Current state analysis for the SaaS industry: growth and IT investments

Software-as-a-Sevice, or SaaS, is on the rise in Sweden. The turnover, innovation rate and security maturity of Swedish SaaS companies is high. Soon, it is estimated that a quarter of Sweden's basic infrastructure will be cloud services, with the application segment not far behind. What are the challenges and opportunities facing the industry right now and which IT investments will have the greatest impact going forward?

Priorities and IT investments shaping the future

The IT industry in general, and SaaS companies in particular, are naturally digitally mature. Customers demand high levels of accessibility, flexibility and security, which have long been a foundation for the industry's growth. As a result, IT investment priorities are different from those of a non-IT business.

In 2024, companies are prioritising investments in AI, IoT, APIs and advanced data analytics in the form of Data lake and Lakehouse. Looking further ahead, we can see that SaaS industry players will mainly focus on strengthening cybersecurity, digital transformation, software development and infrastructure in 2024.

The high priority given to APIs is not surprising given the huge number of SaaS solutions on the market and the need to integrate them into existing business systems. Now, more SaaS providers are enabling integration and open, proprietary APIs to integrate the cloud solution into existing systems. SaaS service APIs allow the customer to develop their own interfaces and applications that are operated independently. There are also more connections to third-party providers where other companies' services become part of the SaaS company's solutions.

High demands on cybersecurity

SaaS companies continue to place great focus and resources on cybersecurity. Applications are being built with a forward-looking security architecture, with zero trust, identity management and multi-factor authentication as basic principles. Nevertheless, in several industries, including the public sector, there is some uncertainty about how SaaS companies fulfil data and information security requirements.

In general, the SaaS industry is strong when it comes to cybersecurity. However, a more serious security situation and an ever-changing threat landscape have brought the issue of security to the fore, resulting in stricter legal and regulatory requirements - including the updated EU NIS2 Security Directive.

How to think about information security as a SaaS company

Investing for future digitalisation and growth

As a decision-maker in a SaaS company, it's important to be aware of the challenges of the world around you and to respond to change. What do you need to think about right now if you work in the SaaS industry? Johan Bålhammar, CEO of Nordlo in Umeå and Lycksele, tells us more.

What do companies need to do to grow?

‘It's important to safeguard expertise and focus on what's in the core business. But also that management is responsible for setting clear strategies for all parts of the business.  If you look at the SaaS customers we work with, the management focuses a lot on their strategic ability, as well as the ability to understand the tactical and through the right investments be able to make the company grow.’

Johan Bålhammar also emphasises how more and more people understand the importance of a close IT partner to work with, even for SaaS companies. ‘On the resource side, SaaS companies find it easier to recruit developers than IT. It's good to focus on your own skills development and bring in a partner who takes care of operational IT and can contribute to tactical and strategic business development through IT.’

What does the future hold for SaaS companies?

‘The biggest trend going forward is self-service, that it works seamlessly and allows the end customer to solve their problems on their own. I also think there will be a greater demand for streamed services, making the user experience even more central than it is today. This means that the industry will need to better understand their customers. From there, they can use digitalisation and the right technology to deliver services in a new way and create more business value.’

Johan lists which IT investments have the greatest impact for Swedish SaaS companies:

1. Micro-segmentation and self-service
   SaaS companies need to invest in sustainable platforms that have micro-segmentation and self-service functionality that will work for end users.

2. Public cloud services vs on-premises
   IT managers need to ensure that the company understands its services and customers, and what is the best solution now and at least 2-3 years ahead. Fully on-premises options may be just right and required by some segments, just as public cloud services may be right for other customer segments.

3. Invest in data protection expertise
   With a weaker security environment and tighter security regulations linked to information security, it's important to have expertise that understands the requirements facing the business. Ensure that employees are involved in driving the development of the company and are constantly in contact with the end customer to develop the right skills in line with the demands of the world around them.

It takes a special skill to adapt to a changing world. Many SaaS companies that were previously highly valued have been forced to pull the brakes, and the challenges faced by the segment are becoming more complicated as access to capital and skills becomes more limited. For companies to maintain profitability going forward, wise IT investments are required. Focusing on investments that reduce the need for cutting-edge IT expertise, streamline operations and protect against external threats is becoming increasingly important.

Nordlo has extensive experience of long-term customer relationships with companies in the SaaS industry. We understand your challenges and opportunities and can deliver IT solutions that suit you.

How can we help your company?