In this post, find out what is SAAS in cloud computing, how it impacts small businesses, how it’s beneficial for customers, what its advantage and disadvantages and also find out the examples of the SaaS business model.
What is SAAS?
SaaS stands for software as a service. It’s one of the business models of cloud computing technology. In SaaS, the software is distributed to the consumer as a service through subscription instead of a one-time purchase. The software will work as long as you have a subscription and after that, you have to renew it. The software in SAAS is like a mobile phone recharge.
Examples of software as a service business application –
1. Adobe Creative Cloud: – Before Adobe Creative Cloud, Adobe Photoshop was purchased by users and it came in CDs and DVDs. But now you have to pay $50 in Monthly plan or $500 + in the yearly plan.
To buy a creative cloud, you have to create an Adobe ID through an email account. After that, you will get a license key and download link in your email. And to complete the installation of the software you need to sign in into the creative cloud.
Now through the creative cloud, you will get all the creative applications such as adobe photoshop, illustrator, InDesign, Premiere Pro and many others for creative and graphics designing works.
You can control your access to all the apps from the adobe creative cloud dashboard. It means you can buy an individual license. You can buy for the team and you can manage the team member and application access.
And you can store the data on the clouds.
The benefits of the creative cloud are that you will get access to all the graphics designing apps, you can collaborate, share and control the entire software and licensing works from a single place. The other team members can install the adobe photoshop on their computer if you give them access to use that. And you can disable the access to the team member whenever you want.
2. Office 365: – Microsoft Office is the most used business application in small and medium businesses and almost used in all types of personal and business official works. Now with office 365 to use the same application’s word, excel, PowerPoint, you have to pay subscription fees per user.
The applications are the same but the difference is that now you will get more features such as you can collaborate with team member on the same the word/excel/PowerPoint file, you can share from the application, you can store the document file directly to the cloud, you can synchronize the office files in mobile, and you can access all the apps in mobile, desktop and tablet.
Related: Uses of Cloud Computing in Business
Advantages of software as a service for software companies:
- The distribution of software as a service is more profitable for software companies and less costly for companies. The cost of delivery, the packaging is finished. The software is purchased and installed on the computer after the login/license key and required an internet connection.
- The companies can track the user’s behaviors or customer uses of their application.
- Piracy is reduced.
- Software and all the customers are easy to update and bill.
- For example:
Companies now earning 80%+ higher revenue than before. For example, the software was sold at $500 at one time for an unlimited period and there were 50000 customers in 1 year. The gross revenue was $25000000. Now the next year software was sold to 30000 customers. The Gross revenue was $150000000.
After the SAAS Business model:
50000 customers purchased the software in 1st year at $300. The gross revenue is: $15000000
30000 customers purchased the 2nd year at $300. And 40000 renewal the subscription (last year customer) in the same price or the gross revenue: $21000000
Now the revenue can keep growing with 50 to 50% each year.
It means the cloud computing SaaS model is used to retain the customer and earn more money from the same customer thousands of times for the same product. Now the user is slave or forced and there is no other option.
Disadvantages of software as services for software companies:
- The cost is higher for the customer. The users of this software are small business owners. From the beginning of buying the software subscription, they will start to find alternative and they will move to open-source software.
It means I think in future the software as services companies that are already established can be profitable in the first 4 and 5 years. But after that their revenue will be reduced by 70% to 80% each year and the software will end with 100 customers from 100000 unless they don’t reduce the price. It’s because the customer will go-to the alternative.
- Technology is changing, demands are changing, user interest is changing. In this change, new software startups are coming in the market at a lower cost.
- It means if today the customer is buying a subscription is $100 for 10 features. Tomorrow new startups will come up with 1 feature 1 software in $1 cost and even with all 20 features. In that times software as services companies or business models will fail.
- Software as a service is increasing capitalism in society. Only a few companies are controlling the whole ecosystem. But that capitalism can be a broken through in the simple formula. Just divide the capital in all. How divide formula work in SAAS?
- When something is costing people, when something that is not adding value and when there is something that ruling people, then new innovation and invention come. It means new software will come. New technologies will come. And that will divide or block the inputs of capital for saas companies.
- Due to the cost of hosting/cloud storage and cloud-based application, small business will buy their own server and storage space. And in that time, they no longer need cloud-based hosting.
- Information Technology is the biggest cost of small businesses. Each small business is heavily relying on big IT companies for everything from marketing, designing, storage, mailing, and many other things. Now in the future, each small business will design its own software and infrastructure, it’s because they will understand or become wise to not pay rent for the services.
- Small businesses will not buy subscription they will take the services for content creation from freelancers. And one freelancer can serve to 10 small businesses. And there 10000+ professional freelancers. It means 10,000 people can satisfy 100000+ businesses. And the freelancer will buy only single license or individual plan.
Yes, I know it’s tough and it just looks like assumptions. But if information technology can be manipulated to acquire more capital than the same technology can be used to break capitalism as well.
Benefits of software as a service for customers:
- Hassle-free buying, installation, and integration.
- Auto updated software.
- Controlled business operations
Disadvantages software’s as services for customers:
- The higher the cost of using software and its features.
- Not all the features in software subscriptions are useful and contribute to revenue.
- Customer doesn’t need updates unless they think they need it.
- The staff has to learn new skills or have to get adaptive to the updates. It will reduce the speed of production.
- The user behaviors are tracked and so there is a question on the data privacy.
- People have to pay for a year or month if they only need to use it for 8 days.
- A small business can’t switch to less costly services in the 2nd month when they already have paid for a year.
So, software as a service has its own advantages and disadvantages. But if forget about the prices for a minute than cloud computing is the good technology to use for small businesses. It will speed up innovation and invention. But really bad for startups, small businesses and freelancers to pay that much cost.
Whatever, as a user of technology, you have to become adaptive. And have to focus on consistent innovation. And it’s the only way to survive and grow the business in instant changing technologies and customer behaviors.
Hi, my name is Vijay Sharma and I am a freelance IT consultant.
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