April 30, 2023

Max Nirenber's article on geektime -6 best practices for building a successful SaaS model

6 best practices for building a successful SaaS model

The Software-as-a-Service (SaaS) model is among the fastest-growing paradigm shifts in the cloud era and will only continue to grow in importance and sophistication.

Max Nirenberg / 14 Oct 2021

6 best practices for building a successful SaaS model
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Written by Max Nirenberg, CRO and Managing Director for North America, Commit

The SaaS industry is exploding. A survey by Gartner forecasted that end-user public cloud spending is expected to reach nearly $333 billion by the end of 2021, with SaaS-based services seeing the largest growth among these cloud-based solutions at $122.6 billion.

The idea behind SaaS is simple. It’s an ongoing service model that needs to enable the provision of software or services in a web interface hosted on the cloud. This type of solution is accessible anywhere and anytime, and end-users can use the software without downloading, installing, and updating versions. This convenience and accessibility drive adoption, but it also brings new challenges for technology developers and providers.

Centralizing Operations – A Key to SaaS Success

For startups and enterprises alike, transitioning to SaaS providers can be a true paradigm shift impacting people, technology, and processes. Once the shift occurs, everything must be provided “as a service.” No matter your location, what industry you’re in or what service you offer as far as the end-users and customers are concerned, they are purchasing a fully managed service that meets all standards. They don’t expect to lift a finger for it to work properly.

While the SaaS-based model eradicates lengthy onsite installations, maintaining quality service requires large upfront investments in infrastructure and the ability to support customers and make updates continually. These efforts impact operations, finance, sales, development and many other departments that must be coordinated. Therefore, the shift to being a SaaS provider, if done correctly, forces organizations to become more centrally managed, cohesive and cost-effective. Silos and inefficiencies can become quickly unstainable, whether you’re managing everything internally or need to partner with a third-party.

To avoid errors, stay up to date and remain competitive on a technical level, organizations will need to standardize their configurations, implement automation whenever possible and operate agilely. For instance, teams should incorporate DevOps best practices into their operations and ensure their continuous integration/delivery or deployment (CI/CD) processes are all aligned with each other, allowing for easier and more updates of apps and services.

Suppose CI/CD pipelines aren’t fine-tuned and considered from an end-to-end perspective. In that case, certain development processes may bridge out in their own silos for too long, and organizations may suddenly find themselves spending extra hours managing integrations or trying to merge applications thus delaying crucial fixes or new updates.

Integrating with Others

In addition to being able to better deliver applications and services, SaaS developers must also ensure their solution easily integrates with customer environments, whether they are completely in the cloud, on-premises, or hybrid.

Gone are the days of complex configurations and service providers dedicating hours to the onboarding stages. Therefore, SaaS providers should build APIs that ease this process, whether for data exchange or infrastructural and operational alignment.

The Subscription Model Revolution

Instead of paying once for the right to download a product, users subscribe to a SaaS product or solution. This means the entire pricing model shifts from annual large-chunk payments to much smaller monthly payments per customer – monthly recurring revenue (MRR). This requires management to understand that cash flow has changed and that business is not what it used to be.

For developers, the solution needs to be built so it can be priced accordingly. That means each feature of the solution needs to be built, so the level of programming, compliances, and services provided matches the level of subscription. For example, a FinTech company specializing in e-payments may provide capabilities for customers to make payments within one country at one price level, and capabilities to make international payments at another.

SaaS companies must also focus heavily on customer retention and not just on passive customer satisfaction. And in the ever-evolving cloud era, not only do companies have to make sure they are cultivating customer relationships, but they also have to keep their product updated and highly responsive to emergent customer needs in order to stay relevant. For this purpose, SaaS providers should map out their customers’ journeys, making sure they know where end customers are along this path to decide how and when to upsell successfully.

A New Level of Assumed SLAs – SaaS and Service

The journey to SaaS often means shifting a company’s business model and culture. This could mean a commitment to meeting new, often pre-assumed, service level agreements (SLAs)  and providing more ongoing support at all levels – software, cloud and application infrastructure.

For instance, ensuring key performance indicators (KPIs) are met for business continuity or timely updates may require a SaaS vendor to operate a 24/7 support center. For this, organizations should consider whether to do so in-house or in collaboration with a service provider. Vendors will likely also need to provide the security, operations and monitoring component of their services.

To satisfy new SLAs and KPIs, a top IT service management (ITSM) approach, such as the information technology infrastructure library (ITIL) framework, can help teams set up the appropriate processes.

A New Level of Security and Compliance

Information security incidents, such as hacking or leaking information, are the direct responsibility of a SaaS company and can damage its reputation. Therefore, SaaS applications must be prudent about the data they access, who owns it, how it is processed, how it is transferred and how it is stored. To this point, SaaS developers need to include processes that determine how long the data is stored and how it is removed from any databases.

Data privacy regulations must also be met rigorously, and these regulations are constantly changing. According to the general data protection regulation (GDPR), you have to anonymize data. And for healthcare tech to be compliant with health insurance portability and accountability Act (HIPAA) guidelines, teams need to encrypt certain data at all levels.

It’s crucial that processes necessary to meet regulations and data security are in place before a company launches its application. Equally important are regular updates to match any changes in guidelines or regulations. This can involve many stakeholders and experts.

Smart Staffing With Flexible R&D

When building out a SaaS solution, it’s crucial to adopt an end-to-end, multi-disciplinary approach, including specialists in many cloud environments, CI/CD, compliance, infrastructure management, customer service and more.

While a holistic viewpoint is always needed, not all experts are needed at the same intensity throughout the development process. Therefore, companies looking to save money when developing and deploying a SaaS solution can utilize multi-disciplinary development services on demand. This approach, known as flexible R&D, enables companies to tap into the world’s best talent but only pay for services when they are needed.

Build Your SaaS Strategy for the Future

The SaaS industry is not only growing but also becoming more complex and demanding to accommodate the latest technology, such as IoT, AI, 5G, and more. This presents many new opportunities, but those who succeed will need to consider all angles of the SaaS journey, including everything from account management and compensation structures to meeting assumed expectations for seamless, secure availability. Teams that do this with an eye towards efficiency and end-user requirements improve their chances to thrive in the evolving market.

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