What is SaaS? Everything about Software as a Service

What is Saas – It won’t be news to anyone to learn that the web has completely transformed the way that many of us conduct our businesses. Not only does an internet connection give you more options for working quickly and efficiently, but it also creates entirely new models of business that simply did not exist until now.

One example is SaaS, or “software as a service.” This is a model that has countless benefits for businesses that want to scale their profits and reach a wide audience – with very few drawbacks. So just what is a SaaS and how does it work? Read on, and we’ll explore the topic in a little more depth.

What is SaaS?

Essentially, a SaaS is a piece of software that is sold via a subscription model. This is usually hosted in the cloud, which ensures that clients (usually business clients, as this tends to be a B2C model) will be able to access the features from wherever they are.

That said, there are many variations on SaaS. Web apps and software tools are becoming increasingly commonplace and today appeal to everyone from businesses, to creators, to casual users.

Let’s take a few examples.

For businesses, project management services are a common form of SaaS. For instance, a company might use the popular tool Asana in order to manage and monitor workflows. Asana works by enabling the creation of multiple different projects, which can then be assigned to users. Different users can then post updates to those projects, upload attachments, comment, or change the status. This powerful tool means that a manager can see all of the open tasks, their status, and who is working on them. It also means that multiple people can work on a project, and thereby collaborate remotely – something that is increasingly beneficial in modern times! For an employer, Asana means all of your assignments can be viewed in one place, with clear deadlines.

Asana has a free membership program, but there is a paid tier for businesses and professionals that want to get the most out of it. By encouraging users to switch to this plan, Asana can drive a lot of sales and generate regular income.

We might also consider something like Dropbox to be an example of a Software As a Service. This is simply a cloud storage solution, though it has many advanced features that make it powerful for enhancing workflow. Dropbox is useful for both casual users and businesses.

You could even consider something like Netflix or Spotify to be an example of a SaaS, though we could argue equally that this is more of a content delivery service model. This brings us to another point: the tricky definitions of SaaS.

Tricky Definitions

The precise definition of a SaaS is one that can be a little tricky to pin down. That’s because some SaaS products will fit multiple categories.

For example, then, you might not consider Adobe Premiere to be a SaaS, seeing as this video editing software is largely downloaded. However, Adobe has gradually moved to a model that could be considered more and more to be SaaS.

This is still a piece of software that is sold on a monthly subscription basis, and it even has a “cloud” element that allows you to download and install updates (called Adobe Creative Cloud). However, as an installed product, we would typically associate this with more traditional business models. The same can be said for Microsoft Word and even Windows, which are now sold via a subscription and which can be updated. While Word once came on a CD-ROM that you purchased in-store, you today simply sign up for a payment plan and then download the entire Microsoft Office suite.

This demonstrates how more and more businesses are moving toward a model that is closer to a SaaS.

It’s also true that some aspects of a SaaS model can resemble a more traditional mode of business. For example, Asana does have an app that can be downloaded for mobile devices or PC, and a free membership option. This means that you could use Asana as a regular customer and never even be aware that it is a SaaS!

The point is that SaaS can be adapted to whatever type of software product you are offering. While we traditionally consider the term to refer to those products that are hosted online and accessed through the browser, this is only scratching the surface of what’s possible.

Once You Go SaaS, You Don’t Go Back

So, what are the advantages of choosing a SaaS business model? Why do companies like Microsoft choose to offer their products on a monthly or yearly subscription, rather than as a single download?

The first and most obvious reason is that this model helps to improve cash flow and profit. With multiple users all signed up for regular, recurring payments, Microsoft and Adobe can now accurately estimate their earnings each month and each year, with far less chance of having a sudden lull in sales.

These monthly payments also work well for businesses and customers: by avoiding a single, expensive, up-front cost, it is possible for more people to use the product. However, by the end of the year, they might actually have paid more for the software than they otherwise would have!

Many companies will offer different discounts for various types of membership. For example, they can offer tiered levels of service, with certain advanced features only available to the highest “premium” memberships. Likewise, companies can offer different payment plans for those that want to pay yearly or monthly.

In exchange, the customer/client gets a product that is constantly being updated and improved. Rather than being dissatisfied with a piece of software that perhaps has bugs or missing features, they can see the thing they paid for improvement over time. This increases satisfaction with the product, not to mention customer loyalty!

Using a SaaS model also gives you inherent protection against software piracy. In the earlier days of the internet, Microsoft and other companies had to deal with their products being copied and handed out freely on burned discs and even via downloads. With a subscription model, that is far less possible. Even if there were a way to run the program without a paid profile, that piece of software would not include the software updates or support that comes with a paid membership.

Of course, these advantages have always been present. The reason we are seeing more and more businesses switch to this type of model now is that internet connections have finally become fast enough to support these types of services, just as servers have become faster and more power to run more advanced software that will be delivered to thousands or even millions of customers.

These advancements have also helped to shape a culture that is now more used to not “owning” the software they use in a traditional sense.

Creating a SaaS Product and Navigating the Challenges

So, how do you go about switching to a SaaS model, or perhaps creating one, to begin with?

The biggest challenge when it comes to delivering a SaaS product is getting the necessary hosting. If you hope that your business will scale, then you need to be prepared to potentially support thousands of users using your services simultaneously.

Typically, the software will run on the server using a language such as PHP and will then deliver the content via the browser using CSS or HTML. You might also rely on external services offered by Amazon Web Services or Microsoft Azure, which can handle such things as username management, cloud backups, machine learning, and much more. These will need further coding to work with your server via APIs.

Essentially, this creates a rather complex technical challenge that requires the service of a full stack developer. You’ll also need to seriously consider subjects such as data security.

When offering a SaaS, it’s also important to provide customer support to ensure that everything remains running smoothly. This is another aspect of the “service” part of the business. In short, the amount of manpower and technical understanding necessary for a true SaaS is fairly high compared with a one-time download of a simple piece of software.

You also then need to consider the other aspects of your business model. That means things like marketing and even policing the use of your services.

The most important part of any SaaS is staying financially stable and that is done through increasing monthly recurring revenue or MRR. MRR is the lifeblood of all SaaS companies and in such a competitive industry, it is not an easy task.

With all that in mind, it’s certainly true that offering a SaaS has a slightly higher barrier to entry. However, the rewards make this added challenge more than worth the effort. Thankfully, powerful tools and services are increasingly emerging to make this process easier for businesses and entrepreneurs that are looking to dabble with the business model. Thanks to products like AWS and powerful hosting solutions made available to all, it’s no longer far fetched that anyone could create the next Asana, Word, or Twitter!

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Joon K Lee
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