SaaS is a business model - SaaS Architecture Fundamentals

SaaS is a business model

Defining what it means to be SaaS starts with agreeing on one key principle: SaaS is a business model. This means that—above all else—adoption of a SaaS delivery model is directly driven by a set of business objectives. Yes, technology will be used to realize some of those goals, but SaaS is about putting in place a mindset and model that targets a specific set of business objectives.

Let’s look more closely at some of the key business objectives that are associated with adopting a SaaS delivery model.

  • Agility – This term summarizes the broader goal of SaaS. Successful SaaS companies are built with the idea that they must be ready to continually adapt to the market, customer, and competitive dynamics. Great SaaS companies are structured to continually embrace new pricing models, new market segments, and new customer needs.

  • Operational efficiency – SaaS companies rely on operational efficiency to promote scale and agility. This means putting into place a culture and tooling that is focused on creating an operational footprint that promotes frequent and rapid release of new features. It also means having a single, unified experience that allows you to manage, operate, and deploy all customer environments collectively. Gone is the idea of supporting one-off versions and customizations. SaaS businesses place a premium on operational efficiency as a core pillar of their ability to successfully grow and scale the business.

  • Frictionless onboarding – As part of being more agile and embracing growth, you must also place a premium on decreasing any friction in the tenant customer onboarding process. This applies universally to business to business (B2B) and business-to-customer (B2C) customers. No matter which segment or type of customer you support, you still need to be focused on time to value for your customers. The shift to a service-centric model requires the SaaS business to focus on all aspects of the customer experience, with specific emphasis on the repeatability and efficiency of the overall onboarding lifecycle.

  • Innovation – Moving to SaaS isn’t just about addressing the needs of current customers; it’s about putting in place the foundational elements that allow you to innovate. You want to react and respond to customer needs in your SaaS model. However, you also want to use this agility to drive future innovations that allow you to unlock new markets, opportunities, and efficiencies for your customers.

  • Market response – SaaS moves away from the traditional notion of quarterly releases and two-year plans. It relies on its agility to give the organization the ability to react and respond to market dynamics in near real-time. The investment in the organizational, technical, and cultural elements of SaaS creates the opportunity to pivot business strategy based on the emerging customer and market dynamics.

  • Growth – SaaS is a growth-centric business strategy. Aligning all the moving parts of the organization around agility and efficiency gives SaaS organizations the ability to target a growth model. This means putting in place the mechanisms that embrace and welcome the rapid adoption of your SaaS offering.

You’ll notice that each of these items is focused on a business outcome. There are a wide range of technical strategies and patterns that can be used to build a SaaS system. However, nothing about these technical strategies changes the broader business story.

As we sit down with organizations and ask them what they’re trying to achieve as part of their adoption of SaaS, we always start with this business-focused discussion. The technology choices are important, but they must be realized in the context of these business goals. Being multi-tenant without achieving agility, operational efficiency, or frictionless onboarding, for example, would undermine the success of your SaaS business.

With this as our background, let’s try to formalize this into a more concise definition of SaaS that conforms to the principles outlined previously:

SaaS is a business and software delivery model that gives organizations the ability to offer their solutions in a low-friction, service-centric model that maximizes value for customers and providers. It relies on agility and operational efficiency as pillars of a business strategy that promotes growth, reach, and innovation.

You should see the alignment between the business objectives and how they rely on having a shared experience for all customers. A big part of moving to SaaS means moving away from the one-off customizations that might be part of a traditional software model. Any effort to offer specialization for customers generally takes us away from the core values we are trying to achieve with SaaS.