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What is SaaS and Should Your Business Do It?

The internet has radically changed the way that we think about business models. It’s affected all of us to a greater or lesser extent, but in the software industry the change has been bigger than any of us would have expected. In this article we’ll be asking “what is SaaS?” and thinking about the reasons why your business should do it.

What is SaaS and Should Your Business Do It?

“SaaS” stands for software as a service, and essentially involves selling one-off, monthly or annual subscriptions to software packages. It’s becoming a huge area of online business, despite the fact that we thought the internet would threaten the profit margins of software providers.

SaaS is so lucrative because it offers software creators the opportunity to sell software to a vast audience. You’re not limited to people visiting a software store, games shop or computer fair either; we buy SaaS online and through various App Stores. It includes games, lifestyle apps and business apps, and it’s serious business.

We’ve seen various market leaders moving towards this model, including Microsoft and Adobe. It’s great news for suppliers because the customer simply downloads the software, stripping away the manufacturing process altogether. Support is incredibly easy to provide, and you can quickly and easily give customers regular software updates through additional downloads.

SaaS is also great for customers. It’s quick and easy to access software, and great for allowing a remote workforce to collaborate. You can often try before you by with a free trial period to establish how well the software will work for your business. It’s also pretty cost effective because you’re paying on a monthly basis, improving your cash flow and giving you the option to cut back if you’re not using software to its full potential.

So, should you consider taking your business into the SaaS market? The biggest argument for moving towards SaaS – perhaps by selling apps, software or templates – is that it has the potential to generate much higher returns that billing by the hour. You’re not paid to build the software, but once it’s live you can sell packages by the month and (potentially) generate much higher returns that you could when working on an hourly basis.

However, there are several important considerations. You need to factor in the development costs of building the software and paying for hosting and testing. At this point you won’t be remunerated for your hard work. There’s also the possibility that sales won’t take off as you’d hoped. It might take months or years to generate the kind of traction you’re hoping for, and even then there are no guarantees. After all, SaaS is a rapidly evolving market and customers don’t want outdated products. You’re also going to need a 24/7 support service to ensure that customers are happy with your product and recommend it to their friends and colleagues.

SaaS is a great business model which offers the prospect of lucrative rewards. However, you need to ensure that there’s an active market and that you’ve done the groundwork before launch. After that, it comes down to hard work and that little bit of luck.