SaaS Business Model – Features, Specs, Prospects



Senior editor

Parul Saxena

Chief editor

Last updated: March 5, 2021

The rapid development of Internet technologies and encryption techniques has led to the emergence of radical proposals that are alternative to installing traditional software. One of such solutions is the SaaS business model. What is it? What is unique about the model? Is it worth implementing?  Being a software as a service model, the approach allows you to connect and use applications via the Internet.


SaaS Business Model – The Basis

You may even have used Software as a Service without thinking about it when using cool tech zone or any other applications. For example, free email services for personal use can be one of them. Taking into account its great features, experts predict the SaaS business model to have high potential in the domestic information market. What is the reliability, versatility, and cost-effectiveness of this cloud model? How does its use save working time and money? Which business segments will be particularly beneficial to implement this solution?

There are some differences between the SaaS business model and conventional software:

  • The application is initially adapted for remote use
  • Multiple clients can use one software
  • Payment for software is either monthly in the form of a subscription fee or based on the amount of data
  • Software support is already included in the price
  • Software updates are transparent to users

Using SaaS, customers do not make license payments and do not own marketing software. They pay for the use of software, and this eliminates the possibility of spending significant funds for the purchase of ready-made applications. When you do not need software, you will be able to stop the subscription quickly.


Advantages of the SaaS Business Model

Several reasons why you need to consider implementing the SaaS business model include:

  • Lack of high initial investment for the purchase of licenses, expensive equipment, etc.
  • Minimal costs at the implementation stage. If there is no need for a serious adaptation of the software to the specifics of the customer, the company initially pays only for the software that you use.
  • Access to the service via the Internet provides mobility. Work with the service is possible from any place if you are connected to the global network.
  • The ability to quickly change software functionality.
  • Flexible and transparent payment system. The user has the opportunity to select the desired functionality (change it depending on the needs) and pay for it only.

What should the Buyer Know?

Before making a purchase decision, analyze the key indicators of the SaaS business model – the number of paying customers, company reputation, and user return rate. They indicate whether a business can potentially be profitable. Besides, it is essential to check the cost of attracting a customer and the LTV index – that is, the total profit from one customer for all the time you work with him. What is more, internet privacy is another important parameter to check. These data will help you assess the feasibility of buying a SaaS business model. Finally, make sure that the seller has the documentation for the source code and that all the business assets will be transferred upon your purchase.

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