Cloud Delivery, Subscription Fees, Two Characteristics of SaaS

What is SaaS?

Software as a Service (SaaS) is a software delivery model. In this delivery model, software can be used over the Internet without traditional installation steps, and the software and its associated data are centrally hosted in a cloud-based service.saas website theme Users typically access the software using a thin client, typically a web browser.

Broadly speaking, all Internet companies are in the SaaS category. Although we will only discuss 2b SaaS in this article, which is primarily aimed at enterprise users, Internet products have been very successful for c-end users, but nevertheless there is still something to be learned from studying 2b SaaS.

From the definition of SaaS, we can see two main characteristics of SaaS: one is the delivery model and the other is the fee-based model.

Cloud Delivery

With the traditional enterprise-class software for deployment to the user through the local side is different, SaaS software delivery is the right to use the software, the customer enjoys a social service, and no longer develops the need for us to care about the bottom of the IT infrastructure education facilities. Local deployment and SaaS cloud deployment have their own advantages and disadvantages,seo how to improve your website ranking enterprise management can at the same time according to their own existence of different needs to decide to deliver the use of the way.

The main elements of the advantages of local deployment include a high degree of customization, controllable security, easy integration of internal control systems, support for single sign-on, the enterprise can directly invest in access to and ownership of these data analytics, and a relatively transparent life overhead. At the same time, the study of issues such as poor scalability, high operation and maintenance costs, and inefficient upgrade and iteration are also obvious disadvantages of local deployment.

On the other hand, Saas deployed in the cloud, customers have direct access to the Internet, so updates are done online, efficiently and quickly to meet customer needs, while its higher scalability and lower O&M costs are also huge advantages. But SaaS is not perfect. Integration issues with a company's existing business systems, customization, and data privacy and security are all issues that need to be considered during a company's procurement process.

Are localized and cloud deployments opposites? Ideally SaaS software must be deployed in the cloud, with the vendor responsible for updating and maintaining the software. Users only need to open an account to use it. However, in reality, there are still enterprises that require localized deployment due to security and high customization. For such customers, most vendors generally choose to provide the appropriate localized deployment products, so the two are complementary, and with the emergence of container PaaS platforms, the local deployment model will be lighter.

Subscription fees

The most attractive aspect of SaaS for investors is undoubtedly its subscription model, which is why it has been adopted. The subscription model charges only for the subscription/use of the software product/service, which generates a significant amount of recurring revenue, making revenues more predictable and therefore popular with financial investors.

While many SaaS vendors use the subscription model, there are different types of subscription models. Here we compare the impact of several different subscription payment methods on SaaS companies.

Multi-year or short-term (less than one year) : The value of a multi-year contract is the ability to lock in a customer for the duration of the contract and also lock in the price. Most SaaS vendors have multi-year contracts with their customers and according to a survey, nearly 80% of SaaS vendors have contracts with their customers that are longer than one year.Such multi-year contracts lock in the customer for the duration of the contract and provide a strong guarantee of the company's future performance. At the same time, the fact that a customer can choose a multi-year contract also means that the customer is recognized by the manufacturer for the products it offers and the market conditions.

Annual or Monthly Payments: In general, annual payments are more helpful to a company's free cash flow than monthly payments. Subscription-based pricing models focus more on the value of the customer throughout the life cycle. In the early stages, there is some net cash outlay as the lower unit price makes it difficult for revenues to cover expenses in the short term.

If customers can pay annually, they can pay the fees earlier and realize positive cash flow. Generally, vendors will offer a discount when customers choose to pay annually, which will have an impact on total revenue later. Considering that positive cash flow will be reached earlier and more money will be available for product development, sales and rapid expansion, SaaS companies will prefer to pay on an annual basis.

Prepayment or Postpayment (Settlement):Most of the subscription contracts signed every year are prepaid, which will make the cash flow of the SaaS business appear good. In fact, considering the business competition, there will be some subscription contracts paid by customers at a later stage, which will increase the competitiveness of the business in business, so the market position of the business can also be judged by the prepayment and post-payment.

In addition, there are some SaaS products need to be billed in accordance with the amount of use, so it will provide a first recharge and then deducted from the results, this payment method for the enterprise cost control is more flexible, and for the supplier, it is more test of customer service capabilities, to help enterprise customers better use the product to enhance the use of the amount of revenue can only be improved.

From the results of the analysis, pay in advance and post-payment of the two ways are not good or bad, vendors still need us to consider the enterprise through their own product structure design issues and market acceptance to choose.

SaaS Cloud Delivery Subscription fees

0