As a business transformation tool, Artificial Intelligence (AI) is a "game-changer" for many business functions. Perhaps not surprisingly, that includes a technology function like application development. Hence, it is easy to see why many SaaS companies integrate the latest AI technologies in their product development & engineering.

Thanks to AI-powered personalization, 87% of SaaS companies are improving the pace of their business growth. Similarly, 92% of SaaS startups in India have integrated AI technology into their products in some form. In the digital age of AI technology, SaaS companies are leveraging benefits such as:

• Process automation
• Seamless scalability
• Higher customer retention
• Cost efficiency

Among the notable real-life examples of AI in the SaaS domain, HubSpot is leveraging this technology to offer personalized recommendations to its users. Similarly, Zoom uses AI to improve video quality and reduce background noise. 

‍AI-powered trends in SaaS applications

‍According to this 2024 Forbes article, AI is leading a paradigm shift in the domain of SaaS application development. Among the prevailing trends, AI technology enables much more capabilities than automating tasks performed by human professionals. AI technology is transforming the paradigm from "Software as a Service" to "Service as a Software."

Traditionally, SaaS companies were responsible for delivering software tools for a particular customer need. Thus, the traditional SaaS model effectively served to “get the work done” instead of “managing” the software. For instance, the SaaS-enabled Microsoft 365 tool is primarily designed as an office-based productivity and communication tool. 

With the AI-powered Outcome-as-a-Service (OaaS) trend, SaaS companies are transforming their customers' business outcomes instead of simply providing another feature-rich tool. In short, the OaaS model has shifted the business focus from delivering the “right software” to customers to providing the right “outcome.” 

This outcome-based approach determines the pricing model of the SaaS application based on the business value it delivers to subscribers. Instead of pricing based on actual resource consumption, the outcome-based pricing model is based on customer value. For example, an outcome-based hiring app can charge enterprises for each new hire that works for them for a specific period – instead of simply hiring an employee.

Besides OaaS, AI technology is powering the “Service-as-a-Software” (SaaS) model with intelligent services designed to improve business processes through its valuable insights. For instance, in healthcare, AI-powered SaaS is transforming patient care and diagnostics. Similarly, this model empowers clinical trials and drug discovery in the life sciences industry.

Thanks to these AI-enabled trends, SaaS companies can develop a more scalable and efficient business model. For instance, they can now expand their product features – and grow their applications in sync with their customer’s business needs. With more service-related data, they can encourage customers to use these SaaS products or services more frequently.

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‍How these AI-powered trends can impact SaaS application development

‍Despite the growing demand for high-quality SaaS applications, the software industry is facing a serious shortage of skilled professionals. 76% of software development companies face a talent gap in their technical skills and expertise. Similarly, the 2023 IBM study found that the lack of internal knowledge is hindering AI adoption in businesses.Going ahead, SaaS companies can look at application development as a service-based approach to meet their skills shortage. For instance, with the "Application Development-as-a-Service" model, SaaS development companies can partner with a dedicated team to manage areas like:

• Product development
• UI/UX design and development
• Application maintenance

Similarly, AI in software development can help SaaS companies in:

1. Automated code generation

Application developers can automatically generate code using AI, based on their stated customer outcomes. This also ensures an error-free product and a faster development process.

2. Personalized user experience

By analyzing user behavior and feedback, AI tools can provide real-time insights for improving the user experience. With a user-centric design, SaaS companies can use AI to analyze the user’s data to personalize the app interface and recommendations.

3. Continuous improvement

By embedding machine learning models into applications, SaaS products can continuously learn from how users interact with them. This can enable continuous improvement over time, thus enhancing overall performance and outcome.

4. Automated testing

Besides application development, AI tools can automate the software testing process for SaaS applications. AI-powered testing tools can reduce human errors and deliver high-quality products in a quick time.

For an efficient outcome-based service model, SaaS companies need an active collaboration-based mindset to partner with their customers. Here are some required elements for this approach:

• Defining service-level agreements (SLAs) using application metrics like performance and uptime.
• Evaluating the performance and quality of the existing service delivered from the SaaS application.
• Defining the key outcomes to be achieved from this service model.
• Training product engineers to build their customer relationships.
• Leveraging AI tools to deliver the desired business outcomes.

‍Conclusion

‍This blog post highlights how AI technology is shifting the SaaS paradigm from a “product” mindset to a service-based mindset. We have looked at some of the AI-powered trends like Service-as-a-Software and Outcome-as-a-Service. In the next part of this blog series, we’ll highlight how AI can transform product engineering and development. 

As a technology partner, Parkar is powering businesses with its AI-enabled innovation and automation. We have successfully transformed AI as a business accelerator, enabling business scalability, adaptability, and security.

If you believe that AI can power your next wave of digital innovation, we can help you get there. Contact our team today.