SaaS (Software as a Service) Business Model

Just remember our old days. Days before the era of Cloud computing, the company needed to buys its own systems, storage and networking system and install necessary software. And everything like sharing, tracking payments, archiving are done. It was too much tedious and costly for the company even difficult to run the company to buy infrastructure and hire engineers to work and provide services.

Early in 1961 John McCarthy had claimed that “Computation may someday organized as a public utility”.

At that time it was sounded ludicrous.

After the digital revolution internet have reached everywhere & every devices.

Today SaaS Applications have been all around us. We have Google Apps for productivity tools,We have Microsoft Office 365 for amazing our daily works and stuffs. Similarly, Amazon Web Services, Dropbox, Slack and so on which have become part of our life and supports productivity to our work.

Software as a service(SaaS) refers as a software licensing and delivery model(a business model) in which software is licensed on a subscription basis and hosted centrally. We can say SaaS applications as “on-demand software” or “software pus service”. SaaS applications are Web-based software. They are considered as part of cloud computing plus with Infrastructure as a service(IaaS), Platform as a service(PaaS), Desktop as a service(SaaS).

SaasS Application have broaden its market all over the work expecting that business to become more reliant and company got more business advantages.

Even fifteen years ago, this term was not in common use — but Google Trends data highlights the consistent increase in popularity of users searching for information on SaaS worldwide:

How does SaaS Differs from traditional Installation?

While using SaaS applications you don’t need to install applications in your data center. You don’t need specific files, folder, codes on your own computer. All the data is stored in the cloud.You can access SaaS applications from any Internet-enabled device(that can be you PC, Laptop, Phones,tablets) and location.Since, SaaS Application are installed in your web-server.

There is payment for the access of SaaS. As many of SaaS Applications are free whereas many of applications can be accessed on subscription basis according to the plan of Application Provider.

Pros of SaaS:

There can be always pros and cons of any business model. SaaS is not for everyone but these positives speak to a large population of entrepreneurs.

Some of the advantages of SaaS are as follows:

Short-Term Cost Savings

Avoiding the initial expenses of tackling a software infrastructure is a game changer and is something the modern internet has recently made possible.

An IT infrastructure is expensive and the ability to avoid those initial fees is the most attractive aspect of the SaaS business model.


If a SaaS business gains initial traction, server space is not an issue. In traditional software companies there would need to be a plan in place to increase server capacity.

A lot of successful software companies experience a brief crisis to build it out. In the SaaS business model, the only hurdle is upgrading the hosting service.


Every company has a specific market but the SaaS business model expands that market. Anyone that can access a browser through the internet has the ability to use the software.


A recurring theme presents itself: not having to deal with infrastructure is a huge positive. The hosting service provider will have to deal with all upgrades concerning hardware and software.


If a top-tier hosting service is used with built-in redundancy with backups in place then a SaaS business becomes resilient.

In a self-hosted infrastructure, contingency plans are expensive. Leaving this up to the hosting service saves time, money, and resources.

Cons of SaaS:

There are some of the cons of SaaS business model too from the infrastructure point of view. The pros of SaaS comes with some sacrifices.


When outsourcing server space and other infrastructural needs you are also outsourcing security.

This isn’t always a bad thing but if there is a security breach with a cloud service that is being used the blame will still fall squarely on the shoulders of the SaaS company.


Outages happen with any server infrastructure. With a SaaS product and an outsourced cloud infrastructure, outages will be completely out of the company’s control.

Any outage is problematic but if there is an outage that is longer than normal, extra resources will have to be deployed towards damage control.


Depending on the industry category a company falls under, compliance can be a factor in the decision of hosting providers and any other vendor used. Using a third-party vendor can even be off-limits in some industries.


There will be customers that complain about performance with a browser-based software. These same customers will have a slow internet connection and a 2003 version of their internet browser downloaded.

Capital Intensive Scaling

The amount of money needed to hire more designers, more developers, and other parts of the team is high.

All of the money made in the initial stages of a SaaS business needs to be reinvested. This also includes capital for more security and storage.

Categories of SaaS Models:

The two overarching models of SaaS business model can be Low-touch SaaS and high-touch SaaS companies.

Low-Touch SaaS:

Low-touch SaaS provides service to client directly to their website with a free trial or free versions. The aim of this is to have the free trail user love the product and then they will purchase a subscription to the software. Subscription can be of multiple levels.

The products under the low-touch category should not be difficult to use. There are apps that can be learned intuitively or with an automated on boarding operation.

These products rely on a lot of people signing up for them as low-touch software is usually less money than high-touch software.

High-Touch SaaS:

High-Touch SaaS is opposite of Low-Touch SaaS. Rather than sending a customer to their website or product with a free trial, direct sales are often made with large scale companies and can pay a lot of money for service.

Sometimes the company will use the software to manage a process or they provide the software to an existing user base (their employees).

Since high-touch SaaS companies deal with enterprise level potential customers, the specific needs of each potential customer need to be met.

This means that resources need to be put towards the relationships built with customers.

It also means that customer support is more personal and turns into managing an account rather than supporting customers when they need help randomly.


We found that there are multiple benefits of SaaS Applications due to its flexibility and scalability. No doubt it reduces IT troubles, infrastructure costs, manpower, and also centralized organised data center have been boon for data security and reliability. So, Service provider application should go on SaaS business model which would be beneficial for both vendors as well as subscribers.

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