Software-as-a-service companies are turning to machine learning and artificial intelligence technologies to stand out in a crowded market, according to GP Bullhound.

The tech advisory and investment firm has published its latest market report on the SaaS space, examining the public company, landscape, M&A, private placement and IPO trends in Q2 2018.

It found that one of the key trends in the SaaS sector is that machine learning and AI are becoming "a must have" for software products and are being incorporated on a wide scale for products to differentiate themselves.

Chatbots and virtual assistants have had a "huge impact" on CX (customer experience) over the past couple of years, creating personalised experiences, freeing up resources and cutting costs.

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Although machine learning and artificial intelligence APIs are now widely available to SaaS companies, GP Bullhound stressed that businesses still need to have the specialist human talent necessary to maximise the impact of these features.

In the report GP Bullhound also examined a number of other areas in the SaaS market, and found that enterprise software firms are "aggressively expanding" into new markets by establishing adjacent business units.

The investment bank also found that deal making for European software remains "robust", with tech investment increasing to $20 billion in 2017 from $3 billion in 2014.

The report's authors predict that M&A activity in Europe will stay strong in the second half of 2018, but deal activity may be limited in certain industries.

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