Three Types of SaaS Businesses Are More Likely to Survive in a Post-COVID Environment
It seems that the novel coronavirus is one of the most disruptive business disruptions in recent decades. While e-commerce and remote work were already being implemented, the pandemic accelerated that transition with lightning speed. Many businesses were not prepared for it. Many of them have struggled to adapt.
In a survey released in April, insurance agency Main Street America found that two-thirds of small businesses would have to shut their doors if the lockdown had persisted for five months or more. Another 30% of small businesses said they wouldn’t be able to withstand a lockdown lasting more than two months.
This is not to say that all industries have been affected by the pandemic.
Many Software-as-a-Service (SaaS) businesses, in particular, have thrived in the new climate created by COVID-19. Many of these businesses will continue to thrive even if the pandemic ends. Consumers and businesses alike are turning to the digital world for entertainment and support. These businesses include:
- Digital collaboration platforms
- Gaming and media
With that in mind, here are the details as to why we believe these SaaS companies will perform incredibly well in a post-COVID world.
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1. Digital collaboration platforms
Software that is business to business (B2B), has been the most successful in the pandemic. This trend will likely continue as the world slowly returns to normalcy.
As mentioned, COVID-19 forced many organizations to move, nearly overnight, from a traditional office to a fully distributed, remote workforce. Many organizations did not have the infrastructure needed to support this change. As a result, they turned to digital collaboration tools.
Platforms like Zoom, Slack, Uberconference, Clockify, Notion, Fuze, Quite, Microsoft SharePoint, and Google Drive have experienced a massive surge in usage over the past several months. Zoom, in particular, saw usage up approximately 300 percent in the early days of quarantine, per JP Morgan analyst Sterling Auty. Microsoft, meanwhile, mentioned in a March blog post that it saw a 775% increase in calls and meetings on Microsoft Teams, its business communication platform.
Although subscribers and usage may decline slightly when people return to work, remote work will not disappear.
Research and consulting firm Global Workplace Analytics, for instance, predicted in a recent survey that by the end of 2021, as many as 30% of employees will work from home multiple days a week, while 80 percent of respondents indicated a desire to work from home “at least some of the time.”
This software is not only used in business, but also in personal life. Many people started using videoconferencing tools to keep in touch with family and friends to help them cope with the stress and isolation of quarantine. Online date nights, movie nights, meetups, and other digital activities became more common.
However, it went far beyond this, according to The Wall Street Journal.
You can find fitness courses via Facebook and Instagram Live. You can also play trivia games via your smartphone app. Video chat is used to play board games. Digital concerts, webinars, virtual conferences, and online events.
Although it is possible that people will return to social gatherings and events when it is safe, experts predict that virtual connections with people will become the norm. Video chats offer a great alternative to traditional physical meetings between people who are busy and may not be able to meet up with their loved ones or friends. Online social gatherings will not be as popular in the consumer and business spaces, but they are expected to continue to grow.
Telemedicine isn’t a new field. Nor are the technologies that underlie it. Telemedicine has been around for many years and allows remote individuals to access medical advice and diagnosis that they may not otherwise have. Telemedicine is seeing a greater rise in popularity than collaboration software due to the concerns surrounding COVID-19.
In April, for instance, software & services review site TrustRadius measured the number of impressions each SaaS category had received since the beginning of the pandemic. Telemedicine was the most popular, with a 6133% increase in usage. Although the site acknowledged that this sharp growth had likely already reached its peak, it will remain an incredibly useful tool even post-COVID.
To that end, the American Medical Association has predicted that moving forward, virtual healthcare could account for approximately $250 billion of health insurance spending in the United States, up from an estimated $3 billion. Telehealth offers many benefits. We can call in and get help from our homes instead of spending hours waiting in a doctor’s chair. Telehealth will make it easier for the mobility impaired to access physicians and receive the care they need.
According to McKinsey & Co, 57% of healthcare professionals view telemedicine as a better option than before the pandemic. 64% say they would prefer it in their own practices.
As such, although the barrier for entry into the SaaS telemedicine space is relatively high and saddled with myriad regulatory requirements, it nevertheless has incredible potential for growth.
3. Gaming and media
It is not necessary to tell you how many online games and media streaming services were used during the pandemic. This surge has likely been experienced by many, at least partially. You’ve probably experienced this surge at least partially.
As streaming platforms expand, theaters are experiencing a major decline (Image Source).
Analyst and consulting firm Deloitte predicted early in the pandemic that media streaming services would greatly benefit from the pandemic, noting several significant increases in both viewership and usage. Multinational financial services firm J.P. Morgan, meanwhile, noted the increasing expansion of the streaming landscape in May, with countless new streaming platforms coming to market. The firm also mentioned video games in its analysis. There was increased use and higher viewership on streaming platforms such as Twitch.
Important to remember that not all publishers and game developers count as SaaS businesses. However, SaaS is a strong part of the gaming industry. It includes digital distribution platforms such as Steam and online games such as World of Warcraft or League of Legends. The vast majority of gaming is moving from offline and single-player to online gaming, so SaaS and gaming are interconnected. Gaming is a rapidly growing SaaS industry with great revenue potential.
Video game streaming is experiencing a pandemic. Source: Image Source
Many of the apps can be used in other areas. Discord and Netflix Party, for instance, allow people to enjoy movies and media together. And more people are creating digital content than ever before. Online content creation was already at a fever pitch. COVID-19 resulted in an unprecedented surge of digital content creation. This means that there is a huge opportunity for content hosting.
Once the worst pandemic is over, there may be a slight drop in streaming media and gaming usage. Despite such huge increases in viewers and users, the outlook is very positive for these entertainment sectors. Digital entertainment will continue to grow as we move into 2021.
How to adapt to a digital world
The coronavirus pandemic didn’t just change the world. It continues to do so. COVID-19 has seen the rise and decline of many industries and sectors and a significant shift in our lives and work.
These changes, like many that occur during periods of great turmoil are permanent. COVID-19, just like the Great Recession that led to companies such as Uber, Airbnb, Venmo and Venmo, will see many new businesses rise and fall and make lasting changes in many industries. The SaaS businesses described above are the clear winners in this shift, but they are not the only victors.
SaaS companies of all types have a positive outlook for the future. Any organization that is able to leverage SaaS has a positive outlook. This software is, afterall, one of the driving forces in digitization and will continue to support us as we move towards a virtual world, even when the pandemic is over.