What is a SaaS Startup? Meaning, Examples, Business Model, and Benefits
Many years ago, the only way for you to benefit from some technical product was to install it directly on your computer. Right?
But these days, you have your operating system (iOS or Windows, macOS) built into your laptop or mobile device and a web browser like Chrome or Internet Explorer. And that’s all you need.
Everything else you can access without any local installation.
You launch your browser (and I never close it), open a new tab in your browser, enter the URL of that Service or software you want to use, and log in.
This is SaaS meaning.
SaaS stands for Software as a Service.
The software part means that this product has some technology that provides core value to you as a user of this product.
And Service means that you kind of rent it out. You don’t own it. As long as you pay for it (usually monthly), you can access and use it.
Let’s take a closer look at the SaaS definition and business model.
How Does SaaS Business Model Work?
So, basically, Software as a Service is all about a business model where you pay a particular software provider for their software platform.
It is some kind of renting a digital infrastructure and using it according to your needs.
In most cases, it implies the following:
- Your software product is hosted in the cloud that is maintained by a SaaS provider;
- A SaaS product is licensed on a subscription basis—usually monthly or annually;
- And finally, any SaaS product’s core value is provided to you via some technology, some code, and some software that is maintained by a SaaS provider.
SaaS Technology Side and SaaS Architecture Features
Surely, Software as a Service is also about some specific technical peculiarities.
Technical basics of Software as a Service architecture include:
- Multitenancy. This is an architecture model in which a SaaS platform shares the same infrastructure and codebase for different users.
- Simple Customization. It would be strange if different companies had to use exactly the same SaaS platform as their competitors. That’s why SaaS providers give great customizability options.
- Accessibility. A SaaS platform may be easily accessed by numerous authorized users from a web browser or a mobile app.
SaaS Examples in eCommerce and other Domains
SaaS business model is very popular among various ecommerce businesses that apply them for interaction with clients or workforce automation.
Here are just a few good SaaS examples you might use or your employees might use within your business are:
- Freshbooks for bookkeepers
- Mint.com for personal finance management
- Pipedrive CRM for sales reps
- Clickfunnels for digital marketers
- BambooHR for recruiters
- Jira or Basecamp for project management
- Canva, Photoshop, or Figma for your designers
- Slack, Dropbox, Gmail, and Zoom for everybody
Most of these SaaS applications you can use via web interface using your web browser or as a mobile app.
In the description below this video, I’ll drop you a link to our google document with an advanced list of existing SaaS products for business in every category you can imagine.
Now, what is not a SaaS?
As I already mentioned One-time purchased software that you need to install locally. You don’t rent it, you buy it once and own it after that. Also, there is no Service part in it. You just bought the product, one-time and use it.
What other types of online services and software products are not SaaS?
Since 2011 in our agency we built about 200 software products. All of them I can put into 3 buckets:
- Social Networks
- Online Marketplaces
- And SaaS products.
For example, Facebook and Instagram are not SaaS. They are social networks.
Shopify and Amazon are not SaaS. They are Online Marketplaces.
While speaking of SaaS ecommerce, mind that most online marketplaces, as well as social networks, are not SaaS.
There are 2 reasons:
- You don’t pay there any kind of subscription. You pay transaction fees or you don’t pay at all. Unless you’re using paid ads on Facebook.
- Second, there is no specific software component that is useful for you in your business. These services provide connections between you and other people which makes that software useful for you. But not the software itself. You’d never use a social network or the marketplace alone without other people sitting there too. Right?
How SaaS Management Is Different?
Now, there are a couple of things about how the SaaS model and SaaS products are different from all previous types of tech startups and products.
There are a few benefits for the end-user and a few advantages for the Software as a Service founder.
Let me start with the end-user:
- Software as a Service user doesn’t need to install anything and that’s a big-time saver.
- Also, there are no huge requirements as to resources on local computers. All resources are on the server and you can access most SaaS apps online even from a pretty old weak laptop. So that’s a money saver
- And finally, users don’t have to buy full software licenses, like a one-time lifetime. You pay as you go. Just month by month. And this month you can pay 10$ for 2 employees, and next month 50$ for 10 employees if your business is growing. So again, that’s a money saver.
Now, if you want to build and launch your own software. What SaaS model will do for you, and what kind of benefits you’ll get?
1. First of all, with the Software as a Service approach, you just need one server where you host a database with all your user’s data and business logic. You don’t have to do local user installs and resource-consuming version upgrades. Every time you release a new feature, you just need to update one server – your central server, and no need to go and visit each client business on-site to update all their computers. Right? So SaaS is much easier and cheaper to build and maintain.
2. Second big reason SaaS is great for the founder: you can scale your SaaS business worldwide w/o changing anything in your infrastructure and w/o a need to visit other countries. The same server will be able to serve users from different cities and countries.
3. Also, because of easiness to set up and maintenance and scale, business costs are pretty low with the SaaS model. Margin sometimes can be up to 50-70% of your revenue. So SaaS products are a pretty marginal business.
4. Finally, unlike social networks or online marketplace, it’s much easier to grow Software as a Service products into a sustainable business.
When it comes to releasing your SaaS product to production, you can get the first paying user even on day one. If your software does the math, provides some user stats, or allows drawing, painting, bookkeeping, selling, etc… you’ll keep that user forever.
But if you’re launching a social network or online marketplace, you’ll always have a complex challenge to overcome. We call it the chicken-egg problem: your app is not helpful before you have hundreds or thousands of users on it simultaneously.
How about SaaS Security?
SaaS applications can be accessed from a broad range of devices. And do you know what it means? Surely, security concerns.
Fortunately, SaaS infrastructure providers take responsibility for security.
That’s why they do their best to provide the most efficient safeguards.
The list of such security measures can include but is not limited to:
- Top-quality data encryption;
- Built-in access management options;
- Access verification and tracking;
- Labeling of different data groups according to their sensitivity;
- Data backup and recovery mechanics.
As you may already understand, most of your security concerns will be handled by a SaaS provider who cares for their reputation.
That’s why SaaS solutions are often listed among the most secure technology business models.
SaaS Distribution Model
SaaS meaning also implies various distribution models.
Actually, there’s nothing too complicated about how is Software as a Service software distributed.
We may distinguish two such models.
In the first one, a software vendor sells its products and services directly to the customer.
The second model implies a software vendor distributing their product through third-party vendors who sell SaaS services or products to customers.
We’re ready to become this intermediary who helps you leverage SaaS platforms provided by the world’s most notable SaaS software providers.
We will use SaaS architecture to customize it and tune it up according to your needs.
So that you will take full advantage of SaaS software architecture.
SaaS Marketing or How You Can Benefit from the SaaS Startup Trend?
SaaS is growing mainly due to overall technology adoption growth in the world by big and small businesses.
73% of organizations are either switching or planning to switch all their systems to Software as a Service platforms.
Software as a Service providers build their SaaS marketing strategy on this fact, as well as the above-mentioned benefits of this model.
Gartner predicts that by the end of 2022, end-user spending on SaaS products will reach $489 billion.
So we’ll have more robots and more software and hardware products replacing jobs and human labor.
That’s why it’s an excellent spot to be in.
And when I’m saying this, I don’t just mean buying and integrating existing SaaS products within your business to make it more productive.
I’m encouraging you to think about building and launching your own SaaS products.
It’s easy like never before, and it’ll provide you with a nice residual recurring income within your existing business.
And if you’d like to explore further an option to launch your own Software as a Service product, I’ve got another video for you here where I’m teaching three methods of how small business owners can leverage software in their business.
After that, if you’ve got an idea and are unsure if it will fly and whether people need it, I’ve got one more video for you. How to generate and validate your SaaS idea?
You’ll get a three-step framework that will guarantee that you build something that people want to buy.
Let’s Summarize
So, let’s summarise:
As you see in our agency, my team and I try to generate a lot of free content for our audience and clients.
Apart from this youtube channel, we also publish a new article on our blog at softformance.com every Wednesday. It’s for small biz owners willing to launch their Software as a Service.
And you know, until a year ago, we’ve been hiring 3rd party editing agency for our blog posts. But then we discovered SaaS named Grammarly, which provides automated proofreading and text editing tools powered by some unique Artificial Intelligence algorithm.
And now, instead of paying hundreds of dollars to that agency, we spend less than 10$/month on Grammarly monthly subscription, and the quality is almost the same.
And this is just a straightforward example of how you can benefit your business by using SaaS and launching your own SaaS-es.
You can build it once, set it up on the server, and scale it worldwide. And you need 2-3 people on board to provide excellent customer support to serve thousands of paying users and earn tens of thousands in monthly recurring profit.
The formula is pretty simple. Margin is pretty high for Software as a Service products.
Most of the products we build for our clients and our products are Software as a Service products. And I love it.
Now, If you run a business and would love to launch your own software, Software as a Service Product, or mobile app, and if you would love to get my personal help with it, then leave an application in the link below this video, and we’ll get back to you within one working day.
Otherwise, join my Facebook group, Software Founders, and prepare yourself for the tech startup in the best possible way. The link is also below this video.
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See you in the next video…
And remember, people need your software…