SAAS was a natural evolution from the previous business model of Hosting. Hosting was (and still is) a valid business model, but SAAS took it one step further.
ACV = Annual Contract Value or MRR = Monthly Reoccurring Revenue
SAAS business models are typically delivered via an Annual or Monthly contract. The model caters for both B2B and B2C.
The consumer or business subscribes to a contract, the vendor supplies the software as a service to those who licence the software.
Vendors of SAAS subscriptions typically enable the software for the customer, the software is then accessed by the customer via a web browser.
Given that SAAS is accessed via a browser, there are many advantages to the customer and vendor.
Little or no IT investment other than web browsers and the licence cost.
- Time to effectiveness – with little or no infrastructure, the customer is able to use the software quicker, get a return on investment sooner and achieve success within short time scales than traditional heavy IT project where infrastructure has to be procured, scheduled, commissioned and so forth.
- Less Project Management time – given the vendors of SAAS products have well defined delivery models, less project management work is required to become operational. The vendors assist the customer with their Best Practice project management experience given they have typically delivered the same service many times over.
- Configurable not customised – most SAAS products are highly configurable via Setting Options. This reduces the need to customize software, the vendor (or the customer) just configures the product to the requirements of the customer.
- Update Effectiveness – Customer instances are generally updated by the vendor. This reduces expensive upgrades that are normally required with onsite software installations.
- Less IT support – As the SAAS vendor provides the infrastructure, less internal IT support is required for storage, backups of data, virus protection, help desk support and a range of other services normally supplied by the internal IT support team.
The vendors of SAAS software gain major advantages using the SAAS model, as follows:
- Leveraged Infrastructure – Vendors can leverage the investment they make in infrastructure over many customer instances. This reduces cost and enable the vendor to On Board customers much faster.
- Leveraged Geography – Vendors can address more geographical reach with the SAAS model than on site software. Vendors can often deliver globally without personnel required in each geography they want to address. Most SAAS products can be delivered in remote geographies with no staff in the region.
- Code Deployment Effectiveness – Vendors in the SAAS model deploy code via automated delivery models to the customers instance. This ensure the customer base has the latest product enabling the customer to get the best array of features and functions, they are not left on old platforms that lack functionality.
- Metrics – SAAS vendors are typically able to report on the metrics of the software they deploy, for example, which functions are used the most, what new features are requested the most by customers. This enable better focussed development road maps, better customer experience and faster critical function point development.
SAAS has many advantages and a reducing list of disadvantages as the industry matures. SAAS enables small and medium size organizations to provide the same types of efficiencies that were previously the domain of larger enterprises but at a fraction of the cost and time to effectiveness.
Help a SAAS Buddy
Comment on your experiences and Help Out a SAAS buddy today 😊