SaaS business model

The SaaS (software-as-a-service) business model continues to gain increasing popularity around the world. Companies of all sizes are now embracing SaaS as the next best alternative to local hardware and software development.

According to a Computer Economics report, about 60% of all companies have integrated at least some percent of SaaS solutions into their business, nearly 36% aim to increase their investments in the near future.

Advantages of SaaS

There are countless advantages of software as a service over other forms, but here are a few of the most significant.

Cost

SaaS can provide significant savings for several different reasons. First of all, it eliminates purchase/installation costs in advance, as well as running costs such as maintenance and upgrades.

Instead of spending large amounts of money on hardware installations, SaaS applications can be easily downloaded and maintained.

Furthermore, pay-as-you-go models allow companies to pay only for what they use and do not pay much for unused licensing. SaaS can be especially useful for small businesses because it provides access to expensive, powerful software that would not otherwise be available through conventional purchasing methods.

Also, the subscription-based method eliminates the extreme financial risk of expensive software. Most SaaS services also offer the ability to scale up and down depending on your needs, making them very cost-effective and flexible.

Time

Many people say “time is money,” and fortunately, SaaS can save both. For many SaaS applications, installation is as simple as establishing an Internet connection and acquiring an application.

Furthermore, maintenance responsibilities are transferred from your IT department to the vendor itself. This eliminates additional uptime and downtime that may be required to upgrade conventional software. Finally, SaaS applications have a smaller learning curve, which means faster adoption in your workforce.

Ease of use and speed factor

Choosing and implementing a business application has never been an easy task. Factors such as time and effort accumulate even after successful implementation.
Cloud applications are implemented faster, which reduces installation and administration efforts.

The ability to quickly develop and implement will give the competitor an advantage, but also the ability to accelerate business advantages. SaaS creates value for its customers much faster, and also offers companies the flexibility they need to make changes when they need them.

Scalability and availability

Another great feature of SaaS is that the model you pay for provides fantastic flexibility and capabilities. Because the software vendor hosts from the outside, changing the usage plan is easy and can be done without notice.

In addition, the use of the Internet allows subscribers to access the software from anywhere with Internet capabilities.

Excellent and updated features

Having the best features for your business applications can actually make the job more interesting and enable high employee productivity. Your team can immediately use new features to make informed business decisions.

In fact, companies with traditional apps have to spend a lot on upgrades. SaaS benefits companies because these upgrades will be managed by service providers, allowing companies to focus or take advantage of new opportunities when and when they become available.

Security and functionality improve in the background.

Compatibility

The usual way to install software updates can require a huge amount of time and money. Even worse, version discrepancies between members of your workforce can lead to compatibility issues and wasted time.

With SaaS, subscribers can easily sign up for already upgraded services.

Security 

By using software as a service, you don’t have to worry about the security of your own solution. Most cloud providers put a lot of effort into security issues and are constantly working to secure all the data you store in the cloud.

Good security practices are extremely important for your customers to maintain trust in you, and thus the highest priority for most cloud vendors.

Eliminate data storage problems

The SaaS service can be run directly from a web browser without the need to download or install software.

This way, you avoid software on your computer and / or application that takes up space on your phone and needs to be constantly updated. Everything you need is already available to you in the cloud.

Limitations of SaaS solutions

Although the use of software as a service seems to be a very viable option for most companies, some drawbacks need to be considered. Here are some disadvantages of SaaS development:

Insufficient data security

This is one of the main concerns of companies looking to opt for a SaaS-based application model. Issues such as identity and access management must be resolved before entrusting any third-party service that provides sensitive information to your company.

Especially in the case of accessibility from a mobile device, strict measures need to be taken before any kind of sensitive data is disclosed to the service provider.

Difficulties in compliance

When your business data is stored in the service provider's data center, it is difficult to comply with national data protection regulations. Your company will need to learn which rules apply to your business, ask the right questions from your service provider, and remove any inconsistencies in the process.

Clumsy data mobility

The software market as a service is filled with startups, and many of them do not have enough experience to survive in a highly competitive atmosphere.

In the event of a failure or when you want to change service providers, the difficult task becomes to transfer critical data of your company from one service provider to another. Therefore, for such an event you need to be prepared with a planned exit strategy.

Problematic software integration

When working with an external SaaS provider to host multiple applications, integration issues with existing internal software may occur.

Internal APIs and data structures may not integrate properly with external software. As a result, you should always perform compatibility checks with all SaaS applications for better results.

How to implement SaaS in your company?

Before you decide to move to a SaaS solution, it is important to research the market and answer the question of whether SaaS is the best solution for your organization, what are the steps to full implementation and launch, and what are the possible limitations or challenges.

Transition to SaaS solution:

Whether you are migrating from local software to a SaaS solution or want to introduce software into your business for the first time, we bring you a few simple steps to successfully transition to software as a service.

Exploring software providers

There are a large number of software providers in the market that serve the same market. Some of them offer more features than others, but the differences are often very small and it is important to explore all the features offered by individual software.

Also, when talking about the SaaS model, it is important to emphasize the difference between vertical and horizontal software, while horizontal software is developed for a wide audience and offers solutions for multiple industries, vertical software is developed for a specific niche market.

Vertical software offers many more features and solutions, but often means a higher price. For this reason, it is necessary to set priorities and decide to what extent and what software functions are needed in everyday business and to what extent certain software can bring savings and return on investment.

Explore the integration possibility of existing data

Once you’ve selected a few SaaS solutions to suit your business based on modules, pricing, and other features, it’s time to address another very important item.

Often, you need your existing data for future use, and in order to continue using it, you need to integrate it into the new system. Investigate how it is possible to integrate your existing data, who is in charge of the integration, whether you will have to take care of that data yourself, or the software provider will do the job.

Also, at this stage it is important to define data rights and data security.

Take advantage of the trial period

Most SaaS solutions have a free trial. Some providers offer a trial period of just a few days, while others offer a three-month trial period, depending on the type of service and industry.

A free trial is a great way to make sure a particular SaaS is the right choice for your business.

During this period, you can explore all the functionalities and capabilities of the software, as well as get to know the way the software provider works. Specifically, create an insight into the customer support of the provider and the way of communication.

Educate employees

Although SaaS solutions are very easy to use and customization is quick and easy, it is important to educate employees and prepare them to use the new software.

If the software provider offers some kind of education on software capabilities and user experience, make sure to involve all employees, and if this option is not available to you, employ one or more employees to research the features in detail and transfer the acquired knowledge to other employees, especially the ones who aren't too familiar with the digitization.

Furthermore, define with all employees what exactly you expect from them, ie how you want SaaS to be used and what is the period for a complete transition to your new SaaS solution. Also, pre-determine the time period for adjustment.

Receive feedback

Once you have completed the trial period, introduced your employees to your goals and expectations, it is time to switch to a subscription or find another solution.

Before you finally decide if this particular SaaS is the right choice for you, gather feedback from all of your employees. In this way, you will create a detailed insight into the cost-effectiveness of this software, ie the usefulness of certain functions, time savings, level of productivity and other.

Also, since most SaaS solutions are charged per user, it is possible that at this stage you will find that some of the employees do not have significant benefits from using the software and you will be able to determine exactly how many employees you want to pay the subscription for.

Challenges of implementing SaaS

SaaS promises easier, faster and cheaper implementation for companies, which has prompted a large number of global companies to choose just this solution.

SaaS also offers automatic updates and patch management, as well as mobility where users can access them from any Internet-enabled device and location.

Despite their enthusiasm for SaaS and its benefits, companies should also prepare for the challenges of SaaS implementation, which according to Tech Target consist of:

Terms and conditions

The SaaS provider will provide their terms and conditions to potential customers, but people don’t usually bother to read these long and drawn-out clauses and often end up clicking “I agree” without actually thinking about what they really agree with.

A company that is not properly controlled and does not allow for easy data transfer between departments could eventually agree to something that would negatively affect them in the future.

Higher cost than needed

While a monthly option may seem like the best deal, a company may end up paying more in the long run because there are a number of hidden costs that a SaaS provider could charge its customers, which may not be immediately apparent to the company.

To avoid this trap, companies should make sure to research their needs carefully. If a company knows that it will use the software application for a longer period of time (a year or longer) and has a budget to pay for its software services per year, then it should choose this payment option as it can save up to 15% per year.

Service level agreement

If the software vendor does not initially provide a service level agreement, then it is up to the company to request a service level agreement from its software vendor.

Once again, if necessary, the company should amend this Service Level Agreement to better suit their specific needs.

Insufficient information about SaaS provider

Customers should request information from their SaaS providers about past performance levels and uptime. They should also try to find out what condition their SaaS provider will be in, both in the short and long term.

Therefore, a company should ensure that their SaaS provider can meet their needs by resolving service delivery issues within hours, not days.

Data rights

Customers should be given access rights to their own data and ensure that their data can still be recovered or recovered if their SaaS provider stops working.

Clients of SaaS providers should also confirm that their service providers will provide their information from a privacy and disaster recovery perspective.

Conclusion

Companies that use cloud applications with a SaaS business model are becoming more common, and the reason is that it is based on a subscriber model and has a number of advantages.

Old business applications are leaving the IT plans of many companies today. The ability to deploy quickly with lower investment risk has forced business owners to choose SaaS solutions over other alternative choices. While there are drawbacks to Saas model, they are really negligible compared to the advantages of most industries.

Companies are constantly looking for solutions that can meet organizational requirements such as data security and high performance, at the lowest possible cost, and SaaS meets the requirements in such scenarios.

Klara Markotić
Content Creator at MachineDesk with a particular interest in marketing and social media.
marketing@machine-desk.com