2015 Predictions for SaaS Business Models

December 15, 2014

2015 is fast approaching and it will be a big growth year for software and SaaS companies.  Here's OPEXEngine's predictions about how SaaS business models will evolve in the new year, as well as Nicholas Negroponte's always insightful thoughts about future trends.  

OPEXEngine’s  Business Model Predictions for 2015

  • “Winner take all” competition for market leadership among highly funded SaaS companies with business models supporting high revenue growth of median 100%
  • Meanwhile, companies that don’t want to or can’t get into the nuclear arms race to be the next billion dollar company have more options to fund manageable growth than ever before:  crowd funding, kickstarter, and debt financing, but won't be spending at the rates that the companies with 100%+ revenue growth are spending
  • Increased focus on metrics and benchmarking at all stages of growth as investors and management become more saavy about SaaS metrics and efficient operations.
  • SaaS companies will focus resources on building partner ecosystems to accelerate growth, establish market leadership and improve product consumption by users
  • Channel sales and channel influenced sales will increase from a median 12-15% to closer to 20% for the fastest growth companies
  • 2015 will see more traditional software products transitioning to the cloud
  • Competition for talent among US companies will increase and successful companies will use more creative solutions to attract experienced talent.  Metrics on hiring and turnover rates will become part of the standard management dashboard
  • Companies will implement more efficient subscription customer success (renewals) processes, using more tools and automation products for renewals sales and tracking of customer usage of products
  • Finance will pay more attention to investments in hosting and platform, as well as to security and disaster recovery
  • Median COGs in the mid-30 percent of revenues for most private SaaS companies.

World Growth Rates

2015 growth rate image

The IMF has reduced its forecast for 2015 global growth to 3.2%.  It projects 3.1% growth for the US next year (the strongest US growth since 2005 when it was 3.3%).  Growth for the euro area will be only 1.3% and 0.8% for Japan.  China is expected to grow by 7.1%, much higher than other countries but China’s lowest growth in 15 years, possibly causing friction in parts of the economy where investments have been made based on expectations of higher growth.

Source:  IMF Global Forecast

US Dollar

It is also expected that the dollar will remain strong in 2015 based on US economic growth and expected Fed rate hikes.

Nicholas Negroponte Predictions (from the MIT CFO Conference)

  • A new brain drain:  most MIT students working on “stupid little apps” and not “big, important problems.”  Big, long term problems like nuclear fission aren’t getting worked on the way they were for the past 30 years.  Everyone wants to make $100 million by the time they are 25.
  • Post ownership society/era.  People are going to buy things less and less.  MIT professor asked in a class how many students were going to buy a car when they graduated – no one raised their hands.
  • End of Suburbs – what young person wants to live in the suburbs?  No one - they want to live in the city.  We now have this absurd educational system based on real estate taxes, which isn’t going to work anymore.
  • A really hard problem is how to connect the last billion people where there is no electricity or manmade infrastructure.
  • Connectivity is a human right.  Why does civil society provide everyone roads and infrastructure but not access to the internet.  Everyone everywhere in the world should be entitled to connectivity simply by the fact of being human.