Software as a Service (SaaS) is a pre-internet phenomenon, originating during the days of floppy disks and Windows 98. However, the last 30 years have seen SaaS grow to an impressive level.
But, it’s time to reinvent SaaS by combining its marketplaces features, and it’s time for businesses to embrace SaaS-enabled marketplaces (SEMs) for more growth, customer acquisition and overpowering competitors.
With the advent of dot-com in 1994, businesses were able to amplify online transactions, and by the following year, marketplaces like Amazon and eBay were launched. In 1999, Salesforce launched its first CRM, and the world came to stand still on a new invention – SaaS.
It’s been 20 years, but both SaaS and marketplace approaches seem to be separate models.
One way businesses reinvented themselves was by combining the scalable features of both models while eradicating the common operational bottlenecks; thus, creating the SaaS-ready marketplace.
A World Gravitating Towards SaaS MarketplacesÂ
SEMs offer to move beyond bare transactions of buying and selling; they help businesses acquire tools to build, market and organise their businesses. Traditionally, an SEM contains a marketplace component to connect parties and build networks along with a SaaS component to integrate enterprise-ready services on a subscription model.
SEMs offer double benefits by multiplying marketplace network effects with SaaS’s maximum utility approach. In 2010, TenderScout, a government-to-business (G2B) SEM, created a marketplace where businesses could bid for proposals and interact with governments spanning across Europe. Interestingly, a number of companies can come together and bid as a single entity. The move is useful, especially in securing design and IT tenders that require continuous upgrades.
From a SaaS perspective, businesses get access to government tenders and business consultants as well as a chance to amplify the outsourcing efforts with one subscription. Additionally, all industries have been slowly engulfed by the marketplace model, so it was only a matter of time before B2B companies also went down a similar path.
The SEM model has also found its applications in the logistics industry as well. Xenata, a benchmarking company for ocean freights, has designed a market analysis platform for commercial shipping.
Xenata uses the marketplace approach to maintain shipping rates despite high volatility while ensuring monetisation through the benchmarking app. The company is now planning to move beyond shipping and enter the aviation market based on its last finding in 2021.
Accounting software firm Xero is transforming cloud-driven accounting via its SaaS and marketplace integration. A few years back, Xero helped the UK government eliminate the tax return regime through new digital taxation initiatives.
Coveo powered Xero’s app marketplace, allowing SMEs to find integrations that work with Xero’s software. Moreover, Xero creates one-click financial reports by tracking real-time business data for marketplace purchases.
Its marketplace currently has more than 800 third-party apps including CRM, project management and time trackers, and Xero also comes with a search toolbar for personalised suggestions.
Today, more and more traditional SaaS players are also integrating marketplace features to attract a broader consumer base. A few years ago, SaaS company Atlassian configured Jira, its flagship project management software, to hire freelancers from Upwork, another work marketplace.
While Jira helps agile teams with planning, reporting and managing tasks, the Upwork integration allows small businesses to hire talent outside of the organisation in parallel. Atlassian is not an exception anymore in leveraging SEM integrations.
What’s Next for SaaS-Enabled Marketplaces?
SEMs hold the promise of an exciting vantage point to doing business online. Today, more and more SEMs are looking to create personalised solutions targeting specific problems (tourism, project management) rather than focusing on different sectors all together.
In the COVID-19 pandemic period alone, vertical SaaS increased by an impressive 28%, and the market cap reached $441.4 billion (£337.5 billion) in the third quarter of 2021, according to Fractal. The phenomenon will soon mark its presence in the SEM economy as well.
Atlassian’s Jira, OpenTable and Quartzy have already done most of the heavy lifting here. However, the niche SEMs will be harder to deploy in low-yielding sectors like agriculture, climate tech, manufacturing and construction. Regardless, it may still be too early to comment upon SEMs’ performance in the sunrise sectors right now, as the model requires extra attention to scale.
SEMs are also not untouched by the rise of blockchain governance and the need for more decentralisation. Blockchain promises intermediary-free and trustless transactions through smart contracts in a marketplace. Blockchain also offers dynamic and transparent pricing across marketplaces while ensuring ownership to SaaS operators.
In the past few years, a number of NFT and crypto marketplaces have appeared in the UK’s digital space. However, the IT industry hasn’t yet exploited blockchain to see if it’s right for all supply chains and sector-specific models. Although blockchain has given positive results in finance-driven activities, the numbers are stagnant in the processing industry and security SEMs.
At the same time, SEM requires government interventions for sectoral interests. The UK government’s G-Cloud Framework allows ICT procurement by SMEs using a marketplace model. Therefore, it may be time to increase SEM activities to achieve a trillion-dollar digital economy.
While it seems unlikely that all SaaS startups will shift to a hybrid model, these SaaS-enabled marketplace platforms are here to stay for good.
