What is this SaaS anyway?

As people hear more and more about what we’re doing at Frontegg and about my previous endeavors. They often ask me about the new ‘SaaS hype’ and whether or not it’s a real ‘thing’ or just another fancy trend?

For the most part, I get approached by web developers who say things like, “Listen Sagi, we’ve been in the industry for close to 20 years, and have focused mostly on B2B websites. We called them: ‘Simple, Dynamic, B2B Websites’. That’s it. Simple. Why the sudden switch to: ‘We’re doing SaaS’? What’s with all this shiny new terminology?”

So let me take this opportunity to resolve your curiosity. In this post I will attempt to clarify what SaaS is and to resolve this mystery once and for all.

Let’s start with some nostalgia

There used to be a time when you could purchase a CD, or even a few of them, in a pack.

You would open the box, take out the disc, flip it over, (maybe even sneak a sniff or two) and quickly feel impressed by how cool and shiny the disc looked especially before it would inevitably get scratched up.

What an amazing feeling it was to purchase new software. Insert it into the CD-ROM drive, pray that the autorun would work and bam(!). After a few minutes, you would have new software installed on your computer and ready to use. (as long as your hardware was strong enough, of course). Those were great times but they are definitely a thing of the past. 

Today, it’s all about web services. Instead of unpacking the CD, you have to sign-up for a new account (and validating your email address). The installation has been replaced by a speedy onboarding process, and everything else is history. Today we’re all about ‘Software-as-a-Service’ baby!

Oh, and by the way, don’t worry if you crave some nostalgia. The scratches on the back of your CD are still happening, they’re just in the form of ‘service downtime’ which are hopefully, for the most part, self-repairable.

Everything has moved to SaaS

According to Gartner, all new entrants in the software market and 80% of historical vendors will offer subscription-based business models (although we’re still not sure how COVID-19 will affect this timeline).

This is an amazing statistic. In the upcoming years, most of the organizations will be running on ‘SaaS Only Software Stack’. All of the categories will be filled with products that showcase their amazing capabilities using everyday updates, full accessibility wherever you are, granular notifications & alerts, reporting, adjustable pricing models, and many more cool new approaches.

So what defines SaaS?

The way we see it in Frontegg and the way I usually pitch the concept to old-schoolers or anyone who hates name dropping and trends is that two main concepts repeat themselves among SaaS products and that have changed the way we consume software in the last decade or so: 

The concept of a Recurring Subscription Model and Software as a Web Product.

Recurring Subscription Model

In the past, you had to purchase software through a one-time payment. It was usually a significant amount. Let’s not even mention the cost for support and upgrades on top of the software costs that were typically billed on an annual basis. 

Today, this method has changed. The usual payments for SaaS products are priced at monthly or annual rates and are on a renewable basis. This means that the service will keep updating repeatedly and you’ll keep paying for it, unless you decide to cancel.

The pricing is usually lower but that comes with a small sacrifice on your end. Unlike in the past where you would pay one-time purchase fees and have the software indefinitely. Today your use of any one SaaS product ends once you decide to stop paying. 

Like everything in life, this subscription model has its pros and cons. Although I think we can all agree that it’s definitely preferable to pay a lower cost, without too much of a commitment. This means that you pay when you need the service and you stop paying when you don’t. Sounds ideal, right?

One example that comes to mind is the usage of Adobe’s prime product — Photoshop.

The benefits in this model

I remember when I was working as a full stack developer and desperately needed to do some editing on images. I was integrating into the web portal I was building. I’ve searched the web for free solutions because back then using Photoshop meant you had to be part of some kind of top percentile and I didn’t fit those criteria. Today, Photoshop costs you $10 a month, set up in minutes, ready to create excellent imagery using high-end software, for as long as you need.

An additional great advantage to monthly subscriptions is the fact that you don’t have to commit to one particular vendor. Basically, you can switch vendors whenever you want, as many times as you want. All that’s needed is for you to do a migration and start payments to the other vendor from the next month or year, depending on the subscription model. That being said, this model can sometimes become more complicated in terms of predictions and budget allocations.

Software as a Web product

As I mentioned in my intro, the “old way” of using software was to install it on your computer, input your license key, and start using it. If you encountered an update notification or bug fix, you simply would install the update or fix and continue on.

Today most of the B2B SaaS products will be offered online, i.e. on a web portal (consumer-facing SaaS products sometimes come as mobile apps as well). You can access the website wherever the SaaS app is located. Sign up for a new account for your organization, do some onboarding, select your subscription plan, pay online, and start using the product right away.

There are definitely a lot of advantages to consuming a software product as a web application as opposed to installing it as a desktop version. A few challenges this model presents are:

1. Lower performance and native OS abilities. Since the app is bound to the restrictions of the browser and some apps require using native computer resources to run properly (AutoCAD or Photoshop are great examples of those). 
2. The web application model is restricted and hence we see more and more apps that deliver two versions, one for web application usage and the other that needs to be installed as a native OS app.
3. Less control over changes since your current version will most likely be updated whenever a new release is out there. Meaning there might be a lot of changes being executed right under your nose without you even realizing it. This ability may have more pros than cons, at least the way we see it, but it can still be challenging for some organizations.

Main challenges

The advantages listed above can also present a lot of challenges for SaaS vendors who will face unrealistic expectations from their customers. To name a few:

Meeting customer expectations for ongoing feature releases

Since customers are paying monthly fees and because everything is always available online. Customers expect speedy releases of new features and want your software to show real-time progress and value creation every few weeks.

These expectations did not exist in the old “pre-SaaS” era because it was clear to you what it was that you bought and paid for. You simply assumed that nothing would change in your installed software unless you installed a patch or an upgrade.

SaaS companies are facing the challenge of short release cycles and the need to constantly be moving new features out into the open. These release cycles not only include the development itself but are also required to cover important aspects such as release notices, monitoring, documentation, and customer success on their newly provided features.

Investing R&D resources before you have paying customers

With the ability to always control who gets what feature and when new SaaS business models have recently emerged. One great example is the Freemium model. In which some of the capabilities of the product will be available to customers for free without time limitations.

The customer is then free to choose to expand to a more extensive feature-set and start paying. Because of this, SaaS vendors find themselves focused on investing in furthering the development stages of their products, “seed” and then letting customers use it before they’ve paid. This means spending more R&D resources prior to any revenue.

In the early days, the Freemium model simply didn’t exist because the support to unleash part of the product just by signing up to a more advanced pricing tier practically wouldn’t have worked.

The Frontegg approach

SaaS is exciting. It’s not just a buzz. It’s a real-life change in the way things work even though it may present new challenges to vendors.

At Frontegg, we believe that as a SaaS vendor you should strive to provide the best product possible for your customers at all times. This is why we provide a 100% risk-free model. In which you can easily plug-in our features to your existing application. And present a massive upgrade for your customers through your SaaS product offering.

We make this possible without the need to pay for it until you get paying users for these features. That way you can (a) focus on your own core value. (b) provide a massive enterprise-grade user experience for your customers who are using your product (c) and only pay for these features once you secure those great deals.