Software as a Service Industry Insights

Software as a Service, SaaS for short, differentiates itself with its consumption of software through an internet connection, rather than one that is locally installed. The software and the hardware essentially belong to a service provider in which the external use of their products are rented. SaaS is fundamentally a part of cloud computing and is considered to be in a vast area of business development. Among others, the cloud computing services include Platform as a Service (PaaS) and Infrastructure as a Service (IaaS).

How does SaaS work?

Essentially, users are able to create their own individual accounts through the internet and they are billed monthly or annually according to accruing costs. The providers are responsible for maintaining, providing, and updating the programs online; the only necessity for users is to access through the internet with any internet-enabled device, as the applications are called up on an online platform and do not run on their own computers.

Advantages of SaaS

  • The ease of online usage allows the user to avoid issuing licenses
  • IT teams can allocate their time on various other tasks as they do not have to spend time on software installations, licenses, updates, or maintenance.
  • Software is no longer necessarily bound to a workstation. With the login data, users no longer need to use a workstation; they can access the tools from mobile or other systems. This also contributes to the support of the home office concept.
  • Cloud architecture offers all users with equal security standards. Thus, smaller companies benefit from the same security standards as larger companies.
  • The vendors have complete control over the software. Hence, this ensures that the user always uses the most recent version of their services.
  • There are payment options per user, so corporate spending can be efficiently monitored.

Disadvantages of SaaS

  • As the user’s confidential company data is stored on the provider’s end, hacker attacks, data leaks, and other incidents that jeopardize the user’s confidentiality are generally beyond control.
  • If the SaaS providers go bankrupt or are coerced into discontinuing their service for other reasons, it is impossible to continue using the services, and, technically, all documents and data could disappear. However, SaaS spontaneously on very few instances switches off.
  • The user requires a constant connection to the internet to optimally utilize SaaS.
  • If the user is using different operating systems such as MacOS, there could be compatibility problems.
  • Quality control is supervised less for SaaS products.

Companies Involved

Email providers have been utilizing SaaS principles for many years, supplying email tools such as 1&1 IONOS through websites. WordPress, Salesforce and major software developers such as Adobe (Creative) and Microsoft (Office 365) are also popular SaaS vendors that provide SaaS versions of their services.

Detailed Example:


Slack is a provider for a communication interface for workplaces. The app divides all conversations into channels that are created and then further spreads into threads that determine the limits of specific conversations. Slack can be set up in a fast manner and the user can invite other people to join by email.

Most popular SaaS programs

  • Content Management Systems (CMS)
  • E-commerce
  • Customer Relationship Management (CRM)
  • Project management apps
  • Personal planning
  • Financial accounting
  • File management
  • Archive management

The Future for SaaS

SaaS is turning into a highly profitable decision for venture capital companies. Reputable VC firms such as The SaaStr Fund, a $90 million venture fund, is gathering its energy and resources to support early-stage funding, particularly for SaaS/B2B/enterprise startups. SaaStr allocates between $500K and $6 million per startup, simultaneously providing expertise to advertise and assist their ventures.

Another VC that proves a promising future for SaaS, Bessemer Venture Partners (BVP) is one of the distinguished leaders in the SaaS venture capital battle. Managing over $4 billion of capital that is invested in more than 130 companies worldwide for the past 50 years, BVP focuses on collaborating with consumer, enterprise, and healthcare industries. Recently, it invested in Claroty, a cybersecurity software for industrial control networks and Mambu, a banking software that assists users with management of loans and deposits.

To invest in SaaS related companies, download KOSHO for free!

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