Software as a service (SaaS) software distribution models are extremely popular. There are several reasons: they’re more cost-effective than purchasing copies of software for employees; they allow companies to access software on-demand without taking up system resources; they update with greater speed and ease than traditional software, and their software distributions can occur immediately and simultaneously.
Nearly all leading enterprises incorporate SaaS into their operating strategies. The popularity of this solution goes hand-in-hand with that of cloud computing, as SaaS can be considered one facet of that larger movement. As businesses rely more on software that exists in the cloud, and that can be accessed anytime, anywhere, cloud computing and SaaS will become integral to the way modern companies operate.
Understanding Why Companies Choose SaaS
A few of the main benefits were mentioned above, but let’s discuss the advantages of SaaS in more detail. Understanding why so many companies use this solution is essential. Why do they pick SaaS over traditional on-premises software? One of the main reasons is the considerably lower cost of SaaS over traditional offerings.
SaaS saves companies money in several ways. Traditional software requires up-front costs in the form of hardware to run the program, licensing fees and support staff. SaaS programs get their processing needs from the cloud and need only basic hardware to function. There are no licensing fees. SaaS vendors supply support staff for their programs, so companies using their software don’t need to train and employ their own teams.
SaaS also poses fewer risks than traditional software. Unlike on-premise software, companies pay little to nothing upfront. Instead, they pay to use SaaS on a yearly, quarterly, or monthly basis. Thus, when they no longer need a service, they can stop paying for it without any further costs. SaaS vendors often give businesses free trials so they can decide whether to pay for these services without any risk.
In addition to financial benefits, businesses are often drawn to the flexibility of SaaS. Whereas traditional hardware upgrades are expensive and include lengthy processes, SaaS services are easily scalable. If a company needs greater processing power, more storage, or additional services, it can quickly and easily acquire these upgrades from a SaaS vendor.
Furthermore, the vendor handles all software patches and updates. Companies using the software need not worry about installation, and with universal updates, they won’t struggle to get everyone on the same page and operating the right software.
With so many perks, it should come as no surprise that SaaS programs have extremely high adoption rates. Services can be accessed on multiple devices and across varying platforms and operating systems. Any device with an internet connection should be able to access SaaS programs. Because so many people are intimately familiar with using the internet now, and SaaS services are based on that-SaaS programs, usually have lower learning curves than traditional software.
SaaS programs also allow for more flexible work schedules. Employees can work from their home offices or while traveling more easily with SaaS than on-premise software.
Speed is another critical factor in the business world. Companies must be able to quickly seize any opportunity that arises. Traditional software takes a long time to integrate into business operations, but SaaS can be deployed with astonishing rapidity.
Many companies still have reservations about the security of SaaS and other cloud computing services. Yet, there have been fewer incidents of service disruptions or security breaches in SaaS than on-premise software programs. SaaS promises even better data security and reliability as time goes on and cloud technology advances.
What SaaS Customers Are Looking For
As mentioned, many top enterprises use SaaS. Human resources, customer relationship management, collaboration software, and procurement departments have seen the highest adoption of SaaS. The exact ways in which these companies use this solution, however, depends on their needs. Across the board, SaaS customers typically look for:
- Reviews: Companies are becoming smarter in researching SaaS vendors. The rise in popularity and competition in the SaaS industry has created a wealth of information for enterprises to consider. Businesses pay special attention to SaaS vendor and service reviews, for example. Vendors can take advantage of this trend by posting testimonials and success stories where companies can easily find them.
- Exceptional Service: SaaS vendors are expected to deliver higher-quality work as well; increased competition between vendors raises expectations. Businesses expect a service with extremely little downtime, few errors, quick and frequent updates, and fair pricing. Failure to meet these increased customer demands can mean losing them to other SaaS vendors.
- Service: Quick customer service from SaaS vendors is essential to businesses. This concept isn’t new. Companies already understood that answering customer questions or complaints quickly is the best way to keep them happy. Enterprises are expecting speedy responses from their vendors, or they may go elsewhere.
- Consistency and Branding: These are important factors for current enterprises. These virtues help build trust between customers and businesses. SaaS vendors need to facilitate branding across all aspects of a business to ensure consistency and eliminate confusion.
- Originality: Businesses are novelty seekers too. A SaaS vendor that can provide something a business has never before experienced will have a distinct edge over competitors. Vendors can consider building surprises into their loyalty programs or going the extra mile for their customers in other ways.
SaaS is becoming a better-known aspect of business. Companies are more discriminating in choosing vendors as a result. Enterprises understand that they have more options, so it’s important for those vendors to understand how companies choose their partners.
Measuring Customer Success with SaaS Metrics
SaaS vendors have a more difficult job than most sales personnel. Because their services use a subscription model instead of a one-time close, vendors need to win customers over repeatedly. Hence, measuring the health of their businesses is extremely important to SaaS companies. There are a number of metrics commonly used to track SaaS performance:
- Churn Rate: Churn rate is the term SaaS vendors use for how many customers they lose every year. This simple statistic is often overlooked in favor of more complicated metrics, but it is actually an effective barometer for the vendor’s health.
- Monthly Recurring Revenue (MRR): Another simple and often overlooked metric, MRR is the monthly revenue that a SaaS vendor can reliably anticipate.
- Committed Monthly Recurring Revenue (CMRR): This metric is a modified version of MRR that describes the monthly revenue a SaaS vendor can expect if relying only on current customers.
- Cash Flow: SaaS services take immense capital and initial resources to create, which makes cash flow an important metric to track.
- Customer Acquisition Cost (CAC): Though not exclusive to SaaS, CAC is an important metric for these companies to measure. CAC defines the cost companies can expect to pay before acquiring a new customer and how long it would take to recover that money.
- Customer Lifetime Value (CLTV): This metric measures how much money a SaaS vendor can expect to make from a customer. If CLTV is lower than CAC, the vendor is essentially selling its services below production costs.
SaaS customers are becoming more knowledgeable about the benefits they can expect from their vendors. To succeed in this industry, SaaS companies must be aware of what their clients want and how to measure their own health.
Featured Image: kentoh.