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The SaaS Business Model

The SaaS Business Model

What Is A SaaS?

SaaS stands for software as a service, which means selling cloud-based software as a service to the customers.

Let’s decode this jargon.

Software as a service is called service because it’s not sold as a one-time transaction, instead offered as a service with a monthly charge.

Cloud is just a term for the internet where the companies have built their resources and allocate a part of these resources to the customers while onboarding them.

Customers who subscribe to the services, use this software through the web or mobile application. There is no requirement for downloading and installing software to the system.

These SaaS products can be aimed to serve other businesses, known as B2B (Business to Business) services like FreshBooks, Mailchimp whose features are more relevant to an organization’s growth.

Why Deploying SaaS Makes Sense

Cloud-based delivery creates several advantages over previous software distribution models:

SaaS Applications Don’t Require Physical Distribution

Because SaaS is distributed online, software distribution based on shipping physical memory devices like compact discs is no longer required. This makes it easier to obtain, access, and distribute the software. New software features, upgrades, and patches can also be deployed more quickly.

SaaS Applications Don’t Require Long-Term Commitments

The subscription basis for SaaS enables companies and users to use software that suits their purposes without fear of becoming “locked in” to lengthy contract commitments.

For many users, this enables a “best in breed” approach to software use. Tools can be adopted quickly (and old tools jettisoned) if a new application offers improved functionality or design.

Most SaaS Applications Don’t Require Special Knowledge or Training

Because it doesn’t require physical storage on the premises it’s deployed, SaaS tools do not necessarily require a specially trained IT specialist for deployment. And many are designed to be user-friendly, frequently eliminating the need for software-specific training.

Why Businesses Need SaaS Management

SaaS now represents the default delivery model for business software. It’s overtaken traditional on-premises practices for software deployment and management. Given its soaring popularity and ubiquitous adoption, what are the downsides to its widespread adoption?

Here are a few reasons why businesses should consider deploying a SaaS Management strategy:

Prevent and Reduce Shadow IT

Shadow IT occurs where technology applications or systems are bought or built within an organization without the IT department’s direct approval or knowledge.

In many cases, the growth of shadow IT has a direct correlation to increased frequency of lines of business, teams, and individual users purchasing SaaS applications directly.

SaaS License Management

As more lines of business or teams purchase SaaS tools, the potential to mismanage SaaS licenses is high. After all, few business unit managers undergo IT management training for best practices. Foremost among the concerns for license mismanagement is under-utilized or unused licenses.

Without the clear attribution of ownership to individual teams or employees, an unused license can pose a security threat. For example, how can the organization be sure a former employee no longer has access to sensitive company data stored in a SaaS application? Without active management, an unused license can also have the potential to trigger an automatic renewal and incur unnecessary costs.

Underutilization of licenses represents a diminished practical value of the SaaS investment. Optimizing SaaS licenses ensures the number of licenses or seats meets the organization’s actual need and helps preserve value.

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