What is SaaS and how does it work?

Software as a Service or SaaS is a cloud computing service model where software applications are provided over the internet on a subscription basis. Instead of installing and maintaining software on individual computers or servers, one can access the software and its features through the web. SaaS providers host and maintain the infrastructure, handle software updates and patches, and ensure the security of the application. This model offers advantages such as cost savings, scalability, and ease of access from different devices and locations. Popular examples of SaaS include Salesforce, ServiceNow, Microsoft 365, Workspace, etc.

Microservices that has become very famous these days is one of the main reason for the success of SaaS. Because there are many services that run in parallel the Subscription model has become easier. With Docker and Kubernetes the management of these applications has been taken to the next level.

In my perspective, Software as a Service (SaaS) represents a distinctive business model. Under this framework, the software is developed for repeated use, ranging from a straightforward one-page PDF to a Word converter to more intricate web products like Learning Management Systems (LMS) or platforms akin to Coursera. Any product that operates without the need for direct human intervention, relying solely on the software or website to interact with users, falls under the classification of the SaaS model.

SaaS stands for Software as a service. Today we do not need to install all the software, most of the softwares are available online. Some of them are available free of cost and some others are available on paid or subscription basis.

SaaS (Software-as-a-Service) is a delivery model for software applications. Prior to the advent of Cloud Computing, software was licensed for on-premises customer use. The license model was often a one-time Enterprise License Agreement "buy out" with no recurring license fee - only annual Support and Maintenance Subscription for updates. That changed in the Cloud era as the subscription model for licensing closely aligned with the "utility" model of how customers wanted to consume software, and the software would run at vendor-provided data centers thus reducing significant on-premises overhead. So essentially the same software - same capabilities and features - are simply delivered through the Cloud using a subscription license.

Now a days many companies are working on the same model, SaaS stands for Software as a Service, where you as a producer solving a problem of the consumers or users by a software which can be in format of web, app or anything. It can be a B2B or B2C buisness too.

The benefits of a SaaS model are clear - freedom from: 1) buying, maintaining, upgrading, and housing (and cooling) the hardware required to support the software, 2) installing software patches and updates, 3) large up-front license payments for Enterprise License Agreements, instead paying for the software on an annual subscription basis, and 4) vendor lock-in. While switching vendors of a SaaS application can be complex and expensive (consider an accounting package example), it is markedly easier and less expensive than replacing an on-premises software implementation that has been in use for decades, probably far behind on patching, and for which the institutional knowledge has left the company over time.

SaaS offers benefits such as cost-effectiveness, scalability, automatic updates, and accessibility from any device with internet connectivity. It reduces the need for on-premises hardware and simplifies software management for users.

In my experience, choosing to go for a SaaS solution can differ depending on business needs and requirements. Use SaaS When: Your business needs standard software functionality, and you want a quick and cost-effective solution without significant upfront investments. Opt for Another Solution When: Your business requires highly customized software solutions tailored to specific and unique processes that may not be well-supported by existing SaaS offerings. Or when laws dictate data to not leave the premise (Eg. Saudi Arabia)

SaaS is the layered result of starting with packaged software, each step decoupling more of the onus of managing the mundane aspects supporting a business application. IaaS virtualizes servers, storage and networking. PaaS then adds the O/S, middleware, and runtime. SaaS then adds both data and applications. Each progressive step is akin to moving from features to functions to advantages to benefits. The benefit of SaaS is that it shifts the focus of and the division of labor between provider and consumer; it’s simply moving the interface between the two.

The predictable revenue model for SaaS businesses in 2023 crumbled as ubiquitous SDR tactics saturated prospects’ inboxes, diminishing outreach impact. Reliance on identical data vendors escalated Customer Acquisition Costs and decreased the uniqueness of pitches. This uniform strategy, paired with market overcrowding, made differentiating offerings harder, forcing SaaS firms to seek alternative, creative scaling and outreach strategies beyond the overused, inefficient SDR playbook of the past.

High customer acquisition cost, as most SaaS are built to address common business needs, which means competition is high. High value customer usually demand high customisation, neutralising the cost arbitrage of subscription model for SaaS.

-Limited visibility: It can be difficult for IT teams to keep track of all the SaaS applications in use. -Complex planning and budgeting: Poor budgeting and overspending can occur when IT and procurement can’t be certain about their SaaS subscriptions. -Proliferated vendor management: Dealing with 200+ apps often means managing 200+ vendors, contracts, and renewals. -Loss of control: The vendor manages everything, making you dependent upon the vendor’s capabilities. -Limited customization: Most SaaS applications offer little in the way of customization from the vendor. -Slower speed: SaaS solutions can have more latency than client/server apps.

Explore solutions for integration challenges, like API integrations and middleware, which can facilitate smoother interactions between SaaS applications and existing systems, helping to overcome compatibility issues.

SaaS was always sold as being more flexible and therefore able to save cost. However in reality with older SaaS to get services at reasonable cost you have to lock in for 1,2,3+ years and fix a minimum number of users or whatever UOM is used to price. Therefore the flexibility is all but gone. There is also the vendor lock in issue as mentioned above, with many vendors charging extra to extract data or forcing customers to use their consulting services to support data extraction.

Here are some examples of popular SaaS applications: 1. Salesforce: A cloud-based customer relationship management (CRM) platform that helps businesses manage their sales, customer service, marketing, and more. 2. Microsoft 365 (formerly Office 365): Provides a suite of productivity tools, including Word, Excel, PowerPoint, and collaboration tools like Microsoft Teams, accessible through the cloud. 3. Google Workspace (formerly G Suite): Offers a set of cloud-based productivity and collaboration tools, including Gmail, Google Drive, Google Docs, and Google Calendar. 4. Dropbox Business: A cloud-based file storage and collaboration platform that allows users to store, share, and collaborate on documents and files. 5. Zoom:

Whenever I think of SaaS, I think of Microsoft office and Netflix. Cloud based apps that users can connect to and use over the internet. Any email service is another great example of commonly used SaaS.

Everything on internet and your computer (we don't install anything anymore) - Adobe, Microsoft, Google, and everyone else. Any service/software you use for free or otherwise is SaaS.

Most of the examples were covered above but let me provide a few examples from my experience like Adobe Creative Cloud, Dynatrace, Datadog.

SaaS applications span various fields, from communication tools like Slack to educational platforms like Udemy. They provide essential services in business, entertainment, and everyday tasks, demonstrating the model's versatility.

Historically software - while very lucrative - has been difficult to build and scale. Now with the advent of Copilot & LLM's, competitors can create a solution practically at parity within a few days. Buyers then use agents (GPT's operating within web browsers) to auto-configure and pay 90% less. Whats next? Those with no "lock-in" (unique IP, market domination) don't have pricing power and will get squeezed. Is there more to the product than meets the eye? Probably. But will AI impact sales, marketing, support and development and cripple those who do not adapt? Absolutely. SaaS has enjoyed fat margins for decades. Creative Destruction will cause many of those redwoods to collapse, while smaller more nimble companies rise from the ashes.

SaaS integration with emerging technologies like artificial intelligence and machine learning for more intelligent and personalized features. Also, consider the role of microservices and serverless architecture in enhancing the efficiency of SaaS platforms. The incorporation of blockchain technology could also provide added security and trustworthiness to SaaS solutions.

What comes immediately to mind for the future of SaaS is a shift away from thinking about software in the first place. Nocode systems obfuscated the mechanics of coding onto connecting visual elements instead. Similarly, recent advanced in NLP is moving us quickly along to writing or verbalizing what we’d like to have happen. Perhaps some day, we’ll simply say, “Please create a system that accomplishes <key desired business outcome> with <type of user experience>.” We’ll no longer have to provision servers, install O/S, worry about software language choices, programming styles, interoperability, portability, scalability, maintainability, reliability, security, availability, usability, flexibility, and reproducibility of results!

The future of SaaS hinges on personalized, value-driven outreach and sophisticated use of AI for customer insights. Companies will prioritize differentiated, niche offerings and leaner, more targeted sales operations. Enhanced data analytics will refine lead qualification, lowering CAC. Emphasis on user experience, agile product development, and outcome-based selling will become crucial. SaaS firms will invest more in customer success to boost retention and leverage satisfied customers for organic growth, transforming challenges into innovation drivers.

The future of SaaS is marked by specialization, AI integration, and edge computing for reduced latency. Businesses will adopt hybrid and multi-cloud strategies, prioritizing robust security, seamless integration, and a positive user experience. Blockchain may enhance data security, while evolving subscription models will cater to diverse needs. As more and more facets of life move online, we will continue to see much more specialization and usage of SaaS model software.

I place a high degree of emphasis on integration. Does an app play well with other apps? Does it share information with other apps in the ecosystem? The answer is found in having a rigorous foundation to understand what data is being exchanged. In short, you have to expose data and expose it through a meaningful, reliable contract. If an app, regardless of how it’s delivered, doesn’t have APIs (and/or CLIs) for every function, it takes on a quality of being “arrogant“ in assuming that it is the MOM (Manager-Of-Managers). The business consequence is being forced to do business the inflexible way your SaaS provider thought you should do business, rather than giving you the flexibility to do business the way you’d like to conduct business.

As SaaS evolves, the integration of AI will be paramount for predictive analytics and automating CS, offering more personalized user experiences. We’ll see a rise in vertical SaaS, catering to niche markets. The consolidation by big tech may limit market options, urging antitrust conversations, but can also lead to more comprehensive platforms. Post-2023, expect emphasis on interoperability and partnerships, enabling SaaS to work with legacy systems and across services. Privacy/security will become even more central as data breaches grow costlier. Ethical AI use will be a focal point, ensuring biases are eliminated/trust is built. Environmental impact will shape cloud infrastructure decisions, promoting sustainability in SaaS operations.

The rise of SaaS has democratized access to powerful tools and services, enabling even small businesses and individuals to leverage technology previously reserved for larger enterprises. This shift has fostered innovation and competitiveness across industries.