The State of SaaS in 2025: Market numbers, trends and buzzwords

Content

1. The SaaS market in numbers
2. The biggest SaaS trends & buzzwords
3. The SaaS must-haves of 2025
4. The SaaS questions (& answers) of 2025

The big SaaS market numbers

There will be growth but no growth explosion

According to Gartner, the expected overall end-user spend for SaaS is estimated at 299 billion US-Dollars, indicating a growth of 19,2% compared to 2024.

This marks a small increase compared to the previous year (Source: Gartner, 2024).

SaaS is the biggest public cloud sector

The SaaS market is the biggest sub-sector of the public cloud services market worldwide making up nearly two thirds with 412,5 billion US-Dollar revenue in 2023 compared to 123,3 billion US-Dollar for Platform-as-a-Service and 133,4 billion US-Dollar for Infrastructure-as-a-Service (Source: IDG via Statista).

US is the king of SaaS companies

It is no suprise that the US boasts nearly 1000% more SaaS companies than the 2nd ranked country (UK) according to the SaaS database GetLatka. However, as a company with (among others) German roots, it’s nice to see that Germany is one of the Top 5 leading SaaS countries with ca. 925 SaaS companies.*

*Source: GetLatka, data accessed on January 6th, 2024.

Disclaimer: GetLatka is a SaaS database, so it’s very possible that the actual numbers are much higher, and the rankings might differ due to SaaS companies that are not listed in the database.

Plus, these Top 5 can change fast. The Statista numbers based on GetLatka from last year had Germany placed 4th and India placed 5th.

A few selected countries for comparison

• US: 16.600
• UK: 1.800
• Canada: 1.200
• India: 1.200
• Germany: 925
• France: 816
• Spain: 367
• Netherlands: 328
• Sweden: 207
• Poland: 205
• Denmark: 147

The big SaaS trends & buzzwords

Gen AI

Generative AI was all the rage in 2024 and even though the Gartner hype cycle does imply that the “trough of disillusionment” is imminent for many Gen AI technologies, it’s still highly sought after. But brace yourself for a more sobering year when it comes to new developments and releases.

Concentrate on the “what is” of Gen AI solutions and not on the “what if”

Because the the possibilities are up in the air and it’s sometimes not easy to discern, how long it will take to make small and big steps. Sometimes, seemingly small development jumps can be highly complex and take more time, energy and resources than expected.

There’s already been plenty of evidence that the upcoming development cycles will be slower and less impactful as the previous ones (and this according to some of the bigger players in the game such as Google or OpenAI.)

Don’t use Gen AI to replace human labor but to enhance it

There’s been many different experts who tested Gen AI and incorporated it into their daily work. The main consensus: it’s great as a support to kickstart processes or take some (simple) shortcuts but an unsupervised Gen AI is a sureway to crash and burn.

To make this clearer: there is ample talk of “hallucination” issues (e.g., Gen AI making things up but being programmed to sound very sure, so you’re less likely to double-check or rather do not know where the hallucination might have occured). Experts are needed to compare and confirm, so numbers and facts are not fantasy.

“The risk is that firms invest ahead of learning, without any real clarity about the use case or customer problem they will solve. Investing in innovation without validating your assumptions is an expensive mistake to make.” (Andrew Binns for Forbes, 2024)

CLV (Customer Lifetime Value) & CAC (Customer Acquisition Cost)

In stark contrast to many eCommerce businesses, Software-as-a-Service lives from long-term customers with up- and cross-sell potential.

For these businesses, the customer acquisition cost is usually much higher in that it requires more services (marketing, sales cycles, onboarding, implementation) with less revenue (due to freemiums, free trials and discounts).

Changing customer expectations and habits can also impact the expected CLV. Some of our tech customers have experienced that existing customer bases tend to have a much higher CLV than newer customer bases. Times are changing, and so are customers.

Keeping CAC (comparatively) low while simultaneously generating loyal customers with a high CLV will be the big differentiator for SaaS companies in 2025.

Hyper-Personalization

In my humble opinion, “hyper personalization” is the new “omni-channel-communication” of customer journeys. Everyone will talk about it. Everyone wants to have it. But in reality, it’s costly, it needs focused use cases and it’s actually not necessary for every industry to create satisfying customer experiences.

Most practical examples for hyper-personalization come from streaming or social media, where it’s easy and logical to use real-time data to recommend content and products. From the Spotify-wrapup to Netflix recommendations – hyper-personalization is accepted, entertaining and shallow enough to be seen as an advantage.

But in many other industries, it’s important to ask yourself if you really need hyper-personalization to sell your product or service. A software that covers a necessary repetitive task does not need real-time data to make cross- or upsell suggestions or provide the right content. Historical data might be just fine to give customers the right guide, help advice or app suggestion.  

And in some industries and circumstances, hyper-personalization might even be creepy. Customers can be turned off a brand if it “knows too much” or becomes too invasive. Sure, receiving a discount code just as you pass your favourite coffee shop is great. But it’s also a stark reminder that this company knows where you are at all times.

What companies think hyper-personalization is:

Knowing every little detail about their customer’s movements, desires and profiles to engage with them and increase spending and loyalty.

What customers expect from hyper-personalization:

• Not to be creepy and/or invasive
• Enable Auto-fill forms and other ways to reduce repetitive data input
• Being recognized by service personnel
• Having more functionalities for proper self-service (payment, invoice, and subscription management vs. endless help forums)
• Relevant marketing material and discounts based on purchase and usage behavior (aka: no spam)

The big SaaS must-haves of 2025

Integration for all kinds of end-users

Integration is key for nearly every single SaaS out there. Whether you have a B2B platform that needs to be integrated into your customers’ ecosystem, or you offer B2C services that enable social media connections – the IT ecosystem is real.

In fact, enterprises are relying more and more on multiple public cloud services than on hybrid clouds (source: Flexera Software via Statista). 

Use of multiple public clouds 2021 – 2024

• 2021: 11%
• 2022: 7%
• 2023: 13%
• 2024: 14%

It’s very likely that sometimes, a SaaS solution in the public cloud fits the business case a little bit more than a hybrid cloud compromise. But it’s all the more important that the different SaaS can still be fully integrated into the IT ecosystem for seamless data management, compliance, collaboration and control.

Speaking from our own experience, we found that an easy decision-maker for software users it to address different user types – from developers to power users to experts who don’t have time for complicated setups. You never know who will be tasked with the setup of the software, especially when it addresses small- and medium-sized companies that not necessarily have a big IT force.

That’s why we offer Open API, webhooks and eCommerce plugins, to offer options for developers and business users alike.

Compliance as a default and as a feature

Depending on your industry and markets, your compliancy and security standards can be pretty high. But for many companies, it’s not just important that the standards are met but that you offer functionalities that help with related compliance and security issues to not just provide security by default but even further lessen the workload of your customers.

For example, our payment gateway has a risk filter that allows companies to set their own “alarm flags” for customer behavior and activities to reduce fraud attempts and other security issues.

Likewise, we enable a DATEV export of invoice data for our German customers, since this makes finance management for our customers so much easier.

Putting the Service in Software-as-a-Service

SaaS is a booming business. Especially with AI and automation, it can seem as if an idea and some sales talent is enough to build a proper business model. But here’s something you probably don’t need to hear from me: SaaS is also a people business.

Too many software companies have forgotten that especially highly competitive Software-as-a-Service models are all about the service. And no, reyling on an AI chatbot and a self-service help center is good but not enough.

Proper onboarding, digital (and if needed: in person) training, a good and responsive service team, contact options, guides and walkthrough videos are all part of what will create trusting relationships with your customers and furthermore increase your conversion rate.

After all, new customers who have no idea what to do with your tool will very soon be former customers.

Priority equals efficiency: keep your eye on the prize

In our new interview series, we talk to our customers about their business models, pain points and best practices. Of the two tech platforms we covered (Waitly and Happy Helper), both CEOs told us that it’s important to stay focused and lean.

You need to prioritize across different business units:

• What core functionalities make the most money?
• What new functionalities will have the biggest revenue and market impact?
• What new and core functionalities are most expensive / cheapest to maintain?
• What customers need prioritized support?
• What markets need a higher focus?
• Etc.

It’s easy to get distracted by new trends, cool ideas and customer input. But the bottom line is most important. Streamlining and prioritizing can also take pressure off your employees. Organizing their tasks and deadlines is much easier if everyone knows what has the biggest impact.

The big SaaS questions of 2025

AI or not AI? – That should not be the question

If you have a SaaS business, I am quite sure you use AI in one capacity or the other. But when it comes to your investment decisions, you should not ask yourself if you need any or more AI. You should rather ask what pain points you have, what processes can be optimized, what software features can be added – and then look for solutions that might or might not include AI.

It’s like doing arts and crafts and deciding to use a chainsaw before you’ve even decided whether you want to build a tree house or knit a sweater (hint: for one of these two, the chainsaw is NOT appropriate).

Is Usage-based pricing the right model for your business?

At Billwerk+, we’re fans of usage-based pricing. But just because it’s our new favourite thing (or just because everyone is talking about it), doesn’t mean that it fits your business.

First of all, it’s all about the bottom line. Sorry for repeating myself but it’s true.

Does usage-based pricing make sense for your business model or for specific customer groups?

Especially for enterprise accounts or software subscriptions, usage-based pricing makes sense when the service includes measurable volumes (such as data sets, customer accounts, exports, users, data volume such as length or size or service packages such as special workshops, meetings, availability etc.).

Given the many different pricing structures that usage-based pricing offers, there are plenty of opportunities to experiment with usage-based pricing.  

Product-led or sales-led growth?

Product-led growth (PLG)

Is mostly about strong marketing, free trials and easy self-service onboarding. The product speaks for itself, and the product journey should mostly be possible independently from your sales or support staff.

This usually also means: a higher quantity of customers with a relatively short sales cycle.

Product-led is often used for software for private customers, freelancers and small- or medium-sized businesses. The product should be easy to use out-of-the-box with few implementation requirements.

An example would be a design platform like Canva: users can start working with Canva almost immediately since the setup does not require any technical or security know-how.

Sales-led growth (SLG)

Involves a longer sales cycle, the building of trusting relationships, personal demos, implementation or consultation, and overall, a closer human connection. That’s usually necessary because sales-led growth is mainly for higher-priced subscriptions in the B2B sector that require more trust and proof before a long-term decision is being made.

An example would be a CRM system like Salesforce, which has a long implementation cycle, a high degree of customization (form fields, data integrations, etc.) and also requires detailed security and compliance audits as well as longer onboarding and training sessions.

According to Goodfit (via notion.vc), sales-led strategies are more popular with a market breakdown of 71% vs. 29% for product-led. The article further states that purely product-led companies can get some advantages in early investment stages but that sales-led is not just the more popular model but also increases in impact in later stages.

There is a third option:

There have been suggestions to follow a combination of PLG and SLG, stating that it can leverage the best of both worlds.

Since both models have advantages and disadvantages, here’s a wild thought: why not try both? Of course, this depends on your SaaS product. If you offer a simple software solution without higher-priced tiers or enterprise versions with individual service level agreements, the logical way to go is product-led.

And if you only have a big hunk of an incredibly versatile enterprise software that needs implementation cycles, customizations and requires a long sales cycle to settle all open questions, then sales-led is your golden ticket.

But if you – like many SaaS vendors, offer a software that can be fully or partially used by B2C customers, small companies, freelancers but also medium-sized companies and enterprises, then a combination of the two could help you test out different approaches and widen your lead generation.

However, a decision like this should be prefaced with a realistic look at the numbers. A dual approach could create a higher CAC payback and overspending for the product-led side of business which is something you’d want to keep an eye on and test out before fully committing to a dual model.

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Billwerk+ provides you with subscription management and payment solutions to support your SaaS business. Set up your plans, experiment and optimize your pricing structures, offer a self-service customer portal and gain insights into your revenue data, customer activities and more – easily setup and integrated.

Our experts are happy to show you our product in a personal demo meeting.