There are many successful companies around the world today with SaaS business models. You can refer 10 Popular Software as a Service (SaaS) ExamplesMaybe you've heard it, maybe you are also using that product every day, for example: Microsoft 365, Google App or, Amazon Web server, etc. Now let us find out what this model is all about. 

Saas stands for Software as a service. SaaS and cloud computing are among the leading types of software trends today. With its superior advantages, it’s undeniable that SaaS is growing rapidly every day. According to a survey was conducted by Better Cloud, 73 percent of organizations say nearly all their apps will be SaaS by 2020 and it’s expected to reach 86% by 2022.

Therefore, in this post, we will show you What Is SaaS Business Model and How Does It Work? Also, let’s explore the benefits of Saas business model for your company.

1. What is Saas company? How does a SaaS company work?

SaaS Company is an organization that uses software to provide services to customers over the internet. The software is located on the SaaS company's server while the user is accessing it remotely.

The SaaS business model is changing the way today's business organizations operate. The vendor does not sell the software, they sell services based on that software. In short, a provider creates and maintains a web-based software that all users can access on any browser, any device. And then, the company can continue to host software and provide online support.

2. The Advantages of SaaS Business Model

2.1. Benefits of SaaS business model for the customer

Lower costs: The fact that Saas business model helps organizations save costs: including money, time, human resource, conversion costs and opportunity costs. With SaaS model, you do not need to install and run software on enterprise systems. That saves you a huge amount of money related to buying software licenses, installing hardware as well as building new databases.

Saas operates on a spot-on model with no upfront costs. You only need to pay a monthly or annual subscription fee to use CRM as a service. This is one of the reasons Saas is preferred by small and medium-sized companies who are careful about budgeting. During the use of Saas business model, it does not require you to pay the same periodic maintenance and support as on-premise software (about 15 - 20%).

There are 2 types that almost Saas business models focus on selling software as a service:

  • Freemium: you can get it free and then pay more to have advanced features
  • Premium: sale a package based on the number of accounts and usage time

Flexibility & Scalability: The Saas platform also offers customers flexibility and scalability in usage. If you set prices based on usage metrics, customers will pay more if they use more of the product. This is also beneficial for the customer. It eliminates the client's risk of having to pay a large expense for a product that is not sure to suit their needs.

Quick Benefits: Because SaaS tools are cloud-based, customers will see profits immediately. In most cases, it's as easy as registering with your name and email address for immediate access to product features.

Higher Adoption: The ability to use software as a service tool anywhere in the world has increased their adoption. If the user experiences the immediate benefits from SaaS, the chances of sticking with the product will be much higher. Free Upgrades: For many companies, downtime can be expensive. In most cases, it happened during the product upgrade. SaaS software upgrades are typically performed without experiencing user downtime or with shorter maintenance times.

2.2. Benefits of The SaaS Business Model Vendors

  • No Sales Friction: Most SaaS solution plans are available for under $ 100 per user over 1 month. This low price allows the-end user to calculate the cost of the software easily. In addition, it eliminates the sales friction that may becomes as the result of IT budget. Therefore, it can be the solution to fit your budget with a cost effective approach.
  • Recurring Revenue: Another benefit in the Saas model is that it allows you to have recurring revenue streams which helps you to control churn.
  • Pivoting & Improvements: By using software as a service, you can continuously update new features for your product. This helps to increase customer retention and attract new visitors during the upgrade.
  • Easier Free Trial Support: With Saas, you can provide instant user support as well as free trial packages after 7 days or 1 month. Users can fully experience the product for free or switch to a premium plan when they want more premium features whenever they want.
  • Easier to Update and Support: As a Saas vendors, you have full control over the system where the product is being developed, making it easier for you to update and support.

3. The disadvantages of the SaaS Business Model

Although there are many advantages, but the SaaS business model still has limitations.

  • Security: The software's server is located at the service provider, while the data is kept on the "cloud", so you will feel insecure, fear of information leakage or theft. However, as the cloud 4.0 platform grows more and more, this limitation is gradually overcome. Vendors have put more emphasis on data encryption, and are committed to strict confidentiality in the terms of a Service Level Commitment (SLA). Therefore, before choosing to use SaaS software, you should carefully check the security.
  • Internet connection: Users need an internet connection to login and use SaaS. In the case the network connection is not possible, usage will be interrupted. This can be a bit inconvenient sometimes, especially when you are in an area with no internet connection. Currently, vendors are developing support for offline use of these software.
  • Not ready with the updated version: The benefit of automatically updating the new version of the software for free can also be inconvenient. Some people are familiar with the old interface and features, until the new version is updated it makes them feel overwhelmed and it takes some time to get used to it.

4. The more popular types of SaaS services

  • Customer Resource Management (CRM): Allows users to manage customer information and track sales.
  • Enterprise Resource Planning (ERP): A SaaS application best suited for large organizations.
  • Accounting and Invoicing: A SaaS application focused on billing and invoicing services.
  • Project Management: Software helps to manage projects.
  • Web hosting and e-commerce: The remote server handles the online presence of companies.
  • Human Resources: SaaS tracks employee engagement, manages payrolls, hiring processes, and more.
  • Data Management: SaaS products support data analytics and protect business data.
  • Tools: Tool to help find leads on all channels. This is considered as a powerful assistant to increase potential customers. The niche market is extremely potential that you should not ignore. Lead Flow, Smart Post, Facegroup

5. SaaS Growth Strategies

Increase Organic Traffic: Organic search drives 51 percent of traffic to your website and 40 percent of sales. That's why search marketing teams continually set the goal of increasing search traffic. Search engine optimization is an indispensable part of any plan to market products or services. We offer professional SEO services that you definitely don't want to miss. Find out about the services that we bring in the SEO service package here.

Introduce New Marketing Channels: In recent years, the online marketing method has gradually dominated because the market has been affected by the complexity and potential of the internet. Here are some marketing channels you can take advantage of:

Add Product Upsells: The probability to sell more to new customers is only 5-20% while the probability to sell more to existing customers is up to 60-70%. Therefore, growing the Saas business model with upsell tools is an important strategy.

Faster. Stronger. Cleaner: Another idea for Saas growth strategy is that make your website faster, stronger and have clean source code that will attract users. Eliminating bad codes can make a big difference that increases the speed of the software, it improves satisfaction and increases product loyalty.

Add an Affiliate Program: If you need to reach a large global audience, you can add an affiliate program. Affiliate marketing is the process by which an affiliate earns a commission for the marketing of another person's or company's products. Every time an affiliate sells to you, they will receive a commission as compensation.

10 FAQs About Software as a Service


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