The software-as-a-service or SaaS business model has seen a dramatic rise in popularity in recent years, with more and more startups and established companies alike opting to pursue this high-tech avenue.
SaaS has gained traction thanks to the rise of cloud technology, which rapidly jetted into the mainstream tech landscape with the arrival of COVID-19. Consumers sought technologies to span the gaps that were formed by the pandemic and social distancing. Cloud technology was the ideal solution and with the cloud came software-as-a-service.
SaaS refers to software platforms and applications that are offered via the web, with cloud computing and data going straight to the cloud for storage. SaaS uses a subscription-type pricing model, which makes this option very attractive from a pricing perspective too. This was another factor that led to its rapid rise in popularity.
With so much buzz surrounding SaaS, many entrepreneurs have found themselves wondering, “Is SaaS a good business model?” and “Are SaaS companies profitable?” These are the precise questions that a cautious entrepreneur should be asking because they tend to prompt additional research. And let’s be honest: you can never do too much research when it comes to a new business venture.
What is the SaaS Business Model?
The SaaS business model is fairly straightforward. You develop a cloud-based software platform or application and build an online website portal to market the SaaS offering and a portal where users can access the SaaS platform.
You’ll need a tech team to perform routine maintenance and updates to the SaaS platform, as this is a key advantage from the customer’s perspective — the customer doesn’t need to handle any of the maintenance or updates. A SaaS business will also need customer service and tech support staff to provide customer support. This is a key component of a SaaS offering, with the best in the business excelling in this area.
Pricing is another consideration for the SaaS business model. Most will opt to do subscription-type pricing on a monthly basis, with many offering discounts for year-long and multi-year subscriptions.
The most successful SaaS business models involve tools and utilities — offerings that a user will need both today and years into the future. A great deal of research and time should be invested into the research process as you seek to select the right SaaS niche for your startup or product (in the case of an established company seeking to expand its offerings.)
Is SaaS a Good Business Model?
The SaaS business model benefits are many and varied. There are many advantages to pursuing this business opportunity, whether you’re a startup or an established business that’s ready to delve into the software-as-a-service industry.
Here are a few benefits of SaaS as the core offering of a new business venture.
• Low Overhead – There is some initial expense associated with developing the SaaS platform, the website and user web portal. But long-term, the overhead is relatively minimal. There is the cost of cloud computing, cloud hosting and cloud storage, along with employee-related expenses and marketing costs, but this overhead is far less than what you may see with most other business opportunities. The profit margin can be significant for a well-architected SaaS business model.
• Fully Virtual – SaaS companies can operate in a fully virtual manner, without brick and mortar offices. Not only does this cut costs, but it also makes for a more attractive work environment since work-from-home has become so very popular in recent years. The tech industry is very accustomed to virtual workplaces, so you can expect a high degree of productivity right out of the gate.
• Affordability – Affordability is a major driver for the customers who seek SaaS solutions. The customer prefers SasS because the subscription-type pricing is far more affordable than paying a huge lump sum licensing fee. There’s also no “lock in” or long-term commitment, which makes customers far more likely to make a purchase. This makes SaaS platforms some of the most popular in today’s tech marketplace, which translates into great business potential.
• Scalability – Many are attracted to SaaS because it represents a scalable, cloud-based solution that can grow as your customer base grows. Scalability is important, especially if you opt to pursue a business-related software-as-a-service platform, like a SaaS business tool, utility or other enterprise platform. What’s more, lots of customers are drawn to SaaS solutions for scalability as well. This is another factor that has made software-as-a-service so incredibly popular.
• Accessibility – Users are drawn to SaaS platforms in droves thanks to the high degree of accessibility. All you need is access to an internet connection and you can access a cloud-based SaaS platform. Accessibility is yet another factor that is propelling users toward software-as-a-service technology, resulting in more and more opportunities for entrepreneurs who are considering a SaaS business model.
These are some of the countless benefits of a SaaS business model. While these cloud-based software systems aren’t for everyone, a vast majority of entrepreneurs and startups will find that SaaS is a good business model that can generate significant profits.
Innovative SaaS Platforms and Digital Transformation to Drive Business Forward
At 7T, SaaS platform development is just one of our specialties. Our talented tech team loves delving into Digital Transformation projects, including SaaS development for web apps and mobile apps. We have extensive experience working with cutting-edge technologies and we can integrate these capabilities into our SaaS platform development projects for exceptional results that are truly transformative for our clients and their businesses.
At 7T, we develop transformative technology using an approach of “Digital Transformation Driven by Business Strategy.” The 7T development team works with company leaders who are seeking to solve problems and drive ROI through Digital Transformation. We then provide collaborative, multi-phased Digital Transformation solutions to clients in all business sectors, including SaaS startups.
Our offices are situated in Dallas, Houston and Austin, but our clientele spans the globe. If you’re ready to learn more about Digital Transformation-as-a-service or are seeking to develop an enterprise digital transformation solution such as a custom enterprise software platform, mobile app or another piece of technology for your organization, contact 7T today.