Providing Software as a Service (SaaS) is a relatively new means of replacing the standard of purchasing a software license. Though it is new in its field, it is has proven to be more popular among service providers and users alike for its unique features at a palatably low up-front cost.

What makes SaaS unique is its ability to remotely host applications, typically via the cloud, which allows it to be continuously available to customers via the internet. This means deploying the software could be managed remotely, liberating businesses from dealing with the majority of staffing or performance-related issues. Many customers also enjoy experiencing the product for a low rate before deciding if they want to continue to pay for the service, unlike the traditional software business model.

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What Sets a SaaS Business Apart from a Standard Software Company

SaaS is an approach to software delivery and maintenance which is hosted entirely through the cloud; this means the software isn’t physically installed on your computer or phone, and that it is available anywhere in the world to customers with internet access.

Some of the primary selling points of software as a service include:

  • Different Subscription Plans for All Types: Customers can upgrade their experience (or downgrade) depending on their requirements for the software as well as overall usage.
  • Affordability:Because there is no need to purchase hardware upfront and continue to pay to maintain it, customers only need to pay for the resources their app uses.
  • Secure Data Storage: Since the software operates in the cloud, all ensuing data is stored with customer-based security clearance.
  • Dependability: The cloud is made up of a network of servers located all over the world; as such, if one server goes down, there are always others up and running and ready to take its place.

Something else customers find particularly palatable is that they no longer need to pay to update software. Because the software is cloud-based, web applications are available anywhere in the world and will always be operating under the most up-to-date version available.

To put this into context, let’s look at the example of Adobe Photoshop. Originally, this software was sold in the traditional way: software to be integrated onto your computer for a fixed, up-front price. Typically, this initial cost would give buyers the key for recurring updates.

Nowadays, however, this is not the current model Adobe uses for its photo editing platform. Adobe Creative Cloud is a SaaS model which is the present software Adobe offers for photo editing.

Advantages of SaaS

Part of what gives Adobe Creative Cloud its cutting edge in the industry is through merit of its SaaS structure. There are a few foundational benefits to the SaaS system which benefit both customers and vendors. These benefits include:

  • A more affordable up-front cost for clients than for the traditional model of purchasing software
  • A larger potential customer base for businesses due to the lower price point
  • Reliable monthly revenue as well as long-lasting revenue for businesses
  • Clients get regular, instant updates to software with no hassle on their end, including more available storage space on their devices
  • Customers get to experience the product for a low rate before deciding to commit long-term (trial period)

Customers benefit not only for the lower initial cost to try the product, but also have the comfort of knowing the software they access through the cloud online is the most current iteration available.

Businesses can count on sustained income through the stability of user subscriptions, allowing them to focus their efforts on continuously improving customer experience as well as the software itself. This makes them more competitive with other software-based businesses while also allowing them to appeal to as broad a demographic as possible, due to the low price point.

Building Your SaaS Platform

Because SaaS does not require precious computational space on a buyer’s devices, it is up to the seller to find a reliable cloud service to host their platform and perform behind-the-scenes computation. An ideal candidate for this is a host with a lower initial cost as well as the ability to scale as your business grows and you attract more customers.

In tandem with the cloud service provider is the necessary content delivery network (CDN). This ensures that, by providing a network of servers throughout the world, customers will reliably have access to a business’ platform any time they have access to internet. This means that when a customer logs in to a software service through the web, the closest server responds—which in turn creates a seamless customer experience.

Five Basic SaaS Tips for Company Success

Here are a few ideas to consider when forming your SaaS platform to ensure happy customers and continued business.

  1. Know your market audience and offer that demographic a clear service: A subscription-based service will do little to improve the circumstances of a customer who only needs to use your product once, or sporadically. Make sure your service will appeal to a wide audience, keep the price at a palatably low entry point for customers, and define why customers should follow along with your service.
  2. Know your competition and keep current: Has your competition developed a SaaS model? If not, what makes your platform more advantageous to customers? Market research is an excellent tool to find the pulse of what customers want, but a growing business should also look to their competitors for holes in their software or service and be prepared to fill those gaps.
  3. Strategize pricing for maximum long-term gain: Understanding your price point for potential customers is pivotal for maintaining long-term business. One way to attract customers to your subscription is through the “freemium” pricing model; in this model, valuable features are provided for free, with the option to pay for plans of increasing value, including trial periods.
  4. Find entrepreneurs in the field to help you continually develop your software: Because of the evolving nature of technology, it is crucial to your business to stay on top of trends in the industry and neighboring businesses. A SaaS business model is one that is constantly evolving and improving itself, so a growing business should look for top industry experts interested in refining their service.
  5. Choose a technology stack best suited to your goals: Choosing the technological tools as the backbone of your business is akin to building the foundation of a house: a business should choose reliable players they can work to their advantage.
    1. For example, for the user-facing components, HTML + CSS and JavaScript frameworks are well-known building blocks.
    2. For server-side components, a business can choose from Ruby, PHP, or JavaScript as the programming language for their platform.
    3. Back-end data storage is also a must. MySQL and PostgreSQL are two primary relational databases.
    4. Lastly, a business must choose a server to run their program. Two examples of this are Nginx and Apache.

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Conclusion

While the SaaS model is not necessarily the best business model in every case, its benefits to customers and businesses alike make it an excellent practice for many growing software companies. Its focus on customer experience as well as providing cutting-edge service set it apart from traditional business models and foster a truly competitive market in the industry. Understanding short-term versus long-term gain is crucial to growing your SaaS business, so it is important to invest in market research for a full break down of every dollar spent.

For further reading, check out this article on the SaaS Magic Number for maximum business efficiency!