On SaaS

tl;dr: SaaS (Software as a Service) is all about standardised products and services that’ll bring corresponding growth in high gross profit.

  • SaaS business:
    • Subscription-based purchasing
    • Selling the right to enjoy services
      • What services: tiered pricing, on-demand pricing
      • Rights can be expired: expiration
    • Software is not running in your local servers: web-based standardised products
  • What’s good:
    • cheap, and flexible to raise demands or opt-out
    • significant cash flow for vendors, creates elastic sales strategies, and has substantial economies of scale based on standardised features
  • Churn is the key problem:
    • easy replacement
    • weak features squeezing clients heading towards customisation
    • security concerns (most SaaS run on clouds)
  • Metrics:
    • retention/churn/conversion
    • average revenue/cost, LTV/CAC
  • What’s the future?
    • client understanding
    • trends in industries and management acceptance
    • performance of clients themselves
    • next variation of the real economy to drive digitalisation
    • discovery of niches at the intersection of markets
  • Last questions:
    • Do we have the moat?
    • Have we known the clients well enough? What do they all want?
    • They want this and that. What’s the link between this and that? Have we modelled and refined the abstract business operating logic?
    • Have we covered every node on the workflow by standardised feature legos?

Assume that you know nothing about SaaS.

Firstly, it is a business model. #

Its full name is Software as a Service. So there are two key concepts:

What does it mean by not owning the software? #

SaaS doesn’t work like traditional software business. #

So, these are the fundamentals of SaaS business: #

Why do people like SaaS? #

Why does the traditional software industry shift to SaaS? #

But it’s not perfect: what if people stop subscribing? #

Therefore, SaaS has the following differences from traditional software in financials: #

And also these key metrics: #

Lastly, let’s talk about the future. It depends on: #

Fundamentally, SaaS is all about standardised products and services that’ll bring corresponding growth in high gross profit.

Last questions: #

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