According to SaaS Mag, with increased adoption especially of Salesforce, Software as a Service industry is on a rise and is expected to be more than $130 billion industry by 2020. SaaS is referred to as a software distribution model in which a service provider hosts the application and makes it available for the customers over the internet. There are three main categories of cloud computing:
- Infrastructure as a Service (IaaS)
- Platform as a Service (PaaS)
- Software as a Service (SaaS)
SaaS is similar to ASP (Application Service Provider) and on-demand computing software delivery models. The SaaS model where the provider hosts the client’s software and delivers it over the internet to an approved set of users is like ASP. The on-demand software model of SaaS refers to when the provider gives clients network-based access to the software. The source code of the application is the same, and it is specifically created for SaaS distribution. When the new functionalities are to be rolled out, it is done for all users. Data storage again depends upon the type of agreement the provider has with the customers. Customers can opt for data storage locally, in the cloud, or both locally and in the cloud. Organizations can also integrate other software with SaaS applications using APIs.
There are certain advantages and disadvantages of SaaS applications:
- Organizations prefer to pay as you go, model, rather than purchasing software to install and additional hardware to support it.
- With SaaS being hosted in the cloud, businesses don’t need to worry about purchasing new servers and upgrading their capability to accommodate new users.
- Businesses can rely on service providers to automatically perform updates. This in turn reduces the dependency on in house IT staff.
- With data on the cloud, users can access it on the go from any internet-enabled device.
- Data security on the cloud is generally safer than most on-premise software. This is especially useful for small scale businesses that do not have IT support required to maintain cybersecurity.
With more than 80% of the applications being hosted in the cloud, organizations are confident that their operations no longer depend on legacy systems. The main beneficiaries, as expected, are small and medium businesses, which also have the best growth rates in 2018.
There are no potential disadvantages of using SaaS, but the organizations should strictly enforce the service level agreement (SLA) to mitigate any unwanted disruptions and security breach.
Almost all SaaS solutions are based on a multitenant architecture. This means that a single version of the application with a single configuration (OS, network, and hardware) is used for all customers (tenants). Horizontal scaling i.e. the application is installed on multiple machines to support scalability. Also, in some cases, a second version of the application is set up to offer the pre-release of the software (beta version) to some of the selected customers for testing.
Now, this is in contrast with the traditional software where multiple copies are of the software, sometimes of different versions, potentially with a different configuration and most often than not customized are installed across the various customer sites. Each version is based on a unique code in this traditional model.
There are mainly two varieties of SaaS:
- Vertical SaaS- Applications that resolve problems of a particular industry (For eg. healthcare, agriculture, real estate, finance industries).
- Horizontal SaaS- Applications or Products which developed for a particular software category but are industry agnostic
Previously, it was believed that horizontal SaaS is more sustainable as it is a more operation focused software. But SaaS developers have now understood that neither model is superior. In a highly competitive industry and in a bid to stand out, SaaS applications now enable the integration of third-party apps and existing business solutions. The solutions are now designed to meet needs across industries.
Nearly 73% of the organizations say that all their apps will SaaS-based by 2020.
Evolution of SaaS
Intuit Data reveals that 85% of small business owners plan to invest more in SaaS solutions that by 2020, SaaS will be the most disruptive technology. On average, enterprises across industries use between 25 to 100 SaaS applications.
As the competition among the businesses is on the rise especially in the SaaS domain, customer expectations are also rapidly changing, and businesses need to adapt quickly, or they can be left behind in the race. Keyways in which SaaS could evolve in the coming years:
- Incorporation of Artificial Intelligence: The two new and trending technologies AI and ML will lower the cost of the businesses that utilize the technology well. In the next 4-5 years, AI will become popular in SaaS applications.
- Incorporation of Blockchain: Unlike AI and ML, blockchain is relatively a new technology and at present blockchain and SaaS operate as different entities. As Stephen Cummins, founder of AppSelekt speculates: “One of the SaaS verticals that blockchain is predicted to heavily disrupt is government. Auditing, compliance, distributing benefits, tax collection, and government borrowing could all be revolutionized by blockchain.” Therefore, it is inevitable that blockchain will be integrated into SaaS applications sooner than later.
- Thought Leadership: This is the most trending way to generate more prospects SaaS companies can gain 15% more organic traffic by creating educational content rather than PR-focussed content. Yet, only 20% of SaaS companies publish content to educate. Others either don’t even have a blog or are purely company focussed. Educational marketing is here to stay and grow in the coming years.
- Customer Success: As the competition grows stronger and bigger, companies should adopt a customer focussed mentality and should be dedicated to the client’s success. Customer retention and profit take care of themselves if companies are focussed on providing value. Totango notes that only 17% of paying customers use their SaaS service daily, 50% never log in while others sign in less than a month. Therefore, it is vital to focus and increase:
- Customer retention
- Account Success
- Product adoption
- Upsells and Cross-Sells