The Evolution of SaaS and My Learning So Far, By Fatima Majekodunmi
By Fatima Majekodunmi. Fatima is an Associate Consultant at Zeren, and is based within our London office, as a member of our Commercial hiring team.
SaaS – Software as a Service – can be defined as a method of delivering software or other services. Customers pay a subscription fee to access the software instead of buying, owning, and installing it on their own machines.
Whilst this sounds like a relatively new business model, SaaS has its origins in the 1960s. Early SaaS models involved terminals connected to a mainframe computer.
This system was known as ‘time-sharing’ which allowed small to medium businesses, academic establishments, and government bodies to access modern computer systems without having to pay for hardware, support, and training – an early precursor to both the internet and SaaS.
As the price of computers and hardware became more affordable, businesses began to make use of them, allowing employees to have their own computer at their desk, and provided them with hard drives.
Computers became interconnected through Local Area Networks (LAN). Businesses could host their data on the central servers and other apps on the local computers. This meant that employees could access both the data and applications from their own computer through LAN. This model required dedicated IT teams to ensure the smooth operation, including hardware/software maintenance, upgrades, and data backups. Many businesses could not afford to deal with the full implementation and scaling of LAN.
Businesses found it hard to manage their systems and apps, especially as the requirements of the software increased at a faster rate than what the hardware was capable of. Storage space was becoming costly, but with the expansion of the internet and its wider availability, businesses quickly realised the cost-effectiveness of storing their data off-site.
Companies that provided these over-the-internet services were called Application Service Providers (ASP). This form of modern centralised computing offered services such as managed business apps and hosting services. This allowed businesses to cut costs and saved them from investing heavily in the infrastructure and resources needed to maintain and manage the LAN model.
Whilst ASP and SaaS both provide computer-based services over a network, they differ because SaaS is self-service. With the ASP model, the businesses had to manually create each login and environment for their employees.
In 1999, Salesforce launched their Customer Relationship Management (CRM) platform, the first SaaS solution built that achieved record growth. Unlike other companies at the time, Salesforce focused specifically on providing SaaS services. They focused on multiple products and services, including CRM, the Sales Cloud, the Service Cloud, their Force.com platform, Chatter, App Exchange, Configuration, and Web Services.
Cloud Computing is the on-demand availability of computer system resources, especially data storage and computing power, without direct active management by the user. While the concept of Cloud Computing technically launched in the mid-1990s, it became ‘mainstream’ in the mid-2000s with the emergence of the “big 3”: Google Cloud Platform, Microsoft Azure, and Amazon Web Services (AWS).
With Salesforce leading the way, SaaS became a proven business model. It forced businesses like Oracle and Sage to deliver a SaaS version of their products. SaaS became the only option for start-ups, as companies began developing their products in the Cloud. By 2018, around 89% of the world’s business enterprises were using SaaS solutions.
2020s and Trends to Follow
- A shift to product-led growth (PLG)
Typically, we have seen sales-led and market-led growth in the SaaS industry. There has been a shift away from this in recent years to PLG; this is when user acquisition, expansion, conversion, and retention are all driven primarily by the product itself.
Product led SaaS companies usually rely on a ‘freemium’ model that allows users to experience their product without going through a sales or marketing person. This model allows businesses to have many potential customers earlier in their journey. It allows users to understand how the product works, understand the reduced features offered and experience the value of the product.
- The verticalisation of SaaS
Vertical SaaS models allow SaaS to offer full-featured solutions that address the challenges faced by a certain vertical. They have a focus on niche industries and deliver personalised, unique experiences to businesses and consumers.
- AI-driven SaaS
Artificial Intelligence, when integrated in SaaS products, increase efficiency and productivity. AI can be used in many ways including: providing customer service via chatbots; personalising user experience by gathering data generated by customer interactions; and securing products by detecting suspicious behaviours and patterns. This means that certain tasks do not need to be performed manually.
- Bottom-up approach when selling SaaS
This approach means that companies will target specific individuals at the lowest level of the sales chain, usually the ultimate user of the product. This person is often an Individual Contributor who will be affected by how the product works. With success of selling the products to the lower levels of an organisation, you will see your product grow horizontally and vertically across the business.
The work I have done so far with SALESmanago and Planet has taught me a lot in an ever growing industry. I look forward to working with more niche-orientated and fully-stacked businesses alike. Placing candidates within the SaaS industry is crucial, because such Software allows for easy customisation, and fulfills specific business needs without affecting the overall infrastructure.
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