The SaaS Trends You Need to Know for 2020
Update 7/1/2020: We’ve just released the 2020 SaaS Product Benchmarks Report. Take a look and see how your SaaS product measures up.
As you race to close the books on a hopefully successful 2019, it’s worth stepping back and considering what the future will hold for B2B software. OpenView’s experts weighed in with their predictions across product, sales, marketing, pricing, corporate development and talent.
What do you think? Take a look and weigh in with your own predictions by tweeting to @OpenViewVenture with the hashtag #2020SaaStrends.
Product Managers Will Own a KPI
Kyle Poyar, VP, Market Strategy
How many of your highest paid team members are in sales? The fact is that a great (albeit expensive) sales rep is worth every penny and has an obvious ROI. Their compensation is directly linked to the revenue that they generate for the business. In a product led growth business, the product is front and center in how you acquire, convert and expand your users. Your product managers are the equivalent of your great sales rep. Yet research shows that most PMs don’t own the metrics they’re measured against.
With the rise of product analytics and growth-focused product management talent, I expect this will start to change in 2020. Product managers will have a clear KPI they’re responsible for improving and ideally a quota for how much improvement they’re expected to drive. If they exceed their quota, they should have a stake in the upside that they generate. This will take time to get used to, but has clear benefits: it encourages laser focus from the team, fosters more data-driven decision making and leads to product releases that deliver on the desired outcomes.
Customer Happiness Is the New Growth Metric
Liz Cain, Partner
We’ve spent a lot of time trying to understand the dynamics driving product led growth in the last few years – freemium strategies, virality, network effects to name a few. While we clearly see product at the center of user acquisition, conversion and expansion, we know that happy customers buy more.
In 2020, the most forward looking companies will take a page out of the Zoom playbook (see “Our Culture of Happiness”) and focus on delivering the customer experience users expect. At the low end of the market that means delivering a frictionless purchase and onboarding, and a responsive sales team to step in and help with questions. As you move upmarket, that means redefining your sales motion to meet the buyer where they are. Enterprises have different requirements and need the help of an experienced, customer-oriented sales team to help them get the right contract in place, build the business case, and drive growth and adoption internally.
As Traditional Advertising Approaches Become Less Effective, B2B Software Companies Will Look to B2C Tactics to Survive
Sam Richard, Director of Growth
If you read any of OpenView’s content, you understand that Product Led Growth has emerged as B2B software has become more centered around the end users who actually leverage the product. Acquiring these users has traditionally been the mandate of marketing managers, who first used advertising, then inbound and content marketing, and finally growth tactics like building virality, offering freemium products, and reducing sales friction to gain users. Now that the decision to purchase B2B software is increasingly in the hands of the end user, marketing managers will shift to the same tactics that have made Direct to Consumer businesses so successful in the past decade or so.
Related read: What is product led growth?
Today, as an individual buyer of “stuff” I’m more likely to buy something recommended to me by a friend or an influencer on Instagram than I am when I’m directly targeted with an ad. With the B2B SaaS space as crowded as it is, I foresee that in 2020 innovative companies will begin seriously targeting business “influencers” and ramping up their presence on G2Crowd or Capterra (or hopefully another review site will emerge that’s less “pay-to-play) in order to fill their top-of-funnel. As a result, it will get more challenging for marketers to prove ROI for this type of spend, and tech stacks that solve for multi-touch attribution models will become front and center in the marketing technology landscape.
Companies Unbundle Their Products in Order to Better Serve Customers
Jeff Curran, Director of Business Operations
Pricing gets all of the focus in pricing and packaging discussions. But, it’s important to remember that value comes from what you get for a certain price. That’s where packaging comes in.
In 2020, we’ll see companies unbundle their products. This happens when companies break products into smaller, modularized components aimed to solve a specific pain. As software deployment becomes easier and integration between products becomes better, customers are demanding best-in-breed solutions rather than all-in-one suites.
When companies unbundle they can focus on solving an acute pain point for customers. They can simplify the user interface and tailor the user experience. Marketing messages get more clear and prospective customers better understand product use cases and benefits. Customers are more confident that they are purchasing a solution that is exactly what they want and nothing that they don’t need. In all of this, companies build a cohesive product experience and offer it at a price that feels fair and transparent.
Companies Will Prioritize Capital Efficiency
Sean Fanning, Director of Corporate Development
Last year I predicted that our Product Led Growth Index would outperform the market. With some help from 2019 IPOs like Zoom and of course product led growth bellwethers like Atlassian and Shopify it has continued to do so, in no small part because PLG companies are so much more capital efficient than their non-PLG peers. PLG companies make profitability cool again. No, I’m not quoting TechCrunch’s article about profitability being “in”. And no, we didn’t think this up because of the whole WeWork saga from this Fall – we wrote about this back before anyone else cared, in our 2019 Expansion SaaS Benchmarks report. Because of all the other noise this fall, we’re even more convicted and “profitability becoming cool again” is our theme for 2020.
We’re not seriously suggesting all businesses take their foot off the gas turn cash flow profitable tomorrow. But we’re going on year 12 of the current economic cycle – and despite there being no end in sight – it is impossible to ignore the market roller coaster that we’ve been riding. Companies should have downside plans should the economy slow.
The reality is that every business has to demonstrate that profitability is eventually possible. The way to do this is through best in class, predictable unit economics. We’ve written extensively on the topic of unit economics and value drivers, and we even released a data explorer so any company can explore benchmarks from their exact peers for the metrics that matter most. Companies like Zoom prove that you can have high growth, best-in-class efficiency, and generate positive cash flow all at the same time. While not every business is going to look like Zoom it is most important to have a firm grasp of key metrics, the underlying inputs, and how to influence each of those inputs.
Flexible Working Arrangements
Sarah Duffy, Director of Talent
Earlier this year I published a thought piece showcasing the advantages of flexible working arrangements, and I believe 2020 will show a noticeable increase in the number of organizations that adopt programs like remote working, partial work-from-home, staggered working hours, and more. As the talent market continues to demand more flexibility at work, organizations will be forced to take a more open-minded approach to how they manage their workforces. Furthermore as the talent pool in certain geographical regions thins, companies will continue recruiting outside of their backyards. The benefits of increased flexibility in the workplace will be more widely touted and more generally accepted across the industry as commonplace amongst competitive employers.
Learning & Development
Sarah Duffy, Director of Talent
Strategic L&D is going to become a greater priority for many organizations as they realize it more and more as a key employee retention strategy. While learning and development has been on people leader’s minds for many years now, I believe business leaders and exec teams are finally starting to grasp the importance of investing in it early on. With the emergence of so many dynamic learning tools, technologies and resources for growing companies, organizations with even the most modest of budgets now have the ability to create tailored, effective and impactful L&D experiences.
People Leaders as Business Partners
Sarah Duffy, Director of Talent
Gone are the days of the traditional HR team that works in a vacuum. Here are the days of the strategic, business-results oriented People Leader that helps exec teams leverage companies most valuable assets: their employees. This new-era, dynamic and multifaceted People Leader profile has been in high demand recently, as made evident by the exec searches I’ve conducted for many of our portfolio companies this past year alone. HR has become so much more than just benefits and recruiting, and I look forward to seeing just how much the scope and impact of the function and its leaders evolve in the coming year.