’re hearing a lot about AI but the vast majority of so called “smart apps” are still not that smart.

My point of view is that, like with many things, there’s no revolution but evolution. Crazy smart AI in every software we use won’t happen overnight, many steps need to be completed before that, and I believe that in 2015 we’ve progressed well on education and infrastructure.

Education . More and more people got in contact with software bots thanks to messaging bots (like Slackbots) or smart assistants (Clara Labs, Siri, Facebook M…). People start to get used to the concept and to learn how to interact with them. Soon we’ll have more and more lightweight “companion bots”, and messaging platforms are a perfect medium to distribute them.

. More and more people got in contact with software bots thanks to messaging bots (like Slackbots) or smart assistants (Clara Labs, Siri, Facebook M…). People start to get used to the concept and to learn how to interact with them. Soon we’ll have more and more lightweight “companion bots”, and messaging platforms are a perfect medium to distribute them. Infrastructure. It’s unrealistic to think that AI can become mainstream in SaaS products without proper AI infrastructure. Not every startup can hire a team of high level AI specialists, so democratization of AI will be possible only once developers have access to enough AI blocks ready to use “out of the box”. Several big players are open sourcing AI libraries (Airbnb, Google, Facebook) and more and more startups offer AI available as APIs but we’re not there yet.

In 2016 we’ll probably witness the continuation of both trends. We still need more education and more easy to use / developer friendly APIs before AI really becomes ubiquitous (who will be the Stripe / Twilio / Algolia of AI and automation?).

In the meantime the really impressive apps will still come from the big players like Google, Facebook, Tesla… or research projects which have the resources to push the limits of this field.

Maps

Here are several landscapes covering AI and software bots. Keep an eye on the “infrastructure” layer this year.