Startup 101: What’s a SaaS business?

By
Ines Fenner
March 10, 2022

Let’s start with the basics of SaaS.

SaaS stands for Software-as-a-Service. A Software-as-a-Service provider is a company that hosts any type of application or software for its customers via the internet. As it can be accessed through the internet, there’s no need for the user to install and maintain software. This frees the user from complex software and hardware management.

The basic idea is that a piece of software is hosted on a cloud infrastructure, and customers pay a monthly fee to get access to this software. This gets rid of the need for an end user license to activate the software and any infrastructure hosting the software. Instead, the SaaS company hosts their membership. It’s pretty simple - the customer just has to log into their account to get full access.

The software can be accessed and used from almost any device. In most cases, users must pay a recurring subscription fee to gain access to the software.


Why do businesses use the SaaS model?

So, why would a business choose to adopt the SaaS model?

There are many reasons as to why a company may opt for the SaaS model.

One reason is that software that has to be installed on a device can interact with other software and cause operating system errors. With the SaaS business model, users do not need to install anything in order to access product features. As a result, technical problems are less likely.

Another reason is that developers like SaaS because it is consistently developed and runs on the company's infrastructure. Investors are also a fan of SaaS revenue because it is recurring, resulting in consistent and predictable cash flow.

Furthermore, users are more likely to use SaaS because it is less expensive than other software billing methods.


Benefits of the SaaS model for the company:

Recurring Revenue: One of the most significant advantages of the SaaS business model is that it allows for a recurring stream of revenue, which aids in churn control.

Pivoting & Improvements: SaaS allows you to keep your product up to date at all times. You can increase retention and attract new customers by constantly improving your product.


Benefits of the SaaS model for the customer:

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Flexibility & Scalability: The SaaS business model provides greater flexibility to your customers. If you base your pricing on a usage metric, your customers will only pay more if they use the product more frequently. This gives your customers the opportunity to expand their businesses using your software. It also eliminates the risk of paying a large upfront fee for a product that may not meet their needs.


-Lower Costs: SaaS platforms eliminate licensing fees typically associated with traditional software installations. This is due to the fact that they are distributed on a subscription basis. Customers also save money on infrastructure because SaaS solutions are cloud-based.


-Quick Benefits: Users experience immediate benefits. Typically, signing up to a SaaS platform is as simple as entering your name and email address in order to gain immediate access to the product functions.

-Higher Adoption: SaaS platforms can be used anywhere in the world which has led to an increase in their popularity. Users are more likely to stick with a product if they can immediately reap benefits from it.



Challenges of SaaS companies:

Even though there are many benefits to adopting the SaaS model, there are some risks and challenges that come alongside them.

-Connectivity Requirement: In order to use SaaS platforms, you need to have a strong, reliable connection. If your connection is weak and unstable, it may become a challenge.

- Security & Data Concerns: Access management and the privacy of sensitive information are significant concerns when it comes to cloud and hosted services.

-Lack of Control: The SaaS company manages everything. In most cases, everyone must utilise the most recent version of the software application and cannot postpone upgrades or changes in the features.


Examples of SaaS companies

In the recent years, there has been a huge increase in the number of SaaS companies starting up. Some examples include:

Salesforce: Salesforce, Inc. is a famous American cloud-based software company that provides CRM services.

Dropbox: Dropbox is a cloud storage service that lets you save files online and sync them to your devices.

Slack: Slack is a cloud-based instant messaging tool that is intended to be the centre of workplace collaboration.

Canva: Canva is a free graphic design platform that allows you to edit photos without extensive photo editing knowledge or experience.

Hubspot: HubSpot is a cloud-based CRM designed to help align sales and marketing teams, foster sales enablement, boost ROI and optimise your inbound marketing strategy to generate more, qualified leads

Asana: Asana is a cloud-based task management solution that allows businesses to manage, collaborate, communicate, and organise their tasks and projects.

Google Workspace: Google Workspace is a collection of cloud computing, productivity and collaboration tools, software and products developed and marketed by Google.

Monday.com: Monday.com is a cloud-based platform that allows users to create their own applications and work management software.

ClickUp: ClickUp is a cloud-based collaboration and project management tool suitable for businesses of all sizes and industries.

Calendly: Calendly is an SaaS platform that allows people to schedule meetings and events at a mutually workable time without the need for back-and-forth emails.

We hope that this blog has helped you to develop a deeper understanding of  Software-as-a-Service (SaaS). Learn more about the startup world by visiting our blog.