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How the World is Slowly Getting Taken Over by the SaaS Cloud Business Model

SaaS Cloud Business Model

The advent of SaaS cloud applications has transformed the way businesses operate. It’s no longer mandatory for employees to be stationed at their office to carry out their daily operations. The SaaS model has invaded almost every department of an organization. From customer relationship management (CRM) to marketing automation – you’ll find a wide array of useful SaaS cloud applications for various tasks. 

The SaaS model offers several lucrative benefits for organizations in comparison to traditional software. This, in turn, has attracted modern businesses to adopt SaaS applications. According to Blissfully, the average spending per company on SaaS reached $343,000 in 2018. This indicates a 78% rise from the previous year. 

SaaS Average Spend Per Company
Source: Blissfully

Moreover, a recent Gartner report reveals that the worldwide market revenue from SaaS companies is expected to reach $151 billion by 2022. It’s only natural to wonder whether SaaS applications will continue to storm the internet and take over traditional software. Let’s find out. 

Understanding the SaaS Model 

Software as a service, abbreviated as SaaS, is a cloud-based software delivery and licensing model. The software provider typically uses cloud storage to host the application. This, in turn, lets users access the application as long as they have a computer and an internet connection. SaaS eliminates the need to install and configure software on a computer or a business network. 

Additionally, SaaS companies charge customers on a subscription basis. This means users have to pay a monthly or annual subscription fee to access the application. Typically, SaaS cloud applications offer different pricing plans to let users select one that best suits their needs. Many of them also offer free trials to let users get a hang of the application before making a monetary commitment. 

Salesforce, the widely-used CRM platform, is one of the most successful SaaS companies. It has an impressive user base of more than 150,000 clients including established brands such as Godrej, KFC, Schneider Electric, etc. 

companies growing their business with Salesforce
Source: Salesforce

If you’re a business owner, you’ve also likely used other popular SaaS applications such as TrelloMailchimp, and HubSpot. It’s now time for us to understand how SaaS cloud applications are disrupting the software industry. 

Advantages of the SaaS Model 

Today’s businesses often perceive SaaS applications as a preferred alternative to traditional software. Here are a few benefits offered by SaaS cloud applications: 

1. Time & Cost Saving 

SaaS applications are pre-configured and save you the trouble of downloading and installing them on your business network. You don’t have to find a vendor, purchase the software, and hire an expert to configure it. You can simply select your subscription plan, create your account, and start using the software. 

Moreover, you just need a stable internet connection and a computer to use a SaaS application. It eliminates the need to purchase and install specialized hardware. Moreover, the cost of maintaining the application is distributed across all its users and is usually accommodated in the subscription fee. This is in contrast to standalone software that requires a single user to bear the cost of purchasing and maintaining it. 

2. Flexibility 

Unlike traditional software, SaaS cloud applications don’t require you to pay a hefty license fee. The subscription model gives you the liberty to stop using the application whenever you want. You can switch among different applications depending on your budget and goals. Moreover, you can leverage the free trial option to try your hands at various applications to make an informed decision. 

3. Scalability 

SaaS applications are hosted on the cloud. They’re equipped to handle the load of multiple users. This makes them the ideal choice for growing businesses. Even if you hire more employees, you don’t have to purchase additional software to let them work. Moreover, SaaS solutions can be easily integrated with any software you’re already using. 

4. Security 

SaaS solutions typically deploy advanced security measures to prevent data leaks and breaches. This becomes particularly crucial if your business network falls prey to a cyberattack. If all your sensitive data resides on the cloud-based environment of the SaaS application, it can’t be accessed by hackers and other cybercriminals. 

5. Quick Updates 

SaaS companies are constantly improving their solutions by adding new features. The best part is that the onus of updating the software doesn’t lie with the user. Any update is automatically installed and configured by the software provider. 

6. Ease of Use 

SaaS solutions are designed to be user-friendly. You don’t need any specialized skills to use such applications. Moreover, most SaaS solutions include a knowledge base and tutorials to help users get a hang of the software. You also get access to plenty of useful analytics and insights that help you optimize various processes and earn more revenue. 

Additionally, SaaS businesses are known for their round-the-clock proactive customer support. Typically, they include a ticketing system or a live chat feature to let users easily reach out to them for help.  

7. Location Independence 

This is likely the most critical benefit of SaaS solutions. Cloud-based SaaS applications can be accessed from anywhere, anytime. This, in turn, ensures that your employees can carry out critical tasks even if they’re not in the office. It lets them efficiently manage their time and maximize their productivity. 

The Rise of SaaS Businesses 

Although the SaaS model has existed for decades, it gained widespread popularity only in the 90s. According to Crunchbase, there are more than 15,000 SaaS companies in the world, as of June 2020. Here are a few factors that have contributed to the rise of SaaS: 

Internet Penetration 

Back in 1995, less than 1% of the world population had access to the internet. Technological advancement has now made the internet affordable and accessible to many people. As of 2019, there are more than 4.1 billion internet users across the globe. It means more than 50% of the world population has access to the internet today. 

The widespread availability of the internet has made it easier for companies to adopt SaaS solutions. Providing internet access to employees has become more cost-effective than installing specialized servers for standalone software. 

Startup Culture 

In recent years, the world has witnessed a surge in the number of startups and online businesses. Cutting-edge technology has minimized the barriers to entry, thus allowing anyone with a computer and internet access to start a business. In fact, 17.4% of the U.S. population is engaged in entrepreneurial activity, as of 2019. 

However, such companies are often bootstrapped and don’t have funds for new-age infrastructure. Moreover, many startups operate out of coworking spaces and often hire remotely located employees. The SaaS model offers the ideal solution for such businesses. The latest research indicates that more than 80% of mobile startups will start using SaaS solutions by 2020. 

COVID-19 Pandemic 

While many companies had been contemplating embracing remote working and flexible work hours, the COVID-19 pandemic has escalated this process. As work-from-home becomes the norm, today’s employees want round-the-clock access to important data and applications irrespective of their location. This, in turn, has compelled many businesses to switch to cloud-based SaaS applications from standalone software. 

From carrying out regular meetings to collaborating on multiple projects – companies are looking for SaaS solutions to maintain business continuity. Applications such as Zoom and Slack have witnessed a sudden surge in the number of active users. In fact, Zoom reported revenue of more than $328 million in the first quarter of 2020. The popularity of the SaaS model will continue to grow as more companies transition to remote working. 

The Future of SaaS 

SaaS cloud applications are steadily replacing their standalone counterparts in every department. The trend will likely continue as the COVID-19 pandemic compels more employees to work from home. This, in turn, means many software developers and companies will try their hands at developing new-age SaaS applications. Therefore, SaaS businesses must constantly innovate and improve their solutions to stand apart. 

For instance, many SaaS companies including Salesforce have introduced the PaaS (platform as a service) model. PaaS lets users build custom apps by adding new functionalities and features to the core application. Additionally, SaaS businesses must integrate artificial intelligence (AI) with their applications to let users personalize and automate various processes. 

The latest research also indicates that by 2022, 72.4% of the world population will use mobile devices to access the internet. Therefore, SaaS companies will likely develop more mobile-responsive and mobile-focused solutions in the future. 

Conclusion 

Cloud-based SaaS solutions let companies maintain business continuity irrespective of where their employees are located. This, coupled with the easy availability of the internet, has contributed to the growth of the SaaS model. The trend is expected to continue as more organizations embrace remote working due to the COVID-19 pandemic. 

What SaaS solutions have you used at your company? Share your views in the comments section below. 

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