SaaS, or “Software as a service,” is a kind of software model where a service provider hosts applications virtually on the cloud and distributes them to end-users and other business counterparts through the internet. For example, the individual software vendor (ISV) may reach out to a separate cloud provider entity to host the particular application or set of applications. Moreover, for larger companies, the software vendor itself is the cloud provider hosting applications on the internet.
SaaS is one of three main categories of cloud computing. The other two are Infrastructure as a service (IaaS) and Platform as a service (PaaS). SaaS products are now completely mainstream, having a user community that ranges from corporate IT professionals, professional business users, and personal users of all age groups. In addition, the cloud-based distribution model contributes to more than 60% of web-based products than on-premise Software.
Table of Contents
What Is SaaS?
SaaS stands for “Software as a service.” It works over the cloud distribution model as:
- An individual software vendor hosts the application and related services on the cloud or the internet.
- The service vendor themselves provides Infrastructure like servers, databases, networking, and computing resources.
- It contracts a third-party cloud service provider to host the application in its data center.
- The application is usually accessed via web browsers on any device with an internet connection.
The on-premise software delivery model differs from SaaS mostly in two ways:
- SaaS products do not require large-scale hardware support, allowing B2B software companies to outsource most IT maintenance tasks. Such organizations do not have to troubleshoot and maintain the application internally regularly.
- SaaS systems are driven through a subscription model compared to on-premise products, which usually incurs license costs. On-premise users can typically pay up to 20% more annually than SaaS users.
In SaaS or the software-on-demand model, the service provider gives its users specific access to one single copy of the application. The list of users is approved based on the subscription model chosen initially. The source code is the same for all users, and such users also enjoy the benefits of new features and functionalities of the product as and when rolled out. A service-level agreement (SLA) exists between the provider and B2B tech company to store minimal user data in the cloud or locally by the application.
1. SaaS Characteristics
Software applications hosted on a web browser make the hardware more scalable, flexible, and affordable for business users. In addition, businesses using SaaS applications are not responsible for the setup and maintenance of the software application. Instead, the users pay a minimal subscription fee to access the application. Continue reading to understand the characteristics of SaaS products.
2. Multitenant Architecture
Multitenant architecture, also known as multi-tenancy, is an architecture model in which multiple single instances of the application are hosted on a single physical server. It allows serving multiple tenants or users using a single copy of the application.
“Tenants” refers to a group of users who share a common platform and source code that the provider centrally maintains. As a result, the memory is dynamically allocated and cleaned up when required. Since all users share the same code base, it helps vendors quickly innovate and deploy time-bound upgrades and features for their clients.
Major cloud service providers like Microsoft, AWS, and Google Cloud offer Infrastructure based on a multitenant architecture.
3. Extensions & customizations
SaaS products are easily customizable as per your business needs. It is because the architecture caters differently to different organizations. For example, a Microsoft office 365 account can be either used as a personal account by individuals or as a corporate account by organizations. Also, the subscription costs differ as per the model you choose for your business.
4. Improved Access
As SaaS products follow multitenant architecture, they must provide easy and improved access to data from any device. The data visible is uniform across all platforms, with effective security and data control mechanisms in place.
5. SaaS harnesses The Consumer Web.
B2B SaaS companies make effective use of the consumer’s internet space. Websites like amazon.com or Gmail.com effectively manage consumer space, making businesses manage their daily tasks easily.
6. SaaS Trends
As per Gartner’s 2021 emerging technology product leader survey, the SaaS business is one of the top three emerging technology areas. Similarly, McKinsey & Company has predicted further growth in cloud-based computing, where B2B SaaS companies can push the market capitalization nearly to $200 billion by 2024.
What Is B2B SaaS?
Business-to-business Software-as-a-Service utilizes cloud-based software tools used by businesses in areas like accounting, banking, supply chain management (SCM), logistics, warehousing, enterprise resource planning (ERP), customer relationship management (CRM), to name a few. Companies subscribing to the B2B SaaS model usually pay for such services through an annual or half-yearly subscription model.
Few examples of B2B SaaS
- A CRM platform managing its customer relationships and interactions is a widespread example of B2B SaaS.
- Similarly, ERP tools like SAP and ORACLE that efficiently manage a company’s internal processes are B2B SaaS products.
B2B SaaS tools like Grammarly, SEO analysis, and plagiarism check are widely used to promote their content for clients in the digital marketing universe.
Analysts predict that by 2022, 86 percent of B2B companies will depend on SaaS for 80 percent of their daily activities, and the market cap of the SaaS industry will hit $85 billion by 2024.
How Does B2B SaaS Work?
SaaS business is a cloud-based software deployment solution. The solution is developed digitally by a service vendor catering to a particular set of business users in the software market. The solution thus built exists as a single standalone solution for the entire user community.
The service provider then hosts this application on a third-party cloud platform or simply over the World Wide Web. Users are provided login credentials and authentication mechanisms to sign in to the application and register themselves securely. Therefore, a Saas company that operates in the B2B model constantly needs to keep its servers and databases updated and secured.
On successful registration, the authorized users can now utilize all application features over the browser. No specific setup is required for such products. However, in some scenarios, the application or the developer may request you install certain third-party add-ons to have complete access to the features.
Advantages Of SaaS Products
1. Practical Solution
SaaS products are easy and practical tools built by companies for everyday use. These tools do not require specific installations in the client landscape and can be accessed through a web browser. The products are convenient for small businesses that cannot afford high IT maintenance costs.
2. Cost reduction
SaaS products reduce the costs of a business as these are based on subscription models rather than traditional licensed versions. These products run on a single platform for all its customers, making them cheaper solutions for all kinds of B2B customers.
3. Predictable Revenue Model
One of the important advantages of SaaS products is the predictable nature of the revenue gained during its usage. Since the subscriptions offered are annual, half-yearly, or quarterly based, providers can easily estimate the revenues gained from their B2B subscribers. It helps to forecast their subscription model and revenue growth yearly.
4. Free Upgrades
SaaS companies can quickly deploy their upgrades and developments without impacting business processes and the customer environment. These deployments usually take a minimum time delay and are available with a simple refresh of the client browser. Additionally, B2B companies provide 24-hour support to their clients seven days a week.
Top Ten B2B SaaS Companies That Crushed Their Growth Goals
SaaS products are now in huge market demand. In 2022, 86 percent of businesses will rely on SaaS for at least 85 percent of their software tasks. Below is the success story of how 10 top SaaS companies increased their revenue and crushed their growth goals.
1. Intuit: Remodeling Itself In The Market
The company has reinvented itself from just a provider of products and services to an open platform of third-party products. The exchange reseller model has done wonders for the company, with its stock levels rising in 2019, raking in a revenue of $6.8 billion.
2. Atlassian: Creating & Promoting A Platform Of Add-Ons
Atlassian is responsible for creating and promoting a platform of add-on services to third-party applications. Ranging from project management tools like JIRA and messaging service Hipchat, the company built and onboarded around 4000 add-ons in its repository. As a result, it boasts $1 billion in total sales since 2020.
3. Slack: Providing An Offer That Customers Can’t Refuse
Slack is a B2B company that offers solutions to key communication problems among teams. It offers a robust premium model that starts with a free subscription for its customers. Users rapidly get accustomed to these services and get intrigued by trying out the premium models. It is why the company has more than 100k paid customers, the majority of them spending an average of $100,000 annually.
4. DocuSign: Getting Customers Through Proper Channel Partners
DocuSign showcases another SaaS success story. This electronic signature company entered the global reseller market in 2016. In a very short period, it has increased its customer base to more than 500,000 by enabling the distribution of DocuSign.
5. Zendesk: Direct Sales Service
Zendesk is a customer service software provider with a base of 145,000 paid users worldwide. It recently hit a $1 billion capitalization in 2020. With the increase in direct sales service, the numbers have increased exponentially in the last few months. The company had started with self-service sign-ups that made a revenue of $10 million back in 2006.
6. Dropbox: 2000% Growth Through Referrals
Dropbox is a cloud storage company that started in 2007. It provides cloud storage to users worldwide and mostly targets small and medium-level enterprises. In 2019, it brought revenue of around $1.7 billion. The company employed a unique way of increasing its user base through referrals. A user in Dropbox can refer the application to as many friends as they want to receive extra storage space. This deal worked for the company, and users started using Dropbox in no time.
7. Shopify: Most Successful Online Platform
Shopify is a Canadian company that offers website creation, payment deals, shipping services, and more for its 1.5 million merchants worldwide. It boasts a market cap of $89.9 billion, mainly driven by its successful affiliate programs and 26,400 ecosystem partners.
8. Salesforce: An Ecosystem That Is 5 Times The Company
When it comes to SaaS, Salesforce is arguably considered the original Software as a service company. With a strong foothold in the enterprise business and a market cap of $14 billion, the company’s reason for success is its strong ecosystem of services. By 2024, the ecosystem share will increase to 6 times that of the company.
9. Xero: Expert Resellers
Xero is a SaaS accounting tool launched in 2009. It has a user base of 1.8 million globally. The tool resells its products to various customers by pairing them with the accounting experts available. In addition, it has direct sales as well as an online self-service.
10. Microsoft: Global Reseller Platform
Microsoft has emerged as a global cloud service provider amounting to a $20 billion annualized revenue. Solutions like Office 365 and Azure are used in most professional organizations globally. In addition, it has a strong services ecosystem, with more than 90 percent of its business generated through its partners.
B2B SaaS products help you gain more businesses, getting you more customers. Hopefully, this blog will help you gain more information on the B2B SaaS products and top companies that crushed their targets in the SaaS industry. So, get on now and try exploring various SaaS products available for kick-starting your business goals.