The SaaS Business Model What You Need To Know IBM Blog

What is a SaaS Business Model?

A relatively new business model, Software as a Service (SaaS) companies host an essential piece of software on a cloud infrastructure and rent it out to other businesses.

These client businesses pay a monthly fee, logging into their account and obtaining full access to the software and its capabilities.

The client business doesn’t require a license to activate the software. Nor does it need to invest huge sums of capital in creating an IT infrastructure capable of hosting the software.

Setting up and running a SaaS company takes both coding knowledge and user-interface design skills. These are essential to ensure their offering is an incredibly attractive service.

The future of SaaS technology innovation revolves around these companies who, recognising the services many advantages, are constantly revolutionising the concept.


The Start Up Business

Due to the inherent skills required to grow and maintain a Software as a Service business, the people capable of making a successful start-up come from a very narrow band of entrepreneurs

Investments made at the beginning should include bringing on board developers, programmers and UI designers. These are the people tasked with creating a user-friendly and efficient service.

While the model must be easy enough for your clients to understand and operate, this doesn’t mean it’s a simple product for your own teams to maintain. It’s more likely to be a difficult task, even for people who understand all the coding involved.

One great advantage of all this is that clients of SaaS businesses usually tend to remain remarkably loyal.

The software’s capabilities become increasingly integral to their businesses; even to the extent that such businesses are unlikely to change everything for the new and improved solution.

Every month, you are typically going to earn more and more from each client.


The Client Relationship

What is a SaaS business model’s ideal client relationship like?

It’s one based on mutual respect and understanding, as well as entailing a good deal of give and take.

A Software as a Service business is dependent on recurring revenue, as opposed to a one-off sale. It is therefore essential to develop a rewarding relationship with clients to ensure satisfaction in the service.

This can be turned to an advantage, especially in the early days of your service, when it might have some initial problems requiring changes.

If you’ve made sure every client feels special and important to you – by spending time on them, by urgently answering their calls – then they’ll tend only forgive minor faults or setbacks. They will usually also be glad to suggest necessary improvements.

Apologise for the upset. Then provide them with a grand vision of what is to come.

If clients aren’t using your service to the maximum, there may be a disconnect between your product and their needs.

So take the time to educate clients on the benefits off your product, while also finding out the best ways to solve their problems and improve your offering.


Easy Integration of Software as a Service

Naturally, your clients have different needs. Added to this, there are now a multitude of apps for a whole host of products and services.

It would hardly be cost effective for you team to create the required customised integration solution. The answer is to make sure you have an open API, encouraging third-party developers to create the integration options.

This can also lead to faster adoption of your product as clients and developers integrate it with other commercial apps and legacy systems already in use.

You could also think of adding a lucrative affiliate programme.

For instance, offering a residual income opportunity attracts skilled affiliates who’ll promote your offer.


A Growing Business

If your product’s right, and businesses adopt your software, the chances are you’ll experience an immense amount of growth very quickly.

Once you have the clients proving your model’s value, it’s to scale your business by reinvesting your profits, along with some capital.

To support all your newly acquired clients, you need to rapidly expand in data capabilities, storage, security, bandwidth, and any number of other areas. It depends on the service you’re providing.

Your team will probably have to grow too. Not only to handle the extra maintenance, but also to manage any unanticipated issues that might occur.

Your clients are loyal to your SaaS because they don’t need to create the IT infrastructure required for its running. (If clients aren’t renewing their subscriptions, you’re running your business wrong: you need to be paying more attention to your clients’ needs.).

But that means you are the one running, building and continuing to grow that service.

You should always be striving to improve your product.

Make sure it continues to align with the increasing and ever-changing needs of your clients.


Speeding up and Securing SaaS Cloud

Decluttering bad or wasteful code will enable your software to run faster. It will also reduce some infrastructure costs,

It all leads to improved client satisfaction and loyalty.

Security is paramount too, of course.

All customer usage and project data must be securely stored and backed up.

All data centres and infrastructures should be protected by the very latest security upgrades

And a PCI-compliant payment gateway should be used to process orders.


Making More of Your Product

Clients will willingly pay more each month to receive extra features and benefits tailored to their specific needs.

These upsells could be higher end packages: offer extra storage, or deeper analysis.

Regular webinars are ideal for offering reassuring information and extra tips.

‘Free test drives’ of extra software solutions often lead to an adoption of those services.


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