Aldo Luevano
Expert Contributor

Micro SaaS: The Answer for Mass AI Adoption in Latam

By Aldo Luevano | Wed, 09/14/2022 - 11:00

Artificial intelligence (AI) is one of the main technological trends of the last few years. Gartner positions this macro trend as one of the most important pathways toward organizational modernization. While it’s true that AI advantages are here and now, and that many native digital companies have transformed industries and obtained a great part of the market in their corresponding fields by using AI, the usage in Latin America is in an early stage, mainly due to the fact that a great part of the economy lies in small and medium-sized companies that can hardly invest in research and development in AI to strengthen their products and services.

The market size for AI in Latin America in 2022 is US$5.75 billion, divided into three groups: hardware, platform services (cloud) and implementation services.

First, we have the hardware group, where the needed infrastructure is commercialized to support the machine learning model execution, through vendors like Intel, Nvidia or AMD; the second group is formed by the software vendors normally located on the cloud. These provide tools and engines for the creation, execution and maintenance of ML models; and finally, the third group consists of consulting companies and software factories that implement the ML models and develop AI applications. 

Small and Medium-Size Business Digitalization

Latam has around 12.9 million SMEs distributed among 17 countries studied (SMEs alone are responsible for more than 60 percent of formal employment). SMEs are the largest generators of employment in Mexico (72 percent of total jobs) and represent 52 percent of the country’s GDP. However, 90 percent of these organizations lack an AI adoption strategy. The SMEs’ digital assets are limited to websites or prepaid e-commerce solutions. 

Even if the company owners in this specific group of organizations are aware of the potential of AI to transform their businesses, cash-flow problems and lower sales related to the regional macroeconomic situation prevent the investment in digital solutions supported by AI.

Due to the COVID-19 pandemic, it is estimated that 2020 may have seen the closure of 20.7 percent of micro-enterprises, 7.1 percent of small businesses, 2.8 percent of medium-sized companies, and only 0.6 percent of large organizations. Furthermore, another important detriment for AI adoption among SMEs is the high implementation cost of AI applications, which implies service acquisition of infrastructure, platform and implementation (as we previously stated).

Regardless of the fact that there are several vertical SaaS solutions in the market for different sectors of the industry and that include infrastructure, platform and implementation in one single tool, the acquisition cost of these tools is still very high for SMEs due to the fact that there are associated costs for the underlying services. 

Micro SaaS Concept

In this chaotic situation for Latin America, the Micro SaaS concept is a viable alternative for AI adoption in a cross-cutting manner among the region’s entrepreneurial layers, allowing the commercialization of AI applications not only for top accounts but also for midmarkets and small businesses. 

Micro SaaS is a concept in the tech world that references a niche solution that directly impacts a specific pain point. This kind of solution is normally affordable and has a short commercial cycle (completely potent Product Market Fit) due to the fact that the premise is a low-cost development that can be implemented by a small developer group, a single freelancer or a person who uses easy coding tools to create the solution.

The premise of the low-cost development for a Micro SaaS solution differs from the traditional funding scheme for the development of SaaS solutions, where a great up-front amount of venture capital is required for the development and commercialization of the solution with the purpose of taking over the majority of the potential market. 

Micro Saas & AI

Considering all this, Micro SaaS is the ideal package for the AI niche and low-cost applications that tackle the main pain points from which SMES are suffering today. 

Now, there are a great number of algorithms created from data science within the main libraries for machine learning like Keras, Tensorflow and Gluon. These algorithms are constantly used by data scientists to generate models of machine learning that tackle recurring problems in the industry.

These models can be wrapped into vertical Micro SaaS products that make AI accessibility easy for SMEs in a simple way without the need to invest in human resources, infrastructure, software licensing or AI consulting. 

Finally, the Micro SaaS concept generates a circular economy that not only benefits businesses and potential customers but also is a way to create profitable startups that don’t necessarily want to become US$1 billion-dollar companies but which seek to transform the region through innovative solutions that allow entrepreneurs to generate important revenue, improve their standard of living and bolster the economy of the region.

Photo by:   Aldo Luevano