Software as a Service (SaaS): Understand What It Is And How It Works

SaaS is a cloud-based service that helps companies save money while making the lives of clients much less complicated. Know more about it in this post!

Software as a Service (SaaS): Understand What It Is And How It Works

    Have you ever found yourself wondering about the purpose of technology?

    For many, the main goal of it is to foster improvements, whether in general well-being, accessibility for people, or productivity for companies.

    With that in mind, an acronym that has been drawing considerable attention from companies is SaaS.

    You have probably heard about it, or you might even use one of its resources, even if you are not aware of it.

    Surprised? Then, let’s talk more about it!

    If you have ever used Dropbox, Google Drive, or converters like Free PDF, we are happy to tell you that you have used a SaaS.

    Not familiar with any of these? Well, hold on, because we have 2 cards up our sleeve that you certainly are aware of.

    Netflix (yes, this worldwide phenomenon is also a SaaS) and, drum roll… Rock Content! Yes, we are too!

    So, to help you discover all about this universe of SaaS and how it works, we created this complete content. In it, we are going to approach the following topics:

      Are you ready to know everything about Software as a Service?

      Enjoy your reading!

      What are SaaS companies?

      In the old days, entrepreneurs constantly complained about the amount of software they had to acquire to perform different functions within their companies.

      One software to control stock, another for cash flow, one more to issue invoices… And we could keep going!

      These acquisitions included the purchase of software, the payment of its licenses, a computer to receive it, and a server to interconnect different users within the organization.

      And we must not forget the high costs of updating and maintaining these solutions.

      Whew! A lot, isn’t it?

      Based on this and on the clients’ total dissatisfaction with IT resources, the idea of creating software as a service emerged.

      The goal is to eliminate the need for the company to buy, pay for the license, and keep the software updated.

      The program is on the Internet: all you have to do is access it and use it. You don’t need to have it installed on your computer — it’s only necessary to have access to the web.

      You may be wondering in which “area” of the Internet these programs are hosted. To answer this, we need to talk about cloud computing.

      It is a technology that provides a space for storing data on the Internet’s virtual network.

      And all that lead us to the main question: what are SaaS companies?

      They are organizations that develop and market software, considered as services.

      They are responsible for maintaining the system structure and making it available to their customers. In addition, they are also responsible for ensuring data security and reliability.

      Simple like that.

      ➤ ROCK’S TIP: download the SaaS Marketers Essential Guide to Interactive Content!

      What are the benefits and advantages of Software as a Service?

      Now that you know what Software as a Service is, we will show you some advantages. Check them out:

      Lower costs

      As we mentioned in the previous topic, you don’t need to buy the software, obtain a license, have a specific computer, and spend money to keep the program updated.

      The cost is much lower (we will talk about this later).

      No need for hardware to host the software

      The software will be hosted in the cloud, eliminating the need for an actual computer to maintain it.

      This generates more agility, practicality, and usability.

      Access anywhere

      You can access your SaaS from anywhere, as long as you are connected to the internet. This allows you to use a program even if you are on the road, miles away from your company’s headquarters.

      As internet availability advances, the coverage area is expanding and providing many more possibilities for use.

      Customizable options to the customer’s needs

      If the software does not perfectly meet your needs, don’t worry.

      You can purchase additional packages, customize the service, and increase its efficiency.

      Automatic updates

      With a common software, you will have to perform updates constantly, which translates into high and cyclic fees. 

      Software as a service works differently. As the program is hosted on the internet, it performs its updates automatically. 

      Integrations with other systems made easy

      Another great advantage of SaaS is the possibility of integrating with other systems.

      The software is intelligently designed to allow this integration in a fast, simple way.

      What are the differences between SaaS and software companies?

      Now, let’s focus on the main differences between software and SaaS companies.

      The first and biggest difference is where the customer data is hosted.

      While regular software must be installed on a machine owned by the contracting company, SaaS has its data stored in the cloud and is accessed through a web browser.

      Software as a service does not require a specific setup for each customer and has its default customizations, allowing the user to choose the packages that best meet their needs.

      In addition, for a company to be considered SaaS, the software must be service-focused and necessarily accessed through a web browser or an application designed for access by mobile devices.

      What is the initial cost for the implementation of SaaS?

      All right, now you are aware of the advantages of SaaS, but what is the initial cost for using this application? We will show you!

      If you want to use a SaaS, keep in mind that the cost is limited to the subscription.

      Take Netflix, for example. You do not need to download it to your computer or install updates.

      Just log in, register, pay the subscription fee (you can choose the plan that suits you best), and that’s it! You are ready to watch your favorite movies and series.

      For SaaS companies, the procedure is the same.

      The perception of value is even greater because their software solutions are intended to solve big problems, which could otherwise demand much higher investments.

      So it must be clear that SaaS is not seen as an expense but as an investment (a very good one, by the way).

      What are the billing methods?

      If you own a company or want to start a business to offer SaaS solutions, you should think carefully about how you bill your customers.

      This can directly affect your sales and, of course, your business’s profitability.

      Therefore, we will show you some options that are available (pro tip: the last one might be the best one). Take a look:

      Credit Card

      Credit card payment is the most popular method among consumers.

      But this option is not so interesting for businesses, because credit card companies charge high fees, usually ranging from 3 to 8%, in addition to other surcharges.

      It’s essential to take this extra cost into account when calculating the price if you want to preserve your target profit margin.

      And try to negotiate these fees and conditions with the providers.

      Direct debit

      From the company’s point of view, here is the best way of charging: direct debit.

      This option is advantageous because it allows customers to pay right away, with greater convenience.

      In addition, it offers low costs and high customer retention, maintaining a good rate of subscription renewals.

      However, some banks are no longer satisfied with this type of operation and are beginning to reject it. Furthermore, the company must rely on a financial management system to control all payments, ensuring proper performance.

      What are the challenges of this business model?

      Despite delivering a vast range of advantages and possibilities, SaaS companies face a major challenge.

      Convincing their customers that concentrating their data in the cloud is safe.

      Small and medium-sized companies usually do not see problems in using SaaS, because the savings generated are pretty significant, particularly for businesses that are not so big.

      On the other hand, large organizations are somewhat wary of storing their sensitive and strategic data in the cloud.

      Some stakeholders believe that it is still safer to keep all the files within reach.

      Therefore, the biggest challenge for companies that offer software as services is to show that the technology used to host data on the Internet is secure and growing safer every day.

      What is the scenario for SaaS companies in the world?

      Things are going well, to say the least.

      According to a recent survey by Gartner, 70% of organizations are currently investing in SaaS and public cloud offerings — and they have no intention to stop.

      Furthermore, Statista predicted that the worldwide SaaS market size will reach $138 billion by 2022.

      These numbers indicate that Software as a Service represents a major phenomenon that has been changing people’s concepts and ideas.

      Of course, there are still some challenges to overcome, such as the hesitation presented by customers in making strategic data available on the internet.

      However, it is necessary to take measures and show the public that it is, in fact, an excellent investment, considering that this business model is a clear trend.

      Now that you know what SaaS is and how it works, how about checking this recorded webinar session with best-selling author Aaron Ross? He talked to our CEO Diego Gomes about creating a sales process that can achieve predictable revenue.

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