The Future of SaaS - Five Predictions from Bessemer

Bessemer Venture Partners just released their eagerly awaited State of the Cloud 2023 report which is worth reading in full. Cledara is honored to be featured so prominently in their 1st Prediction in this year's report. Read on to see what Bessemer thinks about Cledara, about SaaS sprawl, and how the SaaS industry is evolving.

Bessemer’s 2023 Predictions

The release of the report is an annual event in the startup and SaaS world, as founders are keen to gain competitive insights from Bessemer because of their record of spotting trends early. Here’s the event from last night:

With a track record of more than 135 IPOs and 200 portfolio companies, they are the go-to team for founders and CEOs at every stage of growth, providing support from the early days of ideation to the moment of success. With a portfolio that reads like a who's who of tech giants, Bessemer has backed the likes of Pinterest, Shopify, Twilio, Yelp, LinkedIn, PagerDuty, DocuSign, Wix, Fiverr, and Toast, to name just a few.

Here are Bessemer's five predictions from their State of the Cloud 2023 report:

Prediction 1 - SaaS will fight SaaS inefficiency and sprawl**

Cledara is featured as a top player in the fight against inefficiency and sprawl in the SaaS industry. The report predicts that as the SaaS market matures, businesses will be investigating how to optimize their software stack and manage costs, and Cledara is here to help them do just that.

Bessemer says:

A frothy market is a tide that lifts all startup ships, where SaaS buyers and business users have less discipline in their willingness to pay or spend resources. In downturns, customers become more price sensitive and begin to re-evaluate their software stack, consolidate vendors, and rationalize spend.

Cledara is designed to streamline procurement, manage SaaS costs, and help businesses maximize their SaaS ROI. We're proud to be at the forefront of this wave of change in the SaaS industry, and we couldn't have achieved it without the hard work and dedication of our incredible team and the trust of our amazing customers!

Bessemer continues:

There are many key areas where cloud leaders can leverage software to drive efficiency and reduce excess, including SaaS purchasing solutions to help with vendor negotiation and procurement, Cloud FinOps and cost management platforms to optimize cloud costs, and engineering productivity tools to improve developer workflows and benchmark OKRs.

Prediction 2: Climate software drives the green energy transition**

As the green economy continues to gain momentum, Bessemer predicts the emergence of cloud software specifically designed to power the energy transition. These tailor-made solutions will provide critical support to green energy entrepreneurs and businesses as they work towards building a more sustainable future. By harnessing the power of the cloud, these companies can accelerate their innovation and scale their operations more efficiently, ultimately driving greater impact and outcomes for the environment.

Prediction 3: The majority of the value produced by AI will flow to the end users**

The widespread adoption of artificial intelligence (AI) is driving unprecedented levels of consumer surplus, according to Bessemer, with the efficiency gains and experiences enabled by AI far outweighing its market price. 

This trend is reflected in the plummeting prices of AI solutions, with performance improving at an exponential rate. In fact, OpenAI has managed to reduce its prices by an impressive 10x in the past six months alone! While the adoption of AI is driving massive productivity gains, the end users, consumers, and developers building with AI are capturing outsized value, thanks to these dynamics.

And now announced today, Amazon have entered the space, so we can expect further price competition between providers of LLMs.

As the AI landscape continues to evolve, Bessemer anticipates further breakthroughs in the open-source ecosystem, making this technology even more accessible and affordable for businesses of all sizes. As a result, we expect to see a surge in the number of companies leveraging AI to drive innovation, efficiency, and growth in the years to come.

Prediction 4: The Large Language Model Revolution will transform the SaaS application layer**

Established big tech companies like Microsoft, Google, Adobe, and Amazon have demonstrated their ability to quickly integrate language models into their products, signaling a shift in the industry towards a greater emphasis on AI technologies.

Two quotes from Bessemer stood out:

“AI is now table stakes—those that don’t get on board will be left behind”

and

“...if you're a CEO of a cloud company, opting for no AI strategy is equivalent to signing the business's death warrant.”

In light of these developments, it's more important than ever for SaaS leaders to continue moving quickly and driving innovation, spurring the cloud economy into the age of AI.

Prediction 5: AI Native companies will accelerate path to $1 billion by 50%**

The journey from $100 million in annual recurring revenue (ARR) to $1 billion in ARR is a unique one for each SaaS company. For some, such as Canva, Zoom, and Twilio, this milestone was achieved in record time, with Canva reaching it in just three years, Zoom in 3.5 years, and Twilio in four years.

Looking ahead, Bessemer anticipates that AI-native companies will be able to achieve $1 billion in ARR 50% faster than their cloud counterparts.

Five Predictions, Three Themes**

SaaS fighting SaaS sprawl, climate tech, and AI are the major themes from this year's report. We’ll check back next year to see how Bessemer’s predictions have faired. As the SaaS market continues to evolve, Cledara is committed to staying at the forefront of the industry and providing our customers with the tools they need to fight SaaS sprawl. Thank you for your support, and stay tuned for more exciting updates from Cledara!