Around 50% of the enterprises run their operations by depending on the SaaS platform.
The B2B Tech world is booming the Saas business models. Ever since John Koenig first coined the term ‘SaaS’ back in 2005, the software-as-a-service industry has been one of the fastest-moving and creative in the world. The Saas business model powering all the activities is unique, young and inextricably tied to the power of cloud computing. SaaS is considered the business model of today. More than 50% of enterprises run their operations with it, while 38% work exclusively on SaaS platforms. Companies offering SaaS business model services are also going into a period of development.
What is Software-as-a-Service?
SaaS or Software-as-a-Service is a delivery model in which a centrally hosted software is licensed to customers via a subscription plan. Any company that leases its software through a central, cloud-based system can be said to be a SaaS company. A SaaS company maintains responsibility for the servers, database, and other software that allow their product to be accessed and used.
What is the SaaS business model?
The SaaS business model means selling cloud-based software (typically accessed via the web app, but also sometimes via a desktop app) at a monthly or annual subscription fee. SaaS is now used by nearly every business and most consumers. Some of the most popular SaaS companies are Slack, Mailchimp, and QuickBooks Online. On the other hand, SaaS businesses that solve problems in B2B markets can grow to massive valuations much more quickly and predictably.
Some of the pros of SaaS business models are,
- Recurring revenue
- Highly scalable
- Low barrier to entry- Anyone who sees a need can hire an expert dev team to build a tool
- Tons of untapped opportunities in established markets, emerging markets and niche markets
- Allows for lots of different low-cost marketing strategies, including side project marketing and affiliate marketing
- Can create stickiness and loyalty, keeping the same customers for years
Some of the cons of SaaS business models are,
- Churn from customers
- Hosting and maintenance cost associated with scaling can make growth unsustainable if the pricing isn’t optimized
- High upfront cost- SaaS companies lose money for approximately one year while they work to build up a large enough user bases to break and move towards profitability
- Increased competition as new players enter all the time
The role of SaaS business models in B2B payments
The expectation for customers in SaaS services has drastically increased in the past few years. In many areas of B2B products and solutions, corporate purchasers now expect a consumer-like experience when buying for their organization. This has had a prominent impact on B2B SaaS firms’ customer acquisition strategies. There is almost a virality to products within medium or large organizations. The companies don’t buy products like Slack by making an internal corporate decision that they need a communications tool. They decide because certain teams and individuals use it internally and then it grows virally within an organization.
In the old ways, organizations procuring software had to navigate the usual workflows of requests-for-proposal processes, purchase order generation, then receiving an invoice and fumbling through the payment experience via outdated interfaces and gateways. Now, the rise in demand for a consumer-like buying experience and purchasers of enterprise SaaS are seeking a more seamless payments experience. This means the act of payment method itself is now a competitive differentiator for SaaS providers. This is especially challenging for software companies operating across borders as the number of payment methods grows. There are commercial cards, wires and a variety of domestic bank transfer networks, as well as slew digital wallets and payment gateways like PayPal. SaaS firms must be able to support them all in order to acquire the customers interested in their products.