SaaS (software as a service) is a type of software delivery that includes a cloud provider which enables end-users to access information or applications from different devices by using an internet connection and a browser. SaaS companies are subscription-based and they don’t oblige users to download and install apps or programs.
The video below unveils important facts about SaaS companies.
In this article, we’ll review the features, advantages, and disadvantages of SaaS, and make the difference between SaaS and PaaS clear. We’ll also unveil SaaS security issues, key metrics, and find out how to build a SaaS company in 7 steps.
Features of SaaS Technology
The software distribution model can be characterized by the following features.
- Minimum time on installation. Unlike traditional companies, the configuration and installation of SaaS apps are simple and fast. Product owners roll out their new applications to users seamlessly because of cloud computing. SaaS providers simplify the processes and reduce costs on software and hardware maintenance by freeing users from the need to install apps on their computers. As a result, people save time on all these processes and issues that can arise.
- Low cost. SaaS companies are a great choice for entrepreneurs with limited budgets. By running this business, product owners can avoid the upfront hardware costs, costs on maintenance, and upgrades.
- Flexibility. New apps you create, their additional features, and new clients make up flexibility. This point is critical if you want to have a competitive advantage over rivals in your industry. SaaS gives it all: features, users, and customized solutions for them. If you take into account these points, be sure that your company will scale faster.
- Integration. Now when SaaS solutions have integrations with other essential apps, customers don’t have to pay for other necessary software. Users can benefit from these integrations without paying twice.
- Quick updates. Companies constantly update their apps to provide customers with the most recent features. Clients can always be sure that updates won’t take a lot of time.
Let’s review the main advantages and disadvantages of SaaS companies.
Advantages and Disadvantages of SaaS
Nowadays, more and more SaaS companies emerge in the market. This phenomenon is caused by the potential advantages a company can bring to its owner and customers. First of all, there's a point in mentioning its lower initial costs since the subscription-based business model has no up-front license fees. Secondly, SaaS is easy to set up and deploy and people will experience a minimum number of delays. Thirdly, customers can easily access SaaS apps. Users only need to have a browser and internet connection.
SaaS companies always provide customers with different subscription plans to choose from. They also ensure that their clients have a minimum number of complications, that’s why they manage all updates by themselves.
Yet like any other service or company, SaaS also has several drawbacks. The disadvantages include:
- limited variety of apps;
- lower speed;
- the possibility of losing access to data in case of problems with the internet;
- concerns about the privacy of personal information.
Now that you know the pros and cons, it’s time for you to find out the difference between SaaS and PaaS. It will help you choose the right one that suits your main purpose.
SaaS vs PaaS
Software as a service is a subscription-based software delivery service that uses browsers and the internet to distribute apps to clients. Third-party providers manage the applications to deliver them to the end-users. Apps run without any need to download and install. Customers just need to open their browser and have access to the internet. Examples of SaaS include Dropbox, Cisco WebEx, and Google Workspace.
Platform as a service gives users access to hardware and software tools available over the internet. Then, developers use these tools to create apps. People who develop software or apps are the main target audience of PaaS. It provides them with a platform where they can design excellent software. With PaaS, developers don’t have to spend all their efforts and time on developing an application from scratch and writing codes. Examples of PaaS include Microsoft Azure, Linode, and Amazon Web Services.
Simply put, SaaS and PaaS are different ways of using the cloud to achieve your goals. SaaS is a subscription-based software that can be accessed by using the internet and browser whereas PaaS supplies hardware and software tools to developers that allow them to create apps within a platform.
The differences between the models are clear, so let’s review the problems that might occur when handling a SaaS company.
SaaS Security Issues
Although SaaS companies are considered very profitable and successful nowadays, they still have some drawbacks. Security issues are the biggest. The problems are associated with data and access to it. There are possibilities of data theft by malicious actors, limited control over the users who can have access to sensitive data, inability to control data when transiting to and from cloud apps, limited security, and possible attacks towards cloud providers.
Now when you are aware of SaaS security problems, we need to find out how to create a SaaS company efficiently.
7 Steps to Build a SaaS Company
- Think of a product that can solve a problem
- Develop a business plan
- Ensure that your idea is valid
- Legalize your company
- Enhance your product
- Choose the right strategy
- Keep an eye on your metrics
A lot of people think of running a useful and profitable company yet not all of them succeed. To do everything right, you need to follow 7 steps.
- Think of a product that can solve a problem. You need to outline a clear problem and provide a solution that addresses it. Make use of your profound knowledge and skills in the industry to solve a problem better than competitors do. Show your expertise.
- Develop a business plan. There’s no need to write a lot because a one-page pitch is enough to start. The plan should cover the strategy, tactics, business model, and schedule. The strategy section should contain a unique value proposition, target audience, problem and its solution, and competitive advantage. Tactics should encompass sales channels and approaches. In the business model section, you need to list revenue streams and expenditures. The schedule should include your action plan.
- Ensure that your idea is valid. To start, you need to list all the assumptions you have about your product and the benefit it can bring. By asking questions and answering them, you can figure out whether your idea will work and bring you and customers value. There are several ways you can do this: have a conversion with your potential customers, conduct a competitive analysis, or create a simple version of your product.
- Legalize your company. Although to create the software you shouldn’t comply with regulations, yet to serve the market — you should. Look through the rules and regulations to ensure that you follow them and do everything according to the law. Select a business structure to which your company belongs and register it after going through all the necessary processes. To register, you also need a good name, so pick a suitable one for your business.
- Enhance your product. Consider creating a minimum viable product (it includes the main features which customers can already use to give feedback). It’s essential for further product development. MVP helps minimize costs and collect data important for future changes in the product. Accumulate the ideas of your team to obtain the best result. Avoid outsourcing core product development since there’s a risk of information leaks. It’s advisable to stick to your initial team.
- Choose the right marketing strategy. You can make use of a variety of marketing tools and channels to market your product. From pay-per-click ads, traditional advertising, email marketing to paid ads on social media platforms. It’s a good idea to use several channels to communicate your message and educate leads about your product. However, make sure to use the most effective channels. Run an experiment to figure it out.
- Keep an eye on your metrics. If you want to start a company and ensure it runs smoothly, then you need to monitor your key metrics. When tracking your metrics, you can obtain several useful insights about your business. If you do it, you can improve the performance of your company, solve some issues before they become a real threat to your business, make strategic decisions, etc.
Let’s review the key metrics in more detail.
Key SaaS Metrics
To find out whether your company is growing, it’s essential to keep an eye on the key metrics. Let’s review the main metrics that will help you find out the performance of your business.
- Customer churn. The rate defines the percentage of consumers who stopped using your service. The metric is crucial for assessing customer retention and the general condition of your business. When measuring the monthly churn rate, try to collect as much detailed information as possible to find out why customers stop using your product. Analyze personas of these clients and unique data. It will help reveal the causes why they leave, eliminate them, and stop the increase in customer churn.
- Customer lifetime value. The metric identifies the sum of money each customer spends with your brand during your relationships. This measure shows how valuable the client is and whether it’s worth attracting this customer. Pay attention to the metric, it should be higher than the costs a brand spends on this customer. Check out our guide to find the formula and calculate the measure for your SaaS company. By estimating customer lifetime value you and your investors can have a clear picture of your business health and the value it carries.
- Revenue churn. Besides customer churn, you also need to have an understanding of your revenue churn. Different users have different impacts on a company’s revenue since plans vary in price. Some customers might pay a high price, some of them might use free plans. So, the loss of subscribers who buy expensive plans will harm your income. If you lose clients that use free plans, it will influence only the number of potential users of paid plans.
It’s time to dive into the most successful SaaS examples to get inspired by famous companies.
Top 3 Successful SaaS Examples
To become successful, SaaS companies create various software solutions that simplify clients’ lives. They develop programs for personal use and huge enterprises. We’ve prepared the 3 most successful SaaS companies for you to grab some inspiration, so let’s dive in.
Slack, a SaaS solution for every business founded in 2009, is now a billion-dollar company. With more than 12 million users worldwide, the brand managed to get a $2.8 billion valuation. Its excellent visual design helps grab customers’ attention in a crowded market.
Businesses prefer Slack for its seamless user experience and great UX design. The company has a favorable position because the platform is easy to use. Several facts explain Slack’s success: it’s the main source of information for teams, it provides 24/7 help with its Slackbot, and enables users to access other necessary apps. The platform’s convenience enables it to compete with industry giants.
Zoom, a famous video conferencing platform with annual meeting minutes amounting to 3.3 trillion. It took the company only 4 years to become a platform used by millions of people all over the world. This SaaS company attained success and high profitability because of its focus on product development and customer-centered approach. Zoom managed to prosper and grow fast because of the sudden increased demand for group video calls.
People prefer the platform over others because of its competitive advantage: it doesn't require participants to log in and users can open it in a browser. The company provides an easy-to-use product and high-quality video and audio compared to others.
Adobe, a computer software company with more than 12 million individual and team subscriptions. Founded in 1982, the company gained great success and popularity worldwide. The series of strategic business decisions and marketing efforts created a buzz around the brand and enabled it to prosper. The company excelled in the industry because of its ability to offer valuable use cases for different users and their projects and cater to digital workspaces.
The famous SaaS company has several competitive advantages that make it an industry leader. It’s worth mentioning the company's software's ubiquity, extensive customer base, and international recognition.
Congrats, now you know features, metrics, advantages, disadvantages, and great examples of SaaS companies. Make use of your knowledge to create a great SaaS company or promote the existing one with our bulk email service, web push notifications, and chatbots in Telegram, WhatsApp, and Facebook.
- This article defines the term and unveils SaaS history.
- In this article, you’ll find great examples of successful SaaS companies.
- This article provides readers with key SaaS metrics.
Last Updated: 12.01.2022