As one of the fastest growing industries, Software as a Service, SaaS, is quite appealing to tech-savvy entrepreneurs for a number of reasons. Not only is startup capital much lower than many other online ventures, but SaaS also provides cost-effective operational solutions for businesses large and small.
If you have been hearing of the huge profitability in SaaS, you might want to know just what it takes to enter the market and whether or not you have to be the developer of the software you intend to provide. It is true that there is money to be made but first you need to understand a little about the industry to see whether or not it is a good fit for you. Remember, you will not be selling a tangible product so this is where you should start.
1. Begin with an Understanding of the SaaS Industry
Unlike expensive software that is sold to businesses for use in various aspects of running their business, SaaS provides the use of software located on a cloud service provider. In effect, you are renting use of the software for your business, and it’s provided as a “pay-as-you-go” service.
The biggest appeal to businesses is that the costs upfront are minimal and as soon as you contract the use of the software you will probably pay monthly for use of it. The only thing you need besides a computer is internet connectivity and a compatible web browser. The service also provides security for your data which is also a plus because that’s one less cost to your business.
2. Look for the Sale of a Service That Is Already Up and Running
Even software developers prefer to buy a SaaS business that is already up and running. The reason for this is because it’s easier to learn the industry when you have a product that is already serving businesses. In other words, it’s easier to learn the ropes if you can step into a business that is already running smoothly. What you will want to do first is get a proper valuation for the SaaS business to gauge future profitability.
This is done by looking at current MRR figures (Monthly Recurring Revenue) which is the simplest way to predict future profits. Bear in mind that SaaS is, for all intents and purposes, an intangible product that you rent out monthly. Not only will you be taking on current subscribers/customers but you will also be marketing to capture a larger MRR customer base.
3. Define Your Role in the Company
While you don’t necessarily need to be a software developer to own and operate a SaaS business, it does pay to have a solid understanding of the software you are providing. As the business owner, you will be making a great number of operational decisions, but you can always hire key professionals to run the tech end of the business.
One of the main tips for starting a SaaS business is to know your limitations while ensuring you have team members who are able to keep the software and server running smoothly. Your role is to ensure profitability and that’s where your focus should remain.
How SaaS is provided
As with other cloud services, organizations usually pay a monthly or annual fee for SaaS applications. SaaS providers usually bill applications based on certain usage parameters, such as the number of people who use the applications or the number of transactions.
Users access the applications via a browser. The majority of SaaS offers are based on a multitenant architecture in which a single version of an application is used for all customers of the service provider. Companies that use Software as a Service applications can change the configuration settings and adapt the software to their specific requirements within certain parameters.
However, the functions cannot be adapted to the extent that it is often possible with locally installed business software. In all cases, you need to ensure there is saas security for the clients.
How companies save money with SaaS
One advantage of SaaS is that companies do not have to install and run their applications on their own systems. This reduces costs for hardware purchases and maintenance as well as software licenses and support. The setup costs for Software as a Service are also generally low.
In certain cases, the use of SaaS can also reduce long-term software costs, although this depends on the pricing model for the respective offer and the usage patterns of the company. In fact, software as a service can also cost more than conventional software licenses in some cases. IT organizations should therefore carefully check this.
Thanks to the cloud services, companies can act much more flexibly: They can subscribe to SaaS offers on demand instead of purchasing licenses and having to install the software on internal computers. In the case of applications that require new hardware purchases, the savings can therefore be considerable.
SaaS: More flexibility for enterprise IT
Since the SaaS applications are deployed over the Internet, users can usually access the software from any device and location. SaaS offers usually support not only Windows, but also macOS, iOS or Android and also run on several browsers such as Google Chrome, Apple Safari and Mozilla Firefox.
Another advantage is the simple scalability. Just like other cloud services, users can also make greater use of individual services or functions with Software-as-a-Service offers if necessary. This is especially important for companies that grow rapidly or that require larger capacities due to seasonal reasons.
In addition, SaaS customers benefit from service providers being able to perform automatic updates of the software – often weekly or monthly. So companies don’t have to worry about procuring new releases or patches. This can be particularly interesting for organizations with limited IT staff.
SaaS will Continue to Grow
One thing you can look forward to is the fact that the Software as a Service industry is forecast to continue growing for several reasons. Not only is it cost effective because there are few upfront expenditures for your customers, but businesses like the fact that they will not need to pay a technology team to keep the software running glitch-free.
The demand for Software-as-a-Service (SaaS) solutions is increasing worldwide: According to current studies, “in-the-cloud” models are increasingly gaining ground among companies of all sizes as a cost-saving and efficient alternative to software purchase and software operation on their own. Broadband Internet at an adequate cost, established security technologies and high availability of online connections (“always-on”) promote this trend.
Analysts expect SaaS solutions to gain even more of the software licensing market in the coming years. This mainly increases the pressure to act on classic software providers. They must respond to growing demand and make their solutions cloud computing-enabled in order to continue to compete.
You make money and your customers save money. Isn’t that a B2B industry in the truest sense of the word? If you are looking to break into an industry with a future, this would be it.
