The ascent of SMB SaaS firms is undeniable. It is set to propel the market from $197 billion in 2023 to $232 billion by 2024. Fueled by mobile app demand, cloud adoption, AI, and machine learning, among other factors, SaaS is reshaping industries. With this surge, compliance concerns surge, too. To enhance SaaS sales, your company should prioritize compliance for a competitive edge. Amid the red tape, turning compliance into an advantage is achievable. Let us delve into vital stats and insights on how compliance for SaaS SMBs improves:
Customers' confidence and trust in SaaS
Market growth and revenue
Legal and regulatory risk mitigation
Investor and partner attraction
Operational efficiency and cost-efficiency
Building Customer Trust
Ensuring the security of sensitive data is paramount for SaaS SMBs, as a breach could jeopardize customer trust and tarnish your reputation. A study involving 227 business decision-makers found that a cloud computing trust label effectively communicates trustworthiness. It helps consumers choose the right SaaS services.
Notably, 68% of customers are willing to pay more for a SaaS company with a solid customer service reputation. Additionally, 54% base decisions on customer service, with 19% deeming it the most crucial factor.
According to a Cloud Security Alliance survey, organizations are inclined to switch to a more secure SaaS provider if data security concerns arise. Of those surveyed, 38% reported confidence in their current provider's security controls. On the other hand, 51% stated that their providers are somewhat effective.
Market Expansion and Revenue Growth
Enterprise SaaS is a distinctive category within cloud-based software solutions, meticulously crafted for the unique needs of large organizations. Diverging from conventional SaaS, these enterprise-oriented packages feature advanced functionalities tailored to address the intricate demands inherent in large-scale enterprise operations. Therefore, to step up and effectively target such discerning customers, prioritizing compliance should be a central focus in your strategy.
Security compliance also plays a role in revenue growth and expansion into new markets. According to the FinancesOnline Research Center, approximately 45% of SMBs have migrated most, if not all, of their business applications to the web. In 2021, SaaS organizations prioritizing data security, compliance, and net retention experienced an impressive average of 120%, translating to a remarkable 20% growth.
Mitigating Legal and Regulatory Risks
Security compliance signifies a consistent commitment to upholding the utmost standards in meeting your company's cybersecurity requirements. This encompasses strict adherence to compliance frameworks and regulatory standards. These include but are not limited to CSA (Cyber Security Alliance), SOC 2, HIPAA, ISO 27001, COBIT, PCI DSS, ISAE, NIST SP 800-53, and GDPR. SaaS SMBs should thus be prepared for potential expenses related to data breaches. From penalties under regulations settling claims to covering legal representation costs.
Non-compliance with universal data regulations can lead to lawsuits, reduction in your revenue, prohibition on your products, or hefty monetary fines. A violation of the law can result in harsh consequences if non-compliance is severe. For instance, HIPAA non-compliance fines vary from $100 to $50,000 for each violation, contingent on the perceived degree of culpability and impact. There are four penalty tiers, with potential legal consequences, including imprisonment for those accountable for violations.
In 2023, IBM reported that the average cost of a data breach worldwide hit a record high of $4.45 million. Incidents where attackers accessed multiple cloud environments resulted in more significant losses of $4.75 million, while organizations with simple security systems incurred $3.84 million on average. The report also highlighted that data breach costs between high and low non-compliance levels differed by 23% ($1.04 million).
Attracting Investors and Partners
Venture capitalists are unwilling to compromise on security or risk when investing in SaaS SMBs. As such, a potential investor will do their due diligence before tendering.
By complying with SaaS accounting standards, internal control, and tax obligations, you build credibility with potential investors, thereby future-proofing your firm for growth.
The 2022 Trust in Data Report by PwC establishes a correlation between rigorous data compliance, revenue growth, and heightened investor confidence. It proves that these factors are critical benchmarks for SaaS SMBs that depend on investors to foster expansion. Investing in data monetization after compliance yields a substantial 44% profit increase within a year, attributable to enhanced operational efficiency.
According to the 2022 Cisco Data Privacy Benchmark report, organizations are reaping fantastic returns on private investments and partnerships. What's more, smaller firms are leading the charge, e.g., those with 50-249 employees—skyrocketed from $1.1 Million to an impressive $2.0 Million.
The Cost-Saving Benefit
Manual compliance reviews take a lot of time and money while draining your IT team. You need a dedicated team to carefully check all documents and ensure they meet all the requirements. On the other hand, using SaaS compliance automation brings considerable cost savings in the long run by making this process more efficient, so your team can focus on high-value business tasks. Compliance issues can take up 30% or more of a CISO's time. If automated, this would save about 7.2 hours of their incidence resolution time. Plus, fewer manual reviews mean lower costs for compliance audits and certifications. It's a win-win for efficiency and saving money.
Did you know lack of compliance can cost you 2.71 times more than you would incur to fulfill the necessary data regulation standards? Greece's Hellenic Data Protection Authority fined Clearview AI Inc. twenty million euros. The global marketer of facial recognition services contravened the principles of lawfulness and transparency and key obligations under the GDPR laws.
Losses occur before enforcement when different malpractices trigger potential fines. Following a penalty, the market reaction may result in an extra 5.5% reduction in shareholder value, which can take months to bounce. The extent of reputational damage can be disastrous.
In another instance, Capital One could have saved 5.9% of its shares had they secured specific configuration vulnerabilities in their systems. An estimated $100- $150 million cost was associated with Capital One's 2019 system breach.
Over time, you need improved security and compliance to enhance revenue and shift to upmarket. You'll also need to recruit top compliance professionals. Here's where you can take advantage of marketing compliance. A strong culture of compliance allows your SaaS business to draw and retain top talent because you have demonstrated your dedication to ethical behavior and adherence to the law.
The competitive advantage of compliance goes beyond protecting you from reputational damage and business disruption in the event of data breaches. As other companies receive negative reviews and comments on their pages, you will gain more credibility in the eyes of consumers because you respect their data protection.
A SaaS company focusing on compliance can see a 15% faster growth rate than its non-compliant counterparts. Moreover, 78% of customers express higher trust and loyalty in providers with a strong compliance track record.
The Bottom Line
Compliance is not something you should postpone or ignore. Start looking at it as a competitive edge in a dynamic environment, not a burden. The competitive landscape in SaaS SMBs drives economic growth and trust among clients. Most compliant companies report higher average revenue compared to those struggling with compliance issues. Meeting regulations like CCPA (California Consumer Privacy Act) and GDPR protects your firm from costly data breaches and subsequent penalties. As such, you must stay ahead of SaaS compliance trends as they can affect your business continuity. Ensure you operate ethically and legally to attain industry credibility, faster growth trajectory, and long-term success.
If you'd like to discover the power of compliance for your business and dive into frameworks like SOC 2 and ISO 27001, consider working with a trusted partner. A consultant in security solutions will help solve the compliance puzzle with valuable resources to elevate your business operations with security and confidence. Ready to start? Don't miss out—explore the path to a more robust, transparent, and resilient future today.