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Defining SAAS : What it is and What it is NOT

Is SAAS  a delivery model? Or a business model? Or a delivery strategy under overall business model (read this interesting thread on NextBigCommunity : How do you define SaaS?).

SAAS_Evolution
SAAS Evolution

In order to understand SAAS better, we asked entrepreneurs who are building a SAAS business and here are some great perspective that gives a great insight into SAAS model:

Avlesh Singh, Cofounder WebEngage

What is SAAS?

  • A DIY product – it is the self-serve nature of the product delivery, which to me, is a strong qualifier for a product to be called SaaS.avlesh_webengage
  • A business which is more software and less (or better still, no) service. SaaS products have to have minimal human touch – be it sales, on-boarding or ongoing usage.
  • A subscription based pricing model – monthly/quarterly/annual fee for using the product.
  • A flexible upgrade/downgrade option – most bundled software lock you up. A true SaaS biz, according to me, should allow seamless upgrade/downgrade depending upon customers needs.

What is NOT SAAS? 

  • Just because people can sign-up and pay online for a product doesn’t make it a SaaS business.
  • A limited configuration (or no configuration) driven product. A SaaS business does NOT sell the same software to all its customers. It is for the same reasons a SaaS business has multiple pricing and product tiers. As the customers grow, their spending on a (true)SaaS tool should increase. This HAS to be the underlying business model for any SaaS business, a/c to me.
  • Any business which talks about set-up fees, retainer fees or training costs, to me, is not SaaS. These should be classified as enterprise software where service plays a bigger role than the software itself.
  • Any software for which you need to hire people who would use it on behalf of your customers, to me, is not a SaaS business.

Paras Chopra,Founder , VisualWebsiteOptimizer

What is SAAS?ParasChopra.jpg

I see SaaS as a business model more than delivery model. An ecommerce store that has recurring subscirptions (say sending a Tshirt every month) would also qualify in some broad sense of SaaS.

However, if you were to go by technical definition, SaaS obviously means software that you can access as a service. Accessing it as a service has nothing to do with how the software is charged for, but nowadays increasingly it means charging in a scalable fashion that varies by the usage and is billed in equal intervals (mostly month).

What is NOT SAAS?

Well, a lot of things. A B2C service (say a dating or matrimony site for which you pay for) is rarely qualified as SaaS. So I guess anything non B2B cannot be called SaaS in contemporary understanding.

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Sharath Potharaju, Cofounder MobStac

Sharath PotharajuWhat is SAAS?

The way I see it is that SaaS evolved in phases. The basic definition of saas obviously is limited to how the technology is delivered. But as people starting delivering technology there was standardization of how pricing was structured and how customers could be acquired.

When you multiply pricing and customers you get revenue, hence as people used similar pricing strategies and used standard customer acquisition channels companies were able to build predictable revenue streams.

This brings us what saas currently stands for: My understanding of when someone says it is saas is a predictable revenue model that is driven from standard pricing plans and well understood customer acquisition channels.

What is NOT SAAS?

I would say it is not SAAS if there is no predictable revenue stream for a product being delivered from the cloud.

What’s your take? How do you define SAAS?

Recommended Read : A Critical Look at the SAAS / Cloud Model. Will it End before it Starts?

Also, you can ask any questions to Accel partners regarding SaaS model and how they perceive it.