benefits of saas business model
SaaS or Software-as-a-Service is one of the most thriving branches of the cloud computing market. According to Gartner, the service-based cloud application industry will be worth $143 billion by 2022. This means the global public cloud service market is likely to show significant growth in 2021. Even if the figure diverges to some extent, the numerous forecasts conducted on SaaS industry trends demonstrate that this market will only get bigger and bigger.
That’s because SaaS is the best business model that offers countless benefits. For this very reason, new entrepreneurs love to follow this particular software distribution model. To understand why SaaS is termed the best business model, you need to comprehend the fundamental benefits that compel customers to use this model.
Software as a Service has a significantly low upfront expense. Why?
Instead of making a huge upfront investment to purchase the software outright, users simply agree to a contract that binds them to avail services for a specific duration. Resultantly, they just have to make monthly or yearly payments.
More importantly, it relinquishes the need to purchase and install a new version. That’s because the software is located on a secure site over the internet. So, upgrades, improvements, and additional services can be rolled out without any hassle at any point in time. Users can access them instantly by engaging in more services on the internet.
In SaaS, clients aren’t required to buy any hardware because this model provides a subscription service that binds you to pay every month or year.
Regular payments take the shape of monthly recurring revenue, popularly known as MRR. Since SaaS companies provide a service and not a product, projecting exact revenue can be slightly challenging. Though customers pay you some cash upfront when they signup or subscribe to your service. The amount earned cannot be accounted for as revenue unless you have earned it. Until then the cash should be treated as a liability that users can ask to be returned at any moment if they fail to deliver the service.
Therefore, revenue recognition is considered an essential part of the SaaS business model.
While other products may come up with a ‘next gen’ version; SaaS relentlessly provides small and consistent updates to keep customer retention high.
This is primarily due to the nature of being in the software business. Software vulnerabilities can put customers’ information at great risk, so frequently assessing the security is a top priority in the SaaS business model. Because SaaS companies host their own products, they have the luxury to push updates, release new features and enhanced versions at their sole discretion.
When you combine this with customer communication, SaaS businesses can be highly responsive to their users’ feedback and needs.
With the proliferation of SMART devices such as tablets and smartphones; more and more people are keen to access software services over the internet. They want to use these services rather than buying and downloading software to leverage fully operational computers and networks, which is more tedious and less versatile than mobile devices.
Companies also prefer to go with Software-as-a-Service because it is more uncomplicated and inexpensive for their customers to purchase the software, which helps them boost their sales that’s why most CEOs are investing in SaaS Businesses.
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