Will the future be Consolidated Platforms or Expanding Niches?

The enterprise SaaS industry is experiencing a major shift. What was once a chaotic assortment of niche tools is coalescing into a wave of consolidation, unified platforms, and AI-native reimagination. With companies evaluating their software stacks due to changing business priorities, inflation, and the potential of generative AI, the central question is whether the future of SaaS will reside in all-in-one giants or in a colourful ecosystem of specialised, modular offerings.

Enterprise Software as a Service (SaaS) has reached a strategic inflection point. On the one hand, surging demand for cloud, AI, and digital transformation continues to drive growth in the space. On the other hand, rapid disruption from AI-native competitors and shifts in capital market pressures continue to change the landscape for scaling or exiting SaaS businesses. The industry must ask itself: will the future of growth be primarily through expansion, increasing customer numbers, verticals and geography or will future growth primarily be through consolidation with larger players adding niche capabilities and then abandoning competition?

Market Expansion: The Case for Growth

1. Massive Market Growth Ahead

• The global SaaS market is projected to reach US$370 billion by 2025, growing to US$842 billion by 2030, at a 17.9% CAGR by 2030, mostly tied to enterprise migration to cloud-native, pay‑as‑you‑go consumption models. (Mordon Intelligence)
•  Within B2B SaaS general space that is even stronger, size of the market is expected to continue to rise 26.9% CAGR from US$390 billion to over US$1.3 trillion between 2025 and 2030.

2. AI Integration as a Growth Multiplier

• AI is already integrated into 40-54% of software solutions aimed at automation, analytics, or intelligent agents, a 2023-24 trend driving engagement, predictive capabilities, and upsell velocity. (Market Growth Reports)
• Enterprise customers are on a growing adoption curve towards AI-driven copilots and business-outcomes based pricing models, paving the way from seat-based licensing to modeled business value.

3. Geographic and Vertical Expansion

• For the regions, Asia-Pacific, more notably India, is expected to come in strong, with a Growth Rate of approximately 19-25% CAGR. According to multiple industry reports, India’s SaaS revenues crossed US$15 billion in FY24, with over 36 firms reaching ARR > US$100M.
• Vertical SaaS: Applications focused on specific industries like healthcare, logistics, and legal is growing significantly, representing well above 30% of new SaaS deployments in 2023-2024 and will become the focus of increasing investment and strategic attention.

In the early stages of a hype cycle, features masquerade as products, and products masquerade as companies. But now, many single-product startups are under pressure. Larger platforms are incorporating those features natively. - Ramprakash Ramamoorthy, Director – AI Research, Zoho

4. SMB and Hybrid Cloud Penetration

• The SME market is the fastest growing driver of SaaS towards 2030, with CAGRs projected ~19-23%.
• Hybrid cloud SaaS will grow at ~22-27% CAGRs by 2030, reflecting a growth in demand for data-sovereignty, multi-cloud orchestration, and compliance across enterprise customers.

Market Consolidation: The Forces Driving M&A

1. Strong M&A Activity & Elevated Valuations

• In Q1 2025, private equity (PE) acquirers closed 73 enterprise SaaS transactions that totaled US$15.3 billion—a 12% increase compared to Q4 2024.
• Strategic acquirers also executed 137 transactions (~$13.8 b deal value), shifting focus to AI and automation, and looking for high-synergy acquisitions rather than volume acquisitions.
• Average SaaS revenue multiples remain healthy: ~11 x ARR, and ~18-22 x from niche top-growth SaaS. Public SaaS multiples averaged ~7.6x revenue (median 5.45x) in early 2025.

2. Cybersecurity as a Mega-Consolidation Play

• The cybersecurity SaaS market is accelerating toward consolidation as witnessed in an unprecedented month of announced M&A activity of more than 42 transactions in May 2025, as legacy platform vendors are acquiring AI powered threat platforms.
• Valuations in mid-market cybersecurity average 8-10x revenue, and major transactions like Cisco-Splunk (~$28 billion, ~7-8x ARR) shows the willingness to pay for mission critical capabilities.

“Choosing a vertical SaaS solution doesn’t mean sacrificing integration. The future lies in intelligent, AI-driven, industry-specific platforms that are contextual, scalable, and agile—addressing gaps where traditional horizontal SaaS often falls short.” - Kiran Menon, Senior Director – APAC & Middle East, Phenom

3. Vertical SaaS Consolidation & Platform Creation

• Strategic buyers like Salesforce, Oracle, and Microsoft acquire vertical leaders (e.g. Vlocity ($1.3B), Cerner ($28B), Nuance ($19B)) to build integrated industry clouds.
• Firms like IBM which have acquisitions like HashiCorp, DataStax and SeekAI to build out enterprise stacks for AI-infused automation use cases.

4. Pressures on Mid-market and Legacy SaaS Firms

• According to AlixPartners, 100+ publicly traded mid-market SaaS firms operate under existential pressure as generative AI tools by-pass traditional application layer approaches.
• Net dollar retention in that cohort declined from 120% in 2021 to 108% in Q3 2024; high-growth classifications shrunk from (57%) in 2023 to 39% and only ~27% predicted in 2025.
• These firms face greater churn, margin compression due to increased costs from AI compute, and must shift to outcome-based/utility type licensing (or risk acquisition or irrelevance).

Consolidation vs. Expansion: A Dual Track Future

Ramprakash Ramamoorthy, Director of AI Research at Zoho, believes enterprise SaaS is already making moves in consolidation. “The initial stage of a hype cycle includes features disguised as products and products disguised as companies. Well we are past that, many of these organizations that delivered a single product have to go through either vertical integration or sell out. In fact a lot of companies are mimicking those single-product features natively on large platforms.”

Ramamoorthy says he also feels AI model providers will develop into enterprise SaaS organizations themselves as they continue to capture the value proposition of user data and usage signals for SaaS providers. This is why Zoho built their own AI backbone—to keep pace with competitive offerings and to maintain independence.

On the subject of vibe-code and low-code tools, Ramamoorthy seems quite clear-eyed about their suitability for mass-market production, (i.e., great for ideating and prototyping, but not yet ready for regulated production). “Vibe-code can accelerate you from 0 to 1 faster, but particularly with the increase in governance and privacy, you need additional rigor. For example, in India, we have started to see compliance as a framework (for example GST).” In terms of the best generative tools today, he observes “Anytime I see a UI or content generated by AI—I can immediately recognize the quality that is just not there yet.”

Rather than “either/or,” the evidence points to a hybrid future where expansion and consolidation coexist:

Dual Strategy: Scale and Acquire

Large SaaS platforms will continue to expand through AI, vertical depth, cross border reach, and hybrid architectures, while also using M&A to fill gaps—especially in cybersecurity, niche domain expertise, or automation capabilities.

“Enterprise SaaS is shifting from software to intelligence, driven by velocity and trust. Fast AI deployment adds value, but confidence matters most—making governance, reproducibility, and security essential. Responsible AI begins with strong architecture.” - Karan Kirpalani, Chief Product Officer, Neysa

Examples:

ServiceNow’s acquisition of Moveworks (~$2.85 b) to embed conversational AI in IT ops workflows.

Salesforce’s $8 b acquisition of Informatica in early 2025 to boost enterprise AI and data services.

Mid market Attrition & Vertical Consolidation

Smaller SaaS players with no native AI capabilities, or clear vertical specialization, risk being in the “consolidation wave” that will put them in a situation where they are bought or squeezed. Private equity is becoming increasingly active in rolling up vertical suites, thereby producing scalable enterprise plays out of smaller tools for SMBs.

But Expansion is Not Slowing Down

Despite the consolidation wave, specialized, vertical SaaS platforms are thriving. Enterprises demand more tailored, context-rich solutions that generic horizontal platforms can’t always deliver.

Kiran Menon, Senior Director of Product and India Business at Phenom, rejects the idea that verticalization means fragmentation: “It’s a misconception that you need to sacrifice an integrated platform just because you’re looking at a verticalized solution.” Phenom, an AI-first talent experience platform, demonstrates how vertical SaaS can still deliver broad utility across HR use cases—while remaining contextually rich.

He explains, “Enterprises are demanding more purpose-built, agile, contextual, and intelligent platforms – areas where horizontal SaaS offerings often fall short.”

Menon adds that Phenom’s integration of recruiting, onboarding, internal mobility, and analytics into a unified, AI-driven platform is more than just ‘integration’—it’s orchestration.

Regional & Segment Expansion

Areas like Asia-Pacific are driving organic growth further, as project sizes and SaaS vendors in India, Southeast Asia and Latin America are radically scaling—from approximately ~$15b SaaS revenue in India alone. There is room for new innovation via SMBs, non-Western industries, and hybrid/cloud mandates.

AI as the Great Catalyst

AI is redefining enterprise SaaS from the inside out. AI isn’t just a feature anymore; it’s becoming the foundation of modern platforms.

According to Karan Kirpalani, Chief Product Officer at Neysa, “Enterprise SaaS is undergoing a fundamental transformation, from delivering software to delivering intelligence.”

Neysa’s AI-native platform Velocis is built to address the infrastructural shortcomings of legacy SaaS. “We provide a vertically integrated AI cloud system that unifies the entire lifecycle—from data ingestion and model training to secure deployment and monitoring.”

The results? Clients have reported TCO reductions of 40–70% and product roadmap acceleration by 20–35%.

In terms of adoption drivers, velocity and confidence stand out. “The primary driver is velocity—the speed at which an idea can become a production-grade AI service,” Kirpalani says. The second is confidence, as AI projects in regulated industries stall without strong governance and reproducibility.

Velocis addresses these concerns with observability, zero-trust controls, versioning, and compliance tooling. “78% of enterprise leaders cite traceability and auditability as the top requirements for deploying generative AI tools in production,” Kirpalani adds.

The Role of Trust, Governance & Ethics

Trust is becoming a competitive advantage. Performance-driven, AI-enabled SaaS manufacturers will be required to account for explainability, fairness, and compliance during hiring decisions whether through algorithm or a fraud checking engine.

Menon describes that Phenom’s AI is not automation, it’s augmentation: “AI is augmenting and accelerating the talent experience process while people are making decisions”. Menon is passionate about illuminating the bias and not entrenching it; Phenom’s platform flags inconsistencies ahead of time.

Kirpalani, is aligned with this, stating, “Responsible AI starts with architecture”: Considering things like tamper evident logs, role-based access, and lineage tracking requirements that are built into Neysa Velocis to be compliant with regulations like India’s proposed DPDP Act and on-boarding with RBI’s 2024 AI supervisory framework.

Differentiation in the Age of LLMs

With the advent of LLMs, many of the SaaS solutions are layering AI on as opposed to integrating it. Phenom and others are approaching the foundational method.

“Phenom’s Applied AI architecture reflects 14 years of proprietary data plus domain-based ontologies plus intelligent agents,” says Menon. The agents in Phenom’s architecture do not just suggest, they operationalize and will elevate decisions when necessary- transforming the engagement of AI within an enterprise’s collegiate workflows.

Neysa’s Kirpalani reiterates this ethos saying Neysa’s agents are built with workflow-native intelligence that almost have an equal balance of action and insight. It appears that the future belongs to platforms that are working to embed AI as opposed to adding AI in a bolted-on fashion.

India’s Part in the Global SaaS Ruckus

India’s SaaS ecosystem is maturing at a rapid clip with FY24 revenues surpassing $15B and expected to exceed $35B by 2027. This isn’t just about being a talent hub; India is also emerging as an innovation powerhouse—particularly for vertical and AI-native SaaS products.

With the advent of frameworks such as GST, the DPDP Act, and RBI’s guidelines for AI, the Indian SaaS companies have also been navigating one of the most complex regulatory environments—putting them in an excellent position to carry out large global enterprise deployments.

The industry must ask itself: will the future of growth be primarily through expansion, increasing customer numbers, verticals and geography or will future growth primarily be through consolidation with larger players adding niche capabilities and then abandoning competition?

As Ramamoorthy said simply, “Especially now with increased governance and privacy requirements, you need a lot more rigor... Vibe-code is awesome for ideas, but... they’re not production-ready.”

What Should Enterprise SaaS Leaders Do?

• Build AI first Strategy

Whether you are an incumbent or challenger, AI is now table stakes. Embed AI deeply into workflows, customer analytics, and pricing models. Invest in proprietary datasets and ML IP to maintain differentiation. Outcome-based contracts may become the norm.

• Vertical Relevance Is a Moat

Niche industry knowledge—healthcare, real estate, logistics—is increasingly why buyers pay premium multiples. Specialization improves retention and defensibility. For horizontal platforms, strategic acquisitions of vertical leaders may be a smart path.

• Geographic & Customer Segment Expansion

Focus on high growth regions (Asia Pacific, Latin America) and customer tiers (SMEs adopting cloud for the first time). Public cloud policies and regional compliance demands open new revenue streams.

• M&A Readiness & Portfolio Discipline

Mid market vendors must decide: Double down on differentiation or prepare for acquisition. Strategic buyers and PE firms are targeting scale ready verticals, automation tools, and cyber capabilities—smart sellers will optimize KPIs like ARR growth (>35%), churn (<5%), and high margins (>75%).

• Manage Cost & Capital Pressures

Given elevated interest rates and compute costs (especially for AI workloads), firms must balance growth with profitability. Investors and buyers now expect nearer-term path to margin lift rather than “growth at all costs” models.

Conclusion: Consolidation and Expansion Will Coexist

The future of enterprise SaaS is neither pure expansion nor inevitable consolidation alone, it’s both.

Expansion: The SaaS addressable market is enormous and still growing—from AI integration to new regions and industries. Innovators who scale intelligently in verticals and segments will thrive.

Consolidation: Meanwhile, buyers—especially strategic tech firms and private capital—are actively acquiring vertical specialists, automation tools, and cybersecurity assets. Mid market legacy SaaS vendors face existential pressure unless they pivot.

Ultimately, the winners will be those who use expansion to build scale and platform value, and consolidation to add domain depth, defensive breadth, and AI anchored capabilities.

In the rapidly evolving enterprise landscape of 2025–2030, hybrid strategies win: grow where you can—and acquire where you must