You do not need to buy, install, and upgrade software these days. The time when organizations used to buy software deployed on compact disks is over. Some even call it software trash now. Cloud computing, driven digital transformation has changed the facet of software once and for all. This revolutionary model is called — SaaS, the new buzzword of the tech town.
SaaS, an acronym for software as a service, is a public cloud service model where third-party providers launch the software on a subscription basis over the internet. It does not work offline, as is the case for traditional software and eliminates the burden of creating and managing an in-house software.
Salesforce’s Customer Relationship Management (CRM) software, Slack, ClickUp, Trello are some popular SaaS examples. The remote accessibility option offered by SaaS products is its USP, which is the reason why startups and enterprises are readily investing in building SaaS products that dominate the market.
Almost half of IT industry leaders are planning to make SaaS the go-to option to build a digital ecosystem — 49.2% of organizations are planning to invest in SaaS as part of their digital transformation initiative. — Digital Transformation 2020 Report, Net Solutions
However, the process of setting your footprint with SaaS is a strategic journey to undertake.
Here’s your ultimate guide to building and growing your SaaS business and sustaining its value in the times to come.
What is the SaaS? Understanding Software as a Service
SaaS is simply about renting software from third-party providers on a pay-as-you-go basis, i.e., you only pay for what you use. Here almost everything is managed by the cloud SaaS provider. The anytime and anywhere availability of the software with a working internet connection is its unique selling point.
Here is a glimpse into what all you will be managing for organizations.
Implementing SaaS brings economic advantages as your IT department only manages the users at its end while facilitating a single sign-on (SSO) option for easy access.
Questions to Ask Before Venturing Into the SaaS Business
Here are some frequently asked questions about SaaS.
1. What is SaaS Business Model?
If your organization bases its source of revenues from a SaaS-based product, you are running on a SaaS business model. Startups and enterprises should be investing in the SaaS business model, as nearly 73% of companies agree that they will be adopting SaaS applications for running business operations.
And, now that the impact of COVID-19 on businesses brings the challenge to access in-house software, the SaaS adoption rates are likely to increase. This is an ideal opportunity to disrupt the market with an innovative SaaS solution.
2. What is the Difference between On-Premise and SaaS software?
It may take years to build an in-house software that works in alliance with a businesses’ needs, and by the time it gets released, new requirements pop-up. This means that the product needs iterations.
With SaaS implementation, you handle the burden of creating and managing the software, which offers economies of scale for any organization.
Here is a table that summarises all the major differences.
|1. Can run offline||It is cloud-based, thus requires an internet connection to work|
|2.Needs to be maintained by the organization||The third-party SaaS product provider maintains the application|
|3. One-time licensing cost||A subscription-based application model where you pay-as-you-go, i.e., you only pay for what you use on a monthly basis or even annual|
|4. It is highly secure||Security might be an issue due to its online deployment|
3. What is Multitenant Architecture?
The majority of the SaaS businesses work on the multitenant architecture, i.e., a single software as a service architecture of an application that is owned by you and will be made publicly available to be used by multiple people (tenants). In short, it is a single application with a universal UI and UX that is used by everyone that subscribes to it.
4. What is Micro SaaS?
Micro SaaS is a software as a service model where an individual or a small team works and launches a product that involves lower investments, low risk, and is location-independent. These products target a narrower software as a service market, require no funding, have a predictable revenue stream, and a small user base.
5. What are the Two Types of SaaS?
There are mainly two types of SaaS categories, which include:
- Vertical SaaS: If you create software that answers a specific industry’s needs, it is a vertical SaaS product. For example, creating software for media, food & beverages, healthcare, or the sports industry.
- Horizontal SaaS: If your software focuses on the operational category, it is called horizontal SaaS. In simple words, the software is generic for all industries. Here software as a service example could be a product for marketing, sales, R&D, or even HR operational departments.
6. What are the Different Categories of SaaS Products?
There are mainly three categories for SaaS products, which include:
- Packaged SaaS: These are SaaS products that help manage a particular process in an organizational setup. Any CRM SaaS product is an example of a Packaged SaaS product.
- Collaborative SaaS: These are SaaS products that help manage collaboration and communication across an organization. These types of SaaS products are quite popular now as remote work is gaining traction. Zoom and Trello are examples of collaborative SaaS.
- Technical SaaS: These are SaaS products that act as tools to improve technical processes within an organization. These are products that generally prove helpful in the agile development journey.
7. What is the Difference Between SaaS, PaaS, and IaaS?
Before investing in building a SaaS business, it becomes imperative to understand how it is different from PaaS and IaaS. IaaS is Infrastructure as a Service where an organization rents a small amount of hardware and software to host the application’s virtual machine. Here the organization’s virtual machine is simply moved to the cloud.
In the case of PaaS, the cloud provider manages the system software, thus helping mitigate the IT department’s burden. The organization only has to take care of the application code and its deployment.
In the case of SaaS, organizations simply rent an application that the provider manages completely. An organization’s IT department only has to ensure that an integrated sign-in process is facilitated across the organization.
Read about an in-depth comparison between IaaS vs PaaS vs SaaS here.
Now that we know what SaaS is and other related facts, lets’ see how to finalize a SaaS idea.
How to Come up with a SaaS Idea?
With the increase in SaaS churn rates, it is taxing to make an impression and gain early adopters. According to a McKinsey report, SaaS vendors must show an annual growth rate of more than 20% to survive. If that is the case, a robust and innovative idea is a must to make a difference.
One should be able to come up with a new idea or feature set. To start with — your idea should be well thought off, should have a validated proof of concept, and should solve a real problem.
Here are some methods enlisted by Tom Zaragoza, founder at Vocalmatic, that can help you come up with an idea people would pay for.
1. The Job Search Method
Enter the URL for a popular job search website on the web browser such as Indeed and enter an industry name in the search box. For example, if you are interested in the automobile industry, enter the keyword “automobiles” in the search bar.
This is one of the results that appear under the job search for automobiles for Mexico region – Auto Parts Delivery Driver.
Now when you click further, you can see the job description. Here’s one of the responsibilities that the above job demands.
Here you need to emphasize on the relevance of keywords. Create long term keywords that combine the “job industry” with “job description that can be automated.”
For instance, if you focus on the job description above, and combine “Automobile” and “Delivery Documentation,” and add a suffix “software” to it, you get a long-tail keyword, i.e., “Automobile Delivery Documentation software.”
Google it to find the relevance of this long-tail keyword. If there are SaaS products based on the idea, repeat the process until you find a never-tried-before idea.
2. The App Store Method
This is a simple method to find what other SaaS service providers lack that you can fix and improve on. Visit an app store. For instance, you are interested in building an eCommerce SaaS solution — Magento App Store could be a good starting point for research.
Likewise, you can also research through Apple and Google apps stores to look for relevant apps related to industries that interest you.
Look out for popular apps as well as apps with one-star reviews.
Popular apps will help you see what people are liking and what is currently working in the market.
“One Star” review apps will help you analyze what other market players lack that your SaaS product could address. These types of reviews are mostly long sentences where people enlist the problems they are facing.
3. The What-They’re-Using-Excel-For Method
This process starts with interviewing people working across industries and your workplace. Engage in conversations across social media channels, create surveys that can be spread across your organization, and can be sent over the email.
The questions should be framed around — “What do you use spreadsheets for?”
If they mention the tasks that are managed through spreadsheets, you are in for luck. You can build a SaaS solution for them that automates and eliminates the burden to manage spreadsheets. This could be your innovative idea.
As an add-on, here are the top trends that should inspire your SaaS application development idea.
- E-learning and remote work tools
- Artificial Intelligence and machine learning
- Focus on creating vertical-specific SaaS Products
- Developing and creating Micro-SaaS products
- Embedding chatbots for on the go support
Reasons for SaaS Failure and How to Avoid Them
The demand for SaaS is high, which means that many small-scale and large-scale businesses are investing in building Software as a Service (SaaS) solution. However, most of them are failing to create a lasting impression.
An estimated 92% of SaaS companies fail within 3 years despite growth and funding. — Lighter Capital
Several bricks go into building a robust wall. The same is the case with a SaaS product. If you do not work cautiously on building the foundation, the wall is likely to fall.
Here are some reasons why SaaS products fail and the corresponding solutions to overcome the challenges at hand.
1. Missing Product-Market Fit
A product-market fit is achieved when you create a product that solves the problems of your target audience. If there is a need and you manage to address it, you have achieved a product-market fit. In such a case, your customers become your marketers, who endorse your product through word of mouth.
But, if you fail to address the problems, and develop a SaaS solution that is not pragmatic, failure is evident.
- Market Research. Before coming up with a SaaS idea, understand the needs and problems of your target audience. Brainstorm around ideas and create a list that seems promising.
- Analyze existing SaaS businesses in the market to see if they already have a product based on your shortlisted ideas. Also, analyze where the existing solutions lack so that you can offer a better experience.
- For new ideas, create a proof of concept to check the technical feasibility of the idea.
- Create discussion groups, a combination of development teams, stakeholders, and limited test users to validate the need for a specific SaaS product in the market.
- Finalize the idea that would make a difference after running a vote across the discussion groups.
2. Great Product, No Marketing
An approach that most of the SaaS businesses follow — Develop a product, agile test it and launch the product in the market, announce it on Twitter or a few other social media channels, and wait for it to be the next big thing in the market.
It does not work that way. Instead, the idea should be to adopt the product mindset over a project mindset. Marketing is equally important because, without effective marketing initiatives, even a great product is likely to go unnoticed.
- Create a SaaS marketing plan by looping in marketing, sales, customer service reps.
- Focus on SEO wherever you are using content. The better you rank on Google, the better the chances of conversions. You can also spend on Google AdWords for gathering a better reach.
- Publicize your SaaS offering through social media posts, email campaigns, blog posts, guest posts, etc. You can also try influencer marketing, which works wonders nowadays.
- To gather eyeballs on your product, offer free trials to your customers. Urge them to try the product and receive valuable results. Your pitch should be talking about how your product will make a difference in the user’s life.
- Stick to low-price, low-complexity rule. These are the two parameters that customers will judge you for.
- Maintain a healthy relationship with the early adopters. If they stick to your product initially, send them a gift, something that Freshbooks does. This SaaS company sends a cake to its loyal customers to maintain an ongoing relationship.
3. Inability to Respond to Change
The inability to showcase agility skills when responding to change leads to product failures. For instance, your SaaS product was launched a month ago, and you receive feedback that you fail to respond and iterate through, failure is the result.
If you respond to feedback but spend a lot of time to iterate through the changes, failure is evident again. In short, you need to showcase agility skills to stay relevant and valuable.
- Launch an MVP before moving to the full-scale product. The minimal viable product that focuses on core functionalities should be the focus. This can be a good starting point for gathering loyal customers and honest feedback to start revisions.
- Emphasize on building your SaaS product by following the microservices architecture, i.e., smaller modules of the bigger application that are loosely coupled. It makes it easier to iterate through the suggested changes as the change to a particular module does not affect the other modules’ functionality. Thus, fewer downtimes.
- Maintain a lower amount of cruft in the code, i.e., the unwanted parts of the code. The lower the cruft, the quicker it is to identify and fix bugs.
Most importantly, give it time. Overnight success is a myth; do not fall for it. Instead, drive constant efforts towards — Launch. Market. Gather Feedback. Iterate.
11 Point Checklist to Ensure SaaS Success
To succeed in your SaaS triggered digital transformation initiative, there are a few best practices that align well with the changing times and needs.
Here is a glimpse into some of them:
- The focus should be to create a proof of concept followed by a prototype and then an MVP.
- Create interactive advisory videos for your customers to help them understand the working of the UI and other noteworthy software as a service benefits.
- Offer distinctive and affordable pricing models that are better than your competitors. These offerings should be easy to understand, as complex pricing models can put off your potential customers.
- Work on enhancing the customer experience across touchpoints to eliminate churn rate. These days the end-to-end customer experience of most of the SaaS products seems disconnected. You can make a difference here by offering seamless sign-ups and intuitive and responsive UX.
- Deploy data analytics to analyze the reasons behind churn rates. These results can also help to identify SaaS product shortcomings so that you can improve on them.
- Offer valuable and on-time customer support as it acts as a key ingredient to SaaS vendor success.
- Offer regular and timely updates and bug fixtures to stay one step ahead of the competition.
- Ensure that the SaaS product can operate efficiently with lower bandwidths so that it can run uninterruptedly with low-speed internet connectivity.
- Look for strategic partnerships to expand your user base and reach across the globe. This can help gain scaling advantages for your SaaS product, which can act as a cash cow.
- Analyze your product portfolio from time to time. Make informed decisions by filtering out product offerings and services that offer little to no value and are showing no signs of growth. According to McKinsey, SaaS vendors that manage their portfolios achieve enterprise-value-to-revenue multiples twice those of passive portfolio managers.
- Offer integration capability for your SaaS product as it can help you offer an omnichannel experience to your target customers.
SaaS is a software as a service, public cloud model that delivers software through the internet on a subscription basis. The evolution of SaaS through the years is noteworthy. The subscription-based SaaS model is gaining traction, and the current crisis just brings the tailwinds for the software industry.
A report by Gartner predicts that SaaS revenue will grow to nearly $143.7 billion by 2022. This brings the opportunity to rely on SaaS business models to source revenue streams when most industries are going the SaaS way.
This writeup covers is a comprehensive guide on SaaS that answers everything you should know before venturing into this as a service business.
In the words of Drew Houston, Co-founder, Dropbox — Learn Early, learn Often!