SMB-SaaS: Macroeconomic Forces Driving the Market

At next week’s Localogy: Engage event in Washington DC, we’ll present findings from Wave IV of our proprietary SMB research. The new data show additional SaaS adoption momentum, with meaningful differences by age of business owner.

Ahead of that data, here are some of the macro trends and forces that we believe are shaping the SMB-SaaS market:

  • Generational shift: The research shows clear differences in attitudes and behavior by age of owner. There are something like 12 million Baby Boomer business owners; more than 70% will be retiring over the next decade or so. The torch is passing to new generations with different attitudes and expectations.
  • Market is moving toward SaaS/cloud-based “SMB OS”: As indicated, newer businesses are turning toward SaaS and cloud solutions to launch and run their businesses. One persistent question is how the market evolves (i.e., point solutions vs. broader suites). Business owners generally want broader tools that are integrated; investors want point solutions.
  • Media vs. operational software: For many SMBs, media is completely secondary (and optional) compared to tools and services that help bring more efficiency to their operations and offer a better customer experience. Millennial business owners get this CX point in ways that earlier generations do not (in the aggregate)
  • Economics of software and cloud storage: There’s nothing especially new here; costs have been coming down for some time. However it’s one of the key enablers of the broader changes in the technology market.
  • AI and machine learning: These innovations are new just picking up momentum but they are starting and will continue to have a dramatic impact on innovation, workflows, costs and internal operations and hiring.
  • Competition and lower costs driving SaaS pricing down: Lower costs and competition are putting pressure on SaaS fees. This may have long term consequences (even for business models).
  • 5G: Eventually 5G will enable new applications and customer experiences. But as with so many new technologies, the short term impact will be modest while the medium and longer-term impact will be significant.

These themes and ideas will show up throughout the event but will be especially relevant in the discussion on “Market Outlook: Rollups & Exits” on June 4, featuring:

  • Chris Legg, Progress Partners
  • Sarah Jordan, EverCommerce
  • Luca Sechi, Endurance International Group

See who’s coming to Localogy: Engage. Register here.

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