Home > Method, Software > On Demand – Software as a Service (Saas) 101

On Demand – Software as a Service (Saas) 101

Some information I gathered from the web about SaaS


  • Consumer applications can be done less expensively and get to market faster. The feature requirements, integration and customization requirements are also usually less demanding for consumer applications.
  • It takes 70% to 100% more capital to fund a SaaS company to a liquidity event than a traditional perpetual license company. It also takes 2 to 3 times longer to get there. However, NBVP believes the extra time and money is worth it and pays off in higher market cap values.
  • SaaS companies move faster than big companies. They can introduce new features instantly versus waiting for the next major release. Think years
  • Some companies are changing their sales compensation models and metrics to level the playing field. They might give quota credit for 24 to 36 months of the subscription and pay commissions as the revenue comes in. Or they might just pay commissions based on 18 to 24 months of subscriptions.


  • Fast time to value (days/weeks instead of months)
  • Ongoing free upgrades
  • Top-to-bottom support (how many times have you heard from an on-premise vendor “upgrade to our latest release” or “the issue is due to your customization”?)


  • Attrition – Stickiness – to easy/cheap to switch
  • Power outage

SaaS Maturity Levels (taken from Wikipedia)

  • The first level of maturity is similar to the traditional application service provider (ASP) model of software delivery, dating back to the 1990s. At this level, each customer has its own customized version of the hosted application, and runs its own instance of the application on the host’s servers.
  • At the second level of maturity, the vendor hosts a separate instance of the application for each customer (or tenant). Whereas in the first level each instance is individually customized for the tenant, at this level, all instances use the same code implementation, and the vendor meets customers’ needs by providing detailed configuration options that allow the customer to change how the application looks and behaves to its users.
  • At the third level of maturity, the vendor runs a single instance that serves every customer, with configurable metadata providing a unique user experience and feature set for each one. Authorization and security policies ensure that each customer’s data is kept separate from that of other customers; and, from the end user’s perspective, there is no indication that the application instance is being shared among multiple tenants. As multiple customers’ data share one instance at this level, one customer’s data can be logically/virtually separated from that of other customers. That is multiple customers’ data may be saved physically into same data file. However, through the virtualization of an application, one customer can never see another customer’s data.
  • At the fourth and final level of maturity, the vendor hosts multiple customers on a load-balanced farm of identical instances, with each customer’s data kept separate, and with configurable metadata providing a unique user experience and feature set for each customer. A SaaS IV system is scalable to an arbitrarily large number of customers, because the number of servers and instances on the back-end can be increased or decreased as necessary to match demand, without requiring additional re-architecting of the application, and changes or fixes can be rolled out to thousands of tenants as easily as a single tenant.



My two cents: strive to own and to enrich the customers’ system of record to ensure stickiness.

Categories: Method, Software
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