“There are 100,000+ SaaS apps out there.” –Jason Lemkin on Quora
I read this sentence buried in an answer on Quora and did a double-take. Surely, this number couldn’t be right. I dismissed it.
But later, as I considered how large the SaaS market might be, Jason’s estimate of 100,000 started to seem plausible. There are 6,500+ marketing technology companies alone. There are about 800 in the sales tech landscape. What must there be in finance and operations? And eLearning, and productivity, and BI, and ERP and BPM and on and on?
And what about the SaaS companies we don’t even have on our radar yet? My former business partner Scott Brinker (ChiefMartec) is the mastermind behind the 6,500+ company martech landscape and hardly a day goes by when some company founder doesn’t mention to me that his or her marketing tech company isn’t listed on the landscape (“Oh, and by the way, can you let Scott know, because we’d love to be included.”)
But perhaps it’s not as large as it seems. At least, when you exclude pre- and low-revenue companies it isn’t. Dave Guggenheim, a Ph.D.D researcher with SaaS specialization notes the number of viable SaaS firms at 9,801 with an average company valuation of $4.4M USD.
What an exciting time for all of us to be in SaaS
Either way, the number of SaaS applications is big. And getting bigger. According to Christian Owens, Founder of Paddle the SaaS market is predicted to be worth over $116bn this year (it was around $100bn last year).
Probably trying to determine how many SaaS companies there are is fruitless. As Guggenheim says, “There are many ways to examine the SaaS market, and the simple number of firms operating therein is not particularly insightful in terms of gaining a useful perspective. But it does make good water-cooler conversation…”
And what of that water-cooler conversation? As SaaS founders, executives and employees, we are all probably slightly amused, excited and fascinated by the exponential growth of the SaaS landscape. It validates our existence. It is water-cooler fodder.
We wait in excited anticipation to see how many marketing SaaS companies will be on Scott’s landscape this year. Or do searches for phrases like “How many HR SaaS tools are there?” We see opportunity all around us. Everything is ripe for SaaS transformation. We are on the inside and we are believers. We are pumped.
But what about the buyers?
I’ve decided it’s not quite as fun for the buyers of all these SaaS products.
No, it’s actually not exciting to be a buyer right now. It’s overwhelming. It’s confusing. It’s noisy. It’s stressful. Especially when the decisions to be made about which product to implement is a potential career breaker and there are 5, 10, maybe even 15 suitable vendors to choose from.
As insiders, we sell, market and buy SaaS solutions. We understand it. We’re excited about it. We can cut through the clutter, understand the market and the players with agility.
I’ve come to learn that our buyers can’t.
I remember the first year Scott did his landscape. As the sales leader of our company, all I could think about was how much it would freak out our customers and prospects. It’s one thing to know there are a lot of choices in each category. It’s another thing to know just how many there actually are.
We ran our SaaS company through the explosive growth of the marketing technology landscape. I saw it go from a handful of players to 500, to 2,500, to…well, you know. It’s actually 6,800 companies as of right now. Living through it I saw buyers grapple with understanding the different categories, the different players, the essential tech stack. I saw it, but I didn’t really, empathetically understand it.
We used to get questions from buyers (yes, even the smart ones) like, “Now, how are you different from Google Analytics?”. My head would scream, “I just told you…we are nothing l like them….we’re a software that makes a calculator or a logic-driven assessment without code…you can’t do anything like that with Google Analytics, which is a web analytics tool.”
I would get off calls like that and immediately go to our homepage. Yes, right there on the home page it was clear. What our product did, the challenges it solved, who it solved them for, the benefits of it. Clearly spelled out. How could a buyer be confused?
Then, our martech SaaS company was acquired and I accidentally became a SaaS consultant. And suddenly I was evaluating technology in a way I hadn’t before.
Take sales technology for example. I had been a buyer of our sales technology prior to the acquisition. But that was different. I had a sales operations manager and a director of sales who brought these things to me to evaluate. We would determine a need, they would go to the legwork and then surface the best option for my quick thumb’s up.
Now, when I was looking at sales technology with fresh eyes for a client, it was overwhelming. But not just due to the sheer number of choices for any specific business problem. It’s really about the positioning. Everyone is saying the same thing.
Let me repeat that. Many times. Let it really sink in:
Everyone is saying the same thing.
And forget the entire landscape. Consider that just a sub-category within a software category might have upwards of 100 players. That means that your buyer is staring down 100 potential vendors. Even when there are just a handful of strong dominant players, those other choices are there, adding to the noise and confusion.
And there is little apparent differentiation in some of the sub-categories. The products are different from each other. But the vendors aren’t doing a great job explaining the differences. They aren’t making their product tangible enough for the “a-ha” moment to happen instantly.
What does the product do? Why would I want to use this product? How will it help me? What can I expect? Getting to the answer just isn’t easy enough. Especially because every product seems to tackle a problem in a slightly different way.
I can tell you what’s happening in your buyer’s heads as you pitch them. “But I like the way Company A handles this, and how Company B handles that, and how you are handling this other thing…”
Because there are so many point solutions and so few suites, it’s on the buyer to cobble together a feature set they think will deliver what they need. And you know that cobbling together anything sucks.
Being a SaaS buyer today reminds me of the paradox of choice. There’s just too much to focus on, and many of the choices seem the same, or slightly different enough to be confusing. There’s decision fatigue before we even get close to a decision.
So, what’s a SaaS vendor to do?
We can’t stem the tide of the growth of the SaaS landscape. We probably wouldn’t want to if we could. But we can have empathy with the unprecedented experience of our buyers, and for what this is like for them.
For now, all a vendor can do is focus on massive differentiation—in their product, in their messaging, in their marketing and their brand. And also, in their sales team. Because people don’t buy products, they buy solutions to their problems. And so the products with the best sales teams will win for now. Those who create value, clearly differentiate, forge respectful relationships and best map their product benefits to their buyer’s problems, obstacles and goals. That’s who will win in this noisy environment we are in right now.