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Benefits of a SaaS Model

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Dec, 2014


Benefits of a SaaS Model:

Software as a Service (SaaS) cuts through many silos – with respect to storage, resources, running costs and many other aspects associated with a business. This gives immense opportunity for the Service Providers in making additional revenue by simplifying the solution offering and making their customers satisfied with the offerings.

Businesses are moving away from the on-premise model of installation and service towards “Cloud” which gives the users of the software opportunities to invest time and money in those activities which can contribute to their business. Again the SaaS model favors the users because it allows them to pay for what they need and, hopefully, avoid over-paying – it is more of an “On-Demand” or “Elastic” mode of billing.

In-short the users of SaaS platform does not have to manage the hardware and operations associated with software’s. While this calls for additional investments for SaaS providers but also means lower support costs in the long run. For SaaS vendors, the development cycle is also simplified since they can follow an iterative model and seamless migration to higher versions of the softwares – another venue for enhancing customer satisfaction.

Customer expectations from a SaaS offering:

SaaS customers expect offerings to be easy to use and available all the time. For on-premise software, a vendor would sell the customer a product and typically interact with the customer only once a year for maintenance and renewal, or when the customer reported support issues. In a SaaS delivery model, every time the user logs in to the service a potential new customer engagement opportunity exists. The subscription or pay-as-you-go SaaS offering is volatile by nature, because a customer can switch his or her service provider at any time. The flexibility to leave at any time is often an attractive feature for customers.

Customers expect packages with monthly, quarterly and annual billing options. They also expect the service to work with their existing data and infrastructure. In addition to ease of use, ease of payment and flexible billing options are other features that attract customers to SaaS offerings.


The SaaS model brings new customer expectations and with it, new requirements on software. It brings changes to the financial model for the vendors. Software vendors planning on starting with or switching to a SaaS model for software delivery should pay careful attention to the monetization and related business operations that help maintain a sustainable SaaS offering.

Patterns become more difficult to analyze in the subscription or pay-as-you-go model. Applying detailed analytics to the historical data of customer usage interactions should help better manage cash-flow expectations. And proper customer management and other retention aspects (like discounts and promotions) become critical when it comes to retaining the customers. So SaaS providers will need to develop or acquire tools that provide detailed information regarding a customer’s usage, metering, and interactions and then tie those usage metrics back to accounting.

Even within normal service delivery models, back-office disciplines such as metering, contract management, and billing management are typically complex and requires strict monitoring. SaaS billing solution delivery models create an even more complex and rapidly changing environment for these business operation needs.

The economics of the “as-a-service” model will require successful vendors to look at scaling their resources to deliver these capabilities. If in-house skills are lacking, providers should consider best-of-breed platform vendors. The bottom line is that a vendor selling any given widget as a service should do what it does best, focus its resources on the widget itself, and leave the monetization services to the experts and matured platforms.

Ideally, just as the SaaS vendor’s customers have chosen to outsource services to experts, SaaS vendors themselves should evaluate existing platforms, rather than building systems in-house – which becomes more static and difficult to incorporate the ever changing business rules. Managing the metering, accounting, billing, and other business operations functions of SaaS billing offerings may be unfamiliar territory for traditional software companies.

In the initial excitement and effort to release the first version of a SaaS offering, software companies may fail to adequately address the most basic of these operations requirements and result in money being left on the table. A thought through process and operation design would hence become very critical in the success of the launch.

Resources on SaaS billing Solution

By : Satish Garikipati

Satish Garikipati is a consultant with SURE! (a Magnaquest product). SURE! is an internationally acclaimed player in comprehensive end-to-end Subscription Business Solutions for PayTV, Broadband and Cloud Computing businesses – through deployment of Metered Billing, CRM, Service Fulfillment, Value-Added Services, and Managed Services.

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