The Evolution of SaaS in Business

With COVID-19 outbreak, as many companies are shifting to remote working and digitising their businesses, SaaS has become more and more part of a company’s internal process. What will the future hold for SaaS?

Rising affordability of computers induced companies to take advantage of data storage beyond their own premises. Their growth gave rise to Application Service Providers (ASP), who maintained business software for clients on remote computers.

The Invention of the World Wide Web

And with the advent of the World Wide Web, a whole other software class called ‘Software-as-a-Service’ or ‘SaaS’ was created: email and messaging apps such as Microsoft Outlook, Slack and Google G Suite (Apps), to name but a few; plus those that augment our ability to store, organise and manage data more efficiently.

Unlike installable software, SaaS runs on cloud servers with near limitless computing power; hence it can scale with its user base and deliver drastically reduced customer operating cost per customer.

Because low-touch SaaS products don’t normally carry sale teams, they often use low-friction free trials optimised towards having the most user-friendly signup process possible – from this, the investment is designed to generate growing user bases at a low CAC, usually leading to aggressive scaling with capital-efficient margins.

The Internet’s Influence on SaaS

Accessibility, scalability and cost-efficiency are among the key features that internet infrastructure supplies to SaaS solutions. What’s more, cloud infrastructure allows providers to integrate smarter technologies such as chatbots, digital assistants, IoT devices, blockchain protocols and virtual or augmented reality into their applications, in order to make them more usable and provide better experiences for users.

In fact, most SaaS solutions are accessed via the Web, so that the resources are available from anywhere with an Internet connection. This makes SaaS solutions of special value when dealing with remote work teams or clients; it removes any potential OS incompatibility while placing key business applications in the hands of users at home as well as on the road.

The web-delivery nature of SaaS solutions is a boon to all these avenues of growth, because it allows a product to scale-up with demands on it, thus affording a business an elasticity in dealing with scaling infrastructure problems outside of the product itself (no need to upgrade hardware, save doing it just in time on a pay-per-use basis based on the changes), and also affords an elasticity to the issue of time and artificial IT bottlenecks. Automatic updates could be implemented at will. Failing wishful thinking about the realities of software-flaw fixes, this remains a boon to businesses struggling to break past their market-fit threshold; ultimately, it saves time and manpower on having to implement manual updates.

The Growth of SaaS

With SaaS, the software applications reside on the servers at the provider’s end, not on the user’s own hardware/computer, which eliminates enforcement of hardware barriers and responsibility for maintenance to the end-users. On the other hand, SaaS also allows end-users to expedite updates with new capabilities and functionalities to gain operating efficiency and productivity.

This allows businesses to establish an asset-lights model, where operational expenses (and therefore subscription fees) can be kept low, especially for sites that have high customer retention and low churn. This frees up resources for the business to innovate in terms of improving the product, while also pursuing subscriber base growth.

For SaaS businesses, it remains a capital-intensive task to scale. Marketing and sales often constitute large marginal costs, and, as a result, can absorb all the revenue growth before it’s even realised. SaaS businesses therefore need to measure capital commitment using the right growth-oriented leading indicators, such as lead volumes and churn rate, rather than going by conventional measures of margin or revenue; and re-examine how their go-to-market operations execute so that they can scale effectively.

The Future of SaaS

Traditional software requires IT departments to install, patch, and maintain the machines and systems – but S rather than on each customer’s machine, remove the tethers of licenses, hardware, and maintenance, and enable access from any device, anywhere. It makes applications available to users through any location or device.

But it is cloud technology that also allows them to update and evolve quickly, meaning that new offerings and applications will be generated faster. SaaS providers often ensure data security is maintained and, by complying with industry requirements for regulation and compliance, the customer’s data is better protected.

SaaS’s per-user pricing encourages this, since small and growing businesses often need this cost-efficiency, where recurring budgets are more manageable than one-time outlays. Use-based pricing further encourages this shift towards being clearer and more fair, since a cost is linked to a measurement such as data storage or API calls – and as SaaS products integrate with each other around certain workflows, this momentum or maturity continues. Many of the most efficient workflows, and the most accurate datasets, are created through co-ordinated workflows through various applications all owned by the same vendor, rather than separately maintaining a variety of products from all over the market.