2024 SaaS Trends – Growth
SaaS portfolios decreased 10% between 2022 and 2023; shadow IT dropped to 48%, signaling an increase in SaaS governance actions.
SaaS Growth Trends
SaaS governance is on the rise. While SaaS sprawl was previously trending upward, with employees looking for cutting edge solutions and with no real policy processes in place, the average SaaS portfolio fell 10% between 2022 and 2023 across all business sizes. The percentage of apps in a portfolio that are categorized as shadow IT mirrored a similar trend and dropped down from 53% to 48% last year.
As companies continue to face tighter budgets, team reductions, and a rocky economy, calling for consolidation through better SaaS and spend oversight is proving key to success. Establishing clear policies and procedures for acquisition, deployment, and management can help organizations ensure that every app in their portfolio is providing the maximum value while keeping risk low.
To achieve this, organizations must gain full visibility into their SaaS landscape. This includes identifying and understanding shadow IT — apps that are utilized without IT oversight. Often, IT lacks insight into the cost, functionality, usage, and potential risk of these tools.
Although the size of average app portfolios saw a drop this year, artificial intelligence (AI) applications top the chart when it comes to shadow IT usage. As more companies continue to adopt and integrate AI into their portfolio, it’s likely that percentage will rise again. This further signals a need for strong processes, greater cross-team collaboration, and spend management strategy.
The average SaaS portfolio decreased to 342 apps, dropping from 374 in 2022
KEY TAKEAWAYS
- SaaS portfolio size reached a ceiling at the beginning of 2023, then dropped down by 10% from the 2022 average by the end of 2023. This signals an upward trend of consolidation.
- While all business segments saw a decrease in portfolio size, the percentage was correlated to company size.
- Between 2022 and 2023:
- Enterprise portfolios decreased 11%
- Mid-market portfolios decreased 10%
- Small and medium-sized portfolios fell 10%
The % of shadow IT declined, signaling better governance
KEY TAKEAWAYS
- Despite hitting a high in 2022, apps identified as shadow IT dropped from 53% to 48%, signaling an increase in SaaS governance actions.
- Creation of SaaS governance councils is becoming the norm. Businesses are responding to a need for repeatable processes that allow teams to cross-functionally collaborate and make decisions on SaaS portfolios — for both renewals and purchases. Shadow IT is no longer just an IT problem, as finance and procurement collaboration demonstrates how better business outcomes happen when teams align around data.
- As AI adoption continues to rise, a massive wave of shadow IT is coming to meet it. Businesses will consider new strategies and consolidation opportunities as employees seek out innovative solutions.
- Renewal and purchase processes are getting more complicated. Vendors are using new AI integrations as a reason to increase costs for adjacent use cases to their core offerings, creating additional consolidation opportunities.
Interest in AI applications and features increased shadow IT. ChatGPT claimed #1 spot
KEY TAKEAWAYS
- ChatGPT has jumped to the top of the shadow IT chart as employees continue to adopt Artificial Intelligence.
- As the innovators and early adopters within a company continue to seek out AI-native applications (like ChatGPT and Grammarly) and AI solutions (like those offered by Canva and Evernote) for unmet needs, organizations should be developing a cohesive AI strategy.
- Nearly every application here offers, or will likely offer, some type of AI functionality; #5, Coursera, saw signups for AI courses every minute in 2023, on average. They also demonstrate the continued strength of the PLG go-to-market motion, with most offering free signup variants.
- Outside of AI trends, use of LinkedIn stayed consistent during a time of increased revenue pressure and insecurity in the job market. Trello fell off the shadow IT chart in 2022, as more companies purchase Atlassian’s suite of products.
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