Software-as-a-Service or SaaS product is a very common business model for the world of digital products.
As Bessemer precisely notes, nowaday there are 55 private SaaS companies that cost equal or more than $1 billion. Thus we have a good proof that it’s not just a hype on the market of the cloud-based products.
It’s a sign of rapid growth from the current $500 billion market evaluation to hit a $ trillion mark in the next few years.
What is a SaaS product?
I didn’t mean to write an article like SaaS for dummies. But still I want to explain what is SaaS in simple terms.
SaaS product is an internet software that all users have access to. Many of your favorite internet platforms are SaaS – Google Apps, DropBox or Canva.
The idea of SaaS app began to spread by entrepreneurs in the 90s. And to date it is one of the most relevant business distribution models. At least, 51% of companies already operate every process in the cloud. By 2020 this number is to increase to 73%.
To use SaaS platforms you do not need to install anything on your device. The application is hosted by a server provider. Both the maintenance and updates are performed on the host side, and are invisible to the user.
The amazing thing about SaaS software is that you don’t need any special equipment or specialists to use it. Go to the site – use the product – grow profit. Is there anything easier than that?
As a result, SaaS has rapidly developed as a model for delivering value to the user. And the market reacted. Large corporations like to absorb SaaS companies along with their products.
For example, In 2018 Microsoft acquired GitHub for $7.5 billion, Adobe acquired Marketo for $4.75 billion and Magento for $1.68 billion.
In short, SaaS product market has great potential. It provides an opportunity to become a participant in the “cloud” wars and choose any niche in its trillion-dollar market.
Thus, to become a successful player you need to understand the basic concepts and dynamics of SaaS.
Key characteristics of SaaS product
Entrepreneurs always keep an eye on the features and characteristics of SaaS. This is not surprising, since it’s a great opportunity to move into the big league.
The numerous advantages of SaaS relative to traditional software business model have certainly been a factor. But is everything truly so smooth? Let’s find out pros and cons of SaaS products.
Advantages of SaaS
- Accessibility. It is a client-centricity basis, which defines a cloud software model. The availability of your service is only limited to Internet connection. Your customers are able to entertain or work being as mobile as possible.
- Endless integrations. The number of cloud apps used is constantly growing. Thus, in 2020 the software integrations have become a must-have requirement. It is an advantage of SaaS for organizations, because:
- On average, the organizations with over 250 employees use 100 SaaS products.
- Organizations that have up to 50 employees use around 50 SaaS products.
- Easy scaling. At the heart of any growth is a bunch of metrics and complex calculations. Yet in technical context, only cloud-based software allows for smooth growth in number of features. This is particularly important for any MVP product.
- Data safety. The cloud security standards are so high, that through 2025 99% of cloud security failures will be the customer’s fault.
Disadvantages of SaaS
- Security challenge. Paradoxically, security is both a strength and a weakness of SaaS apps. Why? Because technical solutions like ISO / IEC 27017 standart don’t guarantee the avoidance of user data leakage. Anything can be the cause – from weak passwords to phishing attacks.
- Government regulations. Many SaaS solutions deal with data that is under state regulations. Thus, there may be a tech challenge to meet the state requirements. Whether it is a compliance to GDPR or HIPAA.
Types of SaaS
SaaS model is singled out as a separate market direction for a reason. The diversity of all the possibilities of the market for cloud solutions is simply amazing.
Let’s consider some of the available options. Here are the main types of SaaS:
- The CRM or customer relationship management software. In 2019, 91% of small business players use CRM. The goal of such systems is to automate the sales and marketing processes. The core features include lead’s pipeline and analytic dashboard. Salesforce and HubSpot are one of the most significant trend-setters in this area.
- The ERP or enterprise resource planning software. It’s a management system to manage every business process in real-time. The data shows that customer satisfaction with ERP software has increased to 68% in 2019. On the background of the market growth to $79 billion by 2026, your SaaS would be beloved from the day 1. Oracle and Acumatica are the famous players at this market.
- The Project management software. This type of SaaS product helps PMs to collaborate with their teams. This niche is expected to grow to $4.33 billion by 2023, so there is a good spot to start your own project. One of the strongest competitors in this field are Jira and ProWorkflow.
- The billing software. In simple words, this niche contains SaaS products to cover all payment procedures. It makes a payment and after-payment reports the single-click processes. This market is predicted to reach $20 billion by 2026. It’s great news for such SaaS providers as Xero or Tipalti.
- The collaboration software. Usually, this type of cloud soft includes features for communication and sharing the information. The size of this market is expected to be worth $16 billion by 2025. It is large enough to carve your own piece of the pie. The good examples of collaboration software are Miro and i done this.
- The eCommerce software. This kind of software includes everything you need to do business on the Internet. The core features include goods management and payment integrations. The ecommerce market is forecasted to reach $21.4 billion by 2020. It creates synergy with a Internet-based shopping, since by 2040 95% of customers will make purchases via Internet. To understand the eCommerce trend better, you can analyze such trend-setters as Shopify or BigCommerce.
- The vertical SaaS. It’s a specific SaaS product for a specific niche. It can be anything – a comic store, martial arts dojo, grooming salon or any other business. Vertical SaaS is a general name for the niche products made especially to optimize certain business processes.
Examples of SaaS companies
G2 made a list of the best software companies in 2019. The list is based on reviews of the real users. Let’s take a look at top 5 SaaS companies.
It needs no introduction. Google has developed 137 Internet-oriented products. We enjoy using their products every day. The Google’s product list includes search engines, maps, software for advertising, analytics and documents.
The company started as a little startup in 1998. Today, 21 years later it has $136 billion revenue.
Each of us knows what Photoshop, Illustrator or Flash Player are. Adobe owns more than 50 software products in the field of photo and video editing, printed media and marketing.
Slack was born in 2013 and currently develops three products. Their main product is Slack messenger, which mostly used for business purposes. Slack is easy to integrate with many third-party services.
When Darwin’s theory met email marketing, the world saw MailChimp. The company now owns three products.
The main one is MailChimp, an email marketing tool for developing and analyzing the email-oriented marketing companies. The number of letter sent by MailChimp is 15 billion per month.
As a result, the company earned $400 million with just 550 employees.
Do you want to start your business? Use a credible tool. Shopify is an eCommerce platform that owns four products. Its main product, Shopify, is an eCommerce platform for online stores and retail Point Of Sale – POS.
SaaS learning center
If you want to build a successful SaaS product, permanent and validated learning is a key.
Therefore, I highlighted 5 best resources to let you build own SaaS Knowledge Base:
- SaaStr should become your daily reading. Being credited as “the world’s largest community for business software”, it’s a great resource to upgrade literally everything you know about SaaS. Or find something you always wanted to learn. Also I recommend you to check Twitter of the founder of SaaStr, Jason Lemkin .
- ForEntrepreneurs by David Skok is another example of deep analysis and top quality content. If you want to improve your marketing and sales skills, you certainly need to check this out.
- PredictableRevenue’s blog focuses on the best sales strategies for SaaS. Do you want to know how the author reinvented the cold calls strategy? Take a look at this blog and find out how to scale your SaaS business.
- The most data-driven content in SaaS industry is Tomasz Tunguz’s blog. It nails SaaS concept using deep data analysis. It is very useful and interesting to read.
- And finally, SaaStock podcast. The SaaS Revolution Show has 60+ episodes. The topics are very informative and interesting to listen. They cover every SaaS issue. Enjoy it.
What is SaaS product? It’s a cloud-based computing software with a subscription basis and online access only. This type of soft provides customers with a mobile and comfortable access to speed up their productivity.
It’s a trend in the world of digital products. The statistic shows that 37% of all projects fail because of lack of clearly defined objectives. That is why, I always recommend always validate your idea first.
I hope you enjoyed this article. Feel free to write down your questions, feedback and comments.