Emerging nations to dominate SaaS market by 2020

SaaS market is witnessing record growth and is rapidly eating into enterprise software pie. There exists a large under-served market but with reshaping of global workforce, new mobile internet users — primarily from emerging economies, new possibilities, and innovation by players, the potential addressable market is expanding even faster. The SaaS market in terms of buyers and players, is changing rapidly and will transform substantially by 2020.

It is dominated by players primarily from USA and Europe but emerging nations mainly India and China may soon dominate the market as buyers and new players. As players, they may not be eating much into existing big players pie now, but they may create new markets in their respective countries first, where most of the potential buyers exist and almost all future growth will come from.

MSME remains the driver of growth in SaaS

The micro, small and medium businesses sector is growing significantly in size and value. World Bank research has estimated that this sector has a 95% share in existing businesses and their offerings make up to 49.8% of the global economy. SaaS SMB share globally, will grow from 35% to almost 60% by 2020 and to 78% in USA.

Gartner estimates that by 2020, about 25% of organizations in emerging regions will be running their core CRM systems via SaaS, a 10 percent increase over 2012.

According to a report by BCSG , 64% of small businesses currently own an average of 3 solutions . These mainly include email services, file sharing and communication and task management. Whereas, 78% of businesses plan to expand their SaaS usage over the next three years, thus taking the average number of applications used from 3 to 7 .

An astounding 81% of self-employed and small business owners prefer an ecosystem of solutions that work seamlessly to avoid the hassles of using too many applications.

Reality of future buyers

The new potential SaaS buyers in this emerging SaaS market are getting linked to web through their mobiles first. Currently 43% small business owners use mobile devices as the primary device for running their operations and by 2019, 90% of mobile data traffic will be generated by cloud solutions ( According to Cisco VNI Mobile 2015 ).

By 2020, ~ 90% of the working youth would be from developing countries, with only 32% tertiary educated in Asia and only 12% in Africa. Informal employment as a percentage of non-agricultural employment, ranges from 50% to 75% in the developing and emerging countries.

In the times of increasing unemployment rates, further loss of jobs to robots and harsh economic realities, and with more than half the population in Asia and Africa still not having the basic tertiary education required to get formal jobs, it is expected that over 90% of new buyers will be employed by the SMBs and gig economy or micro businesses or self-employment of various nature. A large majority will only use cloud software(if empowered) only if it enables them to create or increase their income.

Mobile growth throughout the world is having a big impact on the SaaS market. Only 20% of the 3 billion working population of the globe have access to technology . 2.4 billion workers do not use or require technology at work. Considering 2 billion-plus potential technology dependent workers, almost 50% come from the Asia-Pacific and another 20% from Latin America, Africa and the Middle East. Developing nations are mobile first and see higher mobile growth rates as compared to their western counterparts, this clearly indicates that SaaS mobile will be seen storming the markets in the next five years.

What the future looks like?

Developed nations have more than 70% of their population as active mobile subscribers and internet users whereas the working population of these countries is minuscule as compared to developing nations.

Almost 85% of the world population comes from developing nations , and all numbers stated above indicate that the major growth opportunity lies with the developing nations in the coming years.

The emerging new buyer personas and the challenges to introduce them to SaaS is going to be a daunting task, as we need to drastically shorten the learning curve for them. Many factors would affect the global SaaS usage, successful adoption and economics. We would cover these issues in our next blog “The SaaS Divide — current vs new buyers”.

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