“Impossible is not a fact. It’s an opinion. Impossible is not a declaration. It’s a dare.” Aimee Lehto, a creative professional, is credited with penning these words for an Adidas ad campaign featuring American boxer Muhammad Ali. Who would have thought that those words would pertain to SaaS application development as the industry continually breaks stereotypes on what was considered possible?
The first software as a service (SaaS) company, Salesforce, began operating in 1999. Since then, the SaaS industry has steadily grown, garnering a market value of around $152 billion in 2021. It is expected to reach $208 billion by 2023.
What is SaaS?
SaaS is a method of delivering web or mobile applications over the internet for a specified subscription or service fee. It is a simple, user-friendly solution for companies to subscribe to licensed software centrally hosted on the cloud.
A pivotal feature is that it can be easily scaled and offers widespread connectivity to the business world.
The Traditional Licensed Software Model
Traditional software providers deliver a copy of their software for customers to install on their hardware via a CD or as a downloadable.
The software license will usually detail the number of permissible users (and computers) that companies can install the software for, its usage and redistribution provisions, as well as geographic or other usage-related restrictions.
Licensors may offer training, customization and integration services for optimum implementation and operation of the application.
The SaaS Model
Alternatively, SaaS users do not receive the software because it is a cloud computing solution. It is neither provided physically nor is it installed on the customer’s hardware, and generally, end users cannot access the source code for commercial SaaS products.
Customers who subscribe to a particular SaaS sign up via a services agreement that incorporates the necessary information about accessing the software. The agreement will also mention any restrictions, including user numbers, resource utilization and usage volume limits and additional services such as training and integrations.
Why Companies Opt For SaaS
Google Docs, Salesforce, Canva, Trello, BigCommerce, Adobe Commerce (formerly Magneto), Dropbox, Slack, Spotify and Netflix are a few extremely popular SaaS applications that most of us use every day.
SaaS provides organizations with seamless, secure, regularly-updated critical software without draining cash on maintenance and updates.
Because SaaS offers affordable pricing and global access and simplifies work extensively, employers pay lower costs for their teams to work with intricate software and IT infrastructures. These applications carry classified business data that must be safely stored yet accessible by any authorized user anywhere; therefore, SaaS providers diligently work on data security.
Successful SaaS providers are those who promote a safe user experience by continually strengthening their infrastructure and network security to protect their clients from cyberattacks. And as the SaaS infrastructure grows more reliable, secure and agile, an increasing number of businesses across industries will continue adopting it.
What You Need To Know Before You Build A SaaS Platform
It is evident that entrepreneurs and businesses choosing to invest in building a SaaS platform are moving in the right direction. Here are some pointers that will help along the journey.
Comprehensive Market Research
The market for SaaS providers is highly competitive, so anyone thinking of starting up should have dedicated research and development teams to tap into current market trends. Gathering data on target audiences and demographics, unique selling points and value additions will help you draft a reliable MVP based on important features.
Critical features ideally include:
• High-end data security.
• Easy access and high availability.
• High-performance UI/UX.
• Scalability and flexibility.
• Subscription-based billing.
• Automated provisioning.
• Third-party integrations.
• User analytics.
• Reporting tools.
Defining Your Client Acquisition Approach
Strategize about how you will incentivize clients. By defining your client acquisition pipeline, you will boost your chances of developing a successful SaaS platform. You should typically spend approximately two years on product development and refinement and aim to cover acquisition costs within 12 months to avoid succumbing to the “death valley curve.”
The longer it takes to recover costs and start a sales cycle, the more likely it is for the platform’s success to be derailed since SaaS products usually have a longer sales cycle.
SaaS applications depend on secure, large, scalable and accessible databases to run seamlessly. Keep in mind that the database you choose, whether relational or nonrelational, must be easy to set up and maintain.
You should consider factors such as:
• Security, complexity and scalability.
• Data isolation.
• Automatic updates.
• Response time.
Subscription packages are a great way to offer value to multiple audience pools. Your pricing model will depend on your value-adds and your target verticals. You may choose to initially provide a freemium mobile app and later convert those customers to premium purchasers.
According to Drew Houston, cofounder and CEO of Dropbox, “People do not choose Dropbox because it has this much space or gigabytes. They choose it for the experience.” With a current market value of $8.54 billion as of September 9, 2022, it is safe to assume the company knows a thing or two.
SaaS benefits for service providers include:
• Stable revenue generation from subscription-based clientele.
• Scalable customer base resulting from low initial costs.
• Long-term customer loyalty due to consistent iteration and improvement in your SaaS model.