How Startups Can Leverage SaaS App Model to Build a Profitable Business?

SaaS or Software-as-a-Service is going to be the future of software development. Here are some of the unique features and characteristics of SaaS applications.

9 min read
Dec 27, 2021

Software-as-a-Service is gaining a lot of traction and momentum these days. Software such as Wix, Slack, MailChimp, Zoom, Dropbox, and others that we regularly use are all based on the SaaS app model.

A report by BetterCloud finds 70% of the business apps in use today are SaaS-based and by 2025, this figure will go up to 85%. After 2022, more than 86% of the companies will be purely functioning on SaaS. So, from these, we can get pretty much the idea that SaaS-based new startups and businesses will flourish going forward.

BetterCloud

(Source: BetterCloud)

However, extremely profitable SaaS niches are dominated by the biggest industry players, making it difficult for emerging startups to carve a space for their apps. This has led to the rise of the SaaS and MicroSaaS models. Let’s first clearly understand what is SaaS and MicroSaaS.

What is SaaS & its origin?

Saas stands for software as a service in cloud computing. The saas business model is a plan in which the business profits by offering cloud-based programs to clients. SaaS could simply access it via the internet, and free you from complicated software and hardware management.

In the 1960s computers were very expensive and enormous, and very few businesses could afford to invest in computers, which is why the software as a service industry was born. The 60’s model was known as a time-sharing system and that model we know today as cloud computing.

Earlier many organizations wouldn’t be able to afford the cost of computer hardware and software, through this system small and medium-sized businesses could access modern computer systems.

Today the most common type of saas is customer relationship management software (CRM). Other saas models offer you many business applications such as file sharing, emails, calendars, human resources, and customer retention management.

Features and characteristics of software as service (SaaS)

SaaS applications are gradually becoming on-demand services for many companies, here are some of the unique features and characteristics of saas applications the following.

Multi-tenancy model

Multi-tenancy is a critical software architecture that allows a single development to service several tenants. Power management, backups, security, and system maintenance are all duties of the cloud provider for users. Each customer is called a tenant.

Typically, these changes are done per request, as the customer selects what features and attributes they want in their service application. It is common for SaaS services to be constructed in such a way that each storage area is divided by customer.

Typically, these customizations are based on the customer's preferences for which features and attributes they desire in their software service application development.

Different databases can be combined in a specific location or into one database, different sachems can be used in different databases or the same database, and discriminators can be used to separate the databases from one another. This allows for storage area segregation.

Automated provisioning  

Users should be able to access SaaS applications instantly, thus the procedure for setting them up with services must be automated. Since there is a strong demand from their customers for web services that provide them with access credentials, most SaaS application users are B2B and B2C clients.

In most cases, SaaS providers and Cloud Service Broker (CSB) platforms use automatic provisioning to give consumers access based on demand. CREST API from Microsoft is famous for the saas application.

Another crucial feature of SaaS apps is their de-provisioning capability, which enables enterprise users to remove their access if they choose not to utilize the application.

Single sign-on

A business organization would prefer to have a single identity system in place to authenticate the many platforms that consumers would consume. Organizations must have a single page where users can input their login credentials and access all Software as a Service app that have been deployed to them.

Software as a Service application should be simple to integrate with multiple identity management systems.

Enterprises also incur significant maintenance costs when they store and maintain several credentials per system that are utilized by enterprise users.

To authenticate against existing identity systems and give an experience of signing in once and utilizing multiple services, it is crucial to enable single sign-on for SaaS applications.

Usually, software as a service applications use SAML or OpenID kind of impersonations to enable single sign-on for users of their platform.

Subscription-based billing

Saas apps are commercially viable because they are subscription based. Pricing for sass programs does not include complex license costs, upgrade costs, etc.

The majority of Software as a Service (SaaS) products are subscription-based, allowing users to purchase them whenever they are needed and stop using them whenever the business determines they are no longer necessary.

The seat-based charge structure used by subscription-based billing, which SaaS applications follow, determines the overall cost to be paid depending on the number of items ordered.

The SaaS applications must be able to be billed, which is another crucial feature. CSB platforms typically search for this vital component so they may provide a single invoice to their clients.

While some SaaS service providers let their clients choose between monthly, quarterly, half-yearly, or annual subscription periods, the vast majority of SaaS service providers use a usage-based payment method.

High Availability 

SaaS applications are available to users through the internet, it is shared by several tenants and is anticipated to have very high availability throughout. 

Due to its availability software as a service application should provide their customers with a high degree of SLA (service-level agreement).

SaaS applications should also expose administration and monitoring API to allow for continuous availability and health checks.

Elastic Infrastructure

The usage of SaaS apps is typically unpredictable and might change significantly from month to month. SaaS application providers must take this into account and implement the appropriate public cloud architecture to increase or decrease the deployment resources.

SaaS apps are now made to identify the infrastructure's behavior.

Applications that provide software as a service (SaaS) have the flexibility to expand and reduce their services as needed and to deploy adaptable infrastructure.

Monitoring agents that are a part of the deployment resources inform the corresponding management servers about the availability of the resources.

To increase or decrease the infrastructure resources, policies and procedures are embedded into the fundamental architecture. The classic examples of SaaS applications are those built on microarchitecture.

SaaS application hosting systems like Kubernetes and Docker are effective at managing and controlling the elasticity of SaaS applications.

Another strategy that some providers of SaaS applications use is to construct a policy engine that is only responsible for acquiring and responding to an event, which then enables the infrastructure resources to be increased or decreased.

Data security

An important aspect of SaaS is security. This quality protects user data and corporate information from unauthorized access or tampering.

As you are aware that software as a service is shared with multiple tenants it becomes extremely important to secure the data.

For a specific tenant, certain types of data must be enabled with encrypted storage, and those same data types should not be accessible to another tenant.

A good key management framework that interacts well with various external key management frameworks is a vital component of SaaS applications.

By integrating with Cloud Access Security Brokers (CASB), a cloud services broker that further fortifies data security, SaaS application providers can increase the security of their user's data and the trust that users have in their platform.

Open integration protocol

SaaS applications compensate for their lack of access to internal systems, including databases, by providing APIs and interface protocols that function well with the networks of corporate organizations.

Since APIs are now standardized and SaaS apps are widely available, mashups and other lightweight applications have emerged.

Mashups are as useful as software since they connect seamlessly with items beyond the company's firewall.

Software as a service is a piece of software that can be accessed from any device at any place with just the internet and it is a significant factor in the ability of many people to work remotely.

It's never simple to run a Software as a Service (SaaS) business. Fortunately, there are several options you may take into account to keep it expanding. Investing in SEO is one of the best ways to expand your SaaS business.

What are SaaS and MicroSaaS Models?

Software-as-a-Service is a model where disparate services are delivered through the software. Companies can charge end-users by implementing a subscription model for their services. This subscription would last a certain period after which they’d have to renew to continue using their services.

MicroSaaS model is where a small software product is developed to support the functioning of the existing SaaS product. These can include add-ons, extensions, accessories, or tools for other SaaS platforms.

How Does MicroSaaS Work?

Let’s understand how MicroSaaS work with an example.

Throwing off the big players in the content management systems such as WordPress, Wix Joomla, etc. would need a miracle. They dominate the market with their world-class SaaS product.

However, this can’t limit innovators to put their guard down against these industry giants with MicroSaaS, startups can leverage the SaaS model to create complementary apps, add-ons, plugins, etc to build their own profitable business.

The great thing about the MicroSaaS model is it requires a small upfront investment and may not require outside funding.

MicroSaaS products generally are location-independent and can generate high profits from across the world. Such high profits coupled with low overhead costs make SaaS, especially MicroSaaS a lucrative industry for startups to build a profitable business of their own.

AI-Optimized SaaS Solutions

Artificial intelligence has been a disruptive technology on its own, and now its entry into the SaaS arena is opening up the new horizons that were previously unknown and are offering promising outcomes.

AI is capable enough to augment human intelligence, automate redundant tasks, optimize business processes, and improve efficiency and productivity. Even though AI has an outsized potential, only a meager amount of this potential has been fully utilized. Startups who want to take the SaaS approach have the perfect opportunity to break the barrier.

AI is the most innovative technology that can revolutionize the SaaS industry and startups can leverage it to create a well-defined path to a profitable business.

Splitting/Unbundling SaaS Product

A traditional SaaS product that’s focused on offering every imaginable feature possibly can be considered overkill. What we mean by this is startups should focus on building a small set of specific functions packaged as an API instead of a full-fledged platform.

Small businesses, especially when starting up don’t necessarily need to offer feature-rich software that’s out of their budget and requirement. They can split different functions of a fully-fledged SaaS product into APIs that complement those. There are multiple startups that have adopted this startup SaaS app model to build their profitable business.

White Labeling Your SaaS Solution

White labeling is somewhat similar to drop shipping. This literally means offering SaaS software developed by others but with your company branding to other businesses/users. This is not a new trend and in fact, many emerging SaaS startups use white labeling to quickly enter the market.

Doing so will save them from building SaaS solutions from scratch without the mighty investment and offer their clients what they need while still keeping their brand identity. All that end-users want is a solution with the right features that meet their needs.

White labeling speeds up the time-to-market for SaaS startups while still being able to deliver better services. Additionally, white labeling enables you to have higher revenue per client and higher customer lifetime value ultimately making your startup an extremely profitable one.

Blockchain Integration With SaaS

Blockchain and SaaS are polar opposites but are arguably the most revolutionary technologies. Blockchain is considered the core technology behind cryptocurrencies such as bitcoin, Ethereum, Litecoins, etc.

However, it had never taken the center stage in the SaaS industry but it can deliver the transparency so much craved in the SaaS industry. SaaS software thrives when exposed to transparent and trustworthy technologies such as blockchain.

Blockchain is a decentralized database that can bolster transparency in SaaS products. It can help SaaS startups to come up with foolproof systems and eliminate the security challenges in traditional databases. The benefits of Blockchain in the SaaS are immense and can disrupt aspects such as online payments, auditing, tax collection & compliance, etc.

Currently, there are not many Blockchain-enabled SaaS software but it’ll undoubtedly take over and become a permanent fixture for the SaaS app model to build a profitable business.

Horizontal vs. Vertical SaaS

Traditional or Horizontal SaaS products are typically generic solutions that target a vast majority of clients in the field. A perfect example of a horizontal SaaS would be the CRM software offered by Salesforce.

Horizontal SaaS products have a bigger addressable market and also face multiple challenges. Vendors would have to come up with numerous campaigns to lure in new customers.

Vertical SaaS, on the other hand, are more specific solutions that fulfill particular needs or fits into a particular field and have a smaller addressable market.

Thanks to its notable benefits and ability to fulfill the distinct needs of a specific industry, vertical SaaS software have a massive proclivity that uptick it for startups to build a profitable business out of it.

Final Words

A lot of things go into developing a profitable SaaS-based startup. Things like market research, knowing your target audience, and your SaaS product will fit into the customer needs will obviously affect the profitability of your SaaS app model.

However, the core idea behind how startups can build a SaaS product that meets user needs as well as is adopted by other businesses can make a lot of difference in your business’s profitability. Also, the skills and effort put in by the team of developers matter to build user-friendly and highly responsive SaaS software products.

Need a team of expert SaaS-based development professionals? Ashutec Solutions Pvt. Ltd. is a team of experienced and adept developers offering software and product development services. Get in touch with them atconnect@ashutec.comto discuss your web development project further in detail.

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