Target Global’s SaaS Market Outlook 2025: 5 Trends to Watch

Is the global software as a service market due for a rebound after a difficult few years? Which sectors look most promising for investors and strategic partners? Other than AI, which needs no introduction, what are the main tech trends driving innovation and growth in the space?

Opinions vary on these questions, to say the least. For seasoned software investment firms like Target Global, the current environment offers both opportunities and challenges right now.

“Although the overall SaaS investment landscape remains challenging, there are areas within the sector that show promise, particularly in niches like AI-driven solutions, automation, and cloud infrastructure,” says Yaron Valler, co-founder of Target Global. “These segments continue to attract interest due to their potential for long-term growth and the increasing demand for innovation in a rapidly evolving digital landscape.”

Minimizing exposure to the sector’s more challenging aspects while maximizing potential reward is, of course, the job of software investors and of company founders and key leaders. While no one’s track record is perfect, it’s helpful to look at how players like Target Global are positioning themselves at the moment and how they see things developing over the coming 12 to 18 months.

1. Low/No-Code Remains a Key Selling Point

The low/no-code “revolution” is several years old now. Many believe it’s not yet living up to the hype. If it were, they argue, the job market for “real” software developers would be even more depressed than it already is.

However, users clearly appreciate no/low-code functionality, so developers would do well to enable it wherever possible. As AI coding models evolve, it may not be long before apps can more or less write their own features.

2. AI Will Make App Development Easier (But Not Dramatically, Yet)

Sticking with AI for a moment, let’s acknowledge that opinions differ on the speed and scope of its impact on app development. Some believe it will be a matter of months before AI coding becomes recursive; others see a much more difficult path ahead. Few argue that it will be some time before human engineers are not needed at all, however.

3. Falling Interest Rates Will Help With Funding and Valuations

Experts like Forbes contributor Simon Moore expect interest rates to fall in 2025.

“Policymakers’ own estimates of where short-term rates will be in December 2025 is, on average, a little more than 3%, with a median forecast of 3.4%,” Moore says. That’s down from about 5% today.

Falling interest rates mean lower borrowing costs for software companies. That is good news for the SaaS market, although it might not result in a dramatic market improvement.

4. Certain Subsectors Will Oversaturate

The SaaS market as a whole is expected to rebound in 2025. Unfortunately, its recovery won’t be uniform. Certain subsectors, such as fintech and logistics, may experience a pullback next year and perhaps beyond. This will create opportunities for investors in due course, but for now, caution is the word for oversaturated subsectors.

5. The Market Will Reward Comprehensive Solutions

“A well-designed application enables purchasers to finish transactions, accumulate data, and contact your business, and has a simple and attractive interface that doesn’t baffle clients,” according to Techub, an app development consultancy.

In short, well-designed apps offer comprehensive, user-friendly solutions. This may not be earth-shattering news, but in competitive corners of the market, it’s absolutely essential that developers take it to heart.

Boom or Bust?

The conventional wisdom about a SaaS rebound rests on solid ground. After all, the business cycle is known as such for a reason: it ebbs and flows and eventually ebbs again.

However, downturns can endure for much longer than expected, and no business cycle follows the exact same pattern. Especially in the software business, where booms and busts are normal.

That’s why experienced investors are taking a cautious approach right now and will continue to do so in 2025. We’ll just have to wait and see whether that approach is warranted.