The Smart Business Guide to SaaS Subscriptions
What is SaaS?
In 2019, everybody wants their software in the cloud. Gartner predicts that SaaS – already the largest segment of the cloud computing market – will grow revenues by 17.8% in 2019, reaching $85.1 billion globally.
Well, we say ‘everyone’…. At least one study suggests that, while larger businesses are forging ahead with SaaS take up, many SMEs continue to shun it. A reluctant 60% are yet to use any cloud-based software solutions at all.
That could be a mistake, because as MoneyWeek notes, “cloud computing can level the playing field as (SMEs) compete against larger rivals with deeper pockets.” Nevertheless, the study finds that nearly three quarters of senior decision makers at SMEs don’t know enough about SaaS to implement it.
So what is it? In a word, it’s Salesforce, G-Suite and Microsoft Office 365. It’s MailChimp, Xero and Dropbox. It’s a thousand more. You may be using a SaaS service without knowing that it is one.
SaaS apps sit in the cloud and you subscribe to them. You don’t own the software, and you don’t have to install anything. You rent it from a provider on a pay-as-you-go monthly model, and usually use it in a browser.
That’s the basics. Here’s what else you need to know.
What are the benefits of SaaS?
SaaS solutions provide real business benefits.
Capex to opex
More than ever, companies want to control spending and maximise working capital. PwC’s most recent Working Capital study finds that “capital expenditure (capex) as a percentage of revenues has plummeted during the last five years…” SaaS is one reason for this.
SaaS turns capex spending – buying software upfront, along with any additional hardware needed to host and run it – into opex spending – renting the software and letting the provider worry about hosting and storage. Instead of buying a server and software licenses upfront, you simply pay a smooth, predictable monthly fee.
The service provider automatically updates and patches the software as part of your subscription. You’re always up to date and, more importantly, secure. Traditional software businesses released new features every 12-18 months. Some SaaS businesses release new features weekly!
Lower infrastructure costs
With SaaS you don’t need racks of servers humming away in the back office, nor the infrastructure to keep them cool and secure. Basic workstations and connected devices are good enough too, because with SaaS much of the heavy computational lifting takes place in the cloud. And less infrastructure again means lower costs.
Traditional software sits on company servers and is accessed from linked office computers. SaaS apps can be accessed anywhere, anytime and on any appropriate device. As long as you have an internet connection you can access files and work on documents – be that at home, on the train, or at a client’s office. That’s especially important when you consider that nearly every employee would like to work remotely at least some of the time.
SaaS also lets collaboration happen by default. Think of an Office document emailed back and forth to all contributing employees, with each making changes and suggestions, and each needing to be sent a new version whenever modifications are made. Now compare this with an Office 365 document which sits in the cloud and is modified in real time by multiple users, and which represents one version of the truth.
Disasters can be, well, disastrous for business, and especially small business. Research shows that two thirds of small businesses would fold, or be forced to temporarily shut down, after a data breach. For businesses storing critical apps and data locally, floods, fires and theft are potentially catastrophic. But with SaaS, your apps and data are stored in remote server centres, purpose-built for security and resilience, and likely mirrored in more than one physical location. Big tech firms are much better at security than you are: SaaS lets them handle it, while you get on with running your business.
The downsides of SaaS
For most businesses the SaaS model works, but there are issues to consider:
- You don’t need much IT infrastructure to run SaaS apps, but you do need reliable connectivity. Lose your connection and your business can grind to a halt. It may cost a few pounds a month, but keep a backup connection (from a different provider) to your office, or rehearse an emergency work-at-home plan just in case.
- Many SMEs hestitate at sending sensitive information back and forth to the cloud, despite the fact that cloud providers are generally far better equipped to deliver state-of-the-art security than most businesses.
- Businesses must ensure that SaaS providers meet regulatory requirements in relation to the use and storage of data. These regulations are tighter for some sectors (finance and healthcare, for example) than others. Again, these providers are usually better at security than you, and have GDPR baked into their processes; but there are some highly regulated industries which still find SaaS hard to swallow.
The SaaS business model (and why it matters)
The SaaS business model is revolutionising access to business services – not just because there are now so many business tools on offer, but because they are helping small businesses to do more with less and changing the way we work in the process.
SaaS lets you scale usage up and down at will, in a way you simply can’t when buying software outright. For example, if you take on five temporary members of staff to cover a peak in sales driven by a special offer, simply add five seats to your relevant SaaS subscriptions. When the offer ends, take those seats away. Manage SaaS subscriptions properly and you’ll only ever pay for what you use.
New model customer service
Buy a software package and you’re stuck with it, regardless of subsequent levels of service. But experience substandard service from a SaaS provider and you can scrap the subscription and walk away. Providers know this: with no upfront sale, their business model relies on keeping you happy for the long term. That’s why SaaS companies tend to be genuinely interested in your feedback, so they can incorporate the features that keep their subscribers on board. In the SaaS world, the days of crummy customer service where you hang on the line for hours are long gone – because if they treated you like that, you’d be long gone too.
A SaaS ecosystem
Cloud-based connectivity makes it possible to have an ecosystem of complementary services working together on your behalf. For example a SaaS accounting package like Xero links to your bank and automatically pulls in transaction information, saving your staff a tedious and error-prone task. Similarly, you can integrate Salesforce and MailChimp to automatically push newsletter campaign insight back to your sales staff. There are numerous examples of SaaS solutions working together to make business processes more efficient.
The monthly subscription model keeps prices competitive, because of the ease of switching. In addition, SaaS applications can offer different combinations of features at different price points, with subscribers free to switch up and down between versions as their requirements change.
Many SaaS solutions use a combination of recommendation and integration with other services to make sales. In which case, you can also rest easy that you are not paying the salaries of a sales team, either.
A complete SaaS stack for small business
As you can imagine, a typical small business uses several SaaS services, to cover a whole range of business requirements. Pop them together into a “stack” and there are billions of possible combinations.
Here are the most common SaaS applications for SMEs.
Documents and productivity
Write and edit text, spreadsheet and presentation documents wherever you are, and allow different contributors to work on the same document in real time. SaaS productivity suites also typically include email, shared calendars and chat functions.
The two big players here are Office 365 (the cloud version of Microsoft Office, plus email and more) and Google’s G-Suite, while another capable option is Zoho Workplace. Office 365 is the most popular, but your preference may depend on which features you value most.
Cloud-based storage solutions allow you to reduce on-premises infrastructure (and the man-hours spent on its management and maintenance), and give you access to files wherever you are. Popular options let you store virtually any file type, from documents to video. Typically, you can create bespoke permissions and keep control of access and editing rights.
Dropbox, Google Drive and OneDrive are the most popular cloud storage providers today, with Google the market leader. Here’s how they compare. Another option is sync.com, which is less full-featured but includes end-to-end encryption.
Teamwork tools let employees communicate and collaborate seamlessly and instantly. The market leader here is Slack, a corporate instant messaging system with lots of add-ons. Slack is designed to replace email when it comes to communication and file sharing within an organisation – although that’s a touch optimistic. Channel messages to individuals, groups or everyone, and exploit a galaxy of useful integrations, including Google Analytics, ServiceNow, MailChimp and SalesForce. Competitors include Microsoft Teams, Facebook’s Workplace and Basecamp.
Project management tools let your teams collaborate on multiple projects at the same time, without having to rely on memory or email trails to know who is doing what for when. Keep your team abreast of deliverables, deadlines and decisions, with project overviews and the nitty-gritty details of daily tasks.
Options in this space include Trello, Asana, Monday.com and Basecamp, but there are many others.
SaaS applications let you make web-based voice and video calls and set up voice and video conferences. Leaders in the field include Skype, Google Hangouts, Zoom and PowWowNow.
Cloud-based customer support tools give your agents one-click access to customer information, including previous interactions with your company. By doing so, they empower staff to offer more personalised and efficient help by phone, email or live chat. Leading options here include Zendesk, Desk, Freshdesk and Intercom.
SaaS finance solutions abound. There’s accounting software like Xero, QuickBooks and Zoho Books, expense management programmes like Expensify and Rydoo, and simple receipt capture tools like ReceiptBank and ExpensePath. Cloud-based finance programmes often integrate with each other, automating mundane bookkeeping tasks. For example, prepaid business card and expense management solution, Soldo, integrates with Xero, feeding expenses information directly into your main accounts ledger.
Customer Relationship Management (CRM) solution Salesforce is among the best known SaaS tools for business – but it’s expensive. Salesforce gives every part of your business a single, shared view of every customer and every interaction they make with your business, whether they’ve messaged customer support, reacted to a marketing email or phoned a sales agent. By doing so, CRM solutions drive smoother customer experiences. Alternatives to Salesforce include Zoho CRM, Freshsales and Hubspot CRM.
Honourable mentions: Zapier and IFTTT
Zapier and IFTTT (“IF This Then That”) are special SaaS solutions that help your other web-based apps work together. You can use them to get two or more apps to connect and thus automate repetitive tasks, without the need to create complex integrations. For example, they will allow you to connect Gmail and Facebook so that a new Facebook lead is automatically sent an introductory offer by email. There are thousands of other potential connections and automation – many pre-programmed by a community of users.
A basic SaaS office – the startup costs explained
What might a new microbusiness need, and how much would it cost today?
Email, productivity, messaging and video/voice conferencing
G Suite Basic – currently £4.14 per user per month.
Trello – the freemium version is fine for start-ups.
Wave – free. Wave is free accounting software designed for start-ups and entrepreneurs.
Dropbox Standard – £10 per user per month. You’ll quickly fill G Suite Basic’s 30 GB of storage. Dropbox comes with 3 TB.
Mailchimp – free. Mailchimp’s most basic package lets you automate email and social media marketing campaigns.
Total: £14.14 per user per month.
Once you require more functionality, the costs will go up – but it’s entirely predictable. A typical small business can get all the tools it needs for around £100 per employee per month.
Paying for SaaS Services
Paying for SaaS services is usually done via a company credit card or via bank transfer. At first, you might not pay anything at all. A typical SaaS pricing model works like this:
- Freemium edition. A pared down version of the service is made available for free, often for a limited number of users. Providers know that, when integrated into your systems and processes, you’re less likely to switch services, so it makes sense to get you started for free.
- Small business edition. As a startup grows, it sees the need for a larger feature set, more storage or higher user limits. A small business edition is usually made available for around a £10 per user per month pricepoint.
- SME edition. Larger businesses may be obliged to pay £10 – £20 a month for, say, unlimited storage and more comprehensive management or reporting tools.
- Enterprise edition. This full-featured version is designed for a large number of users and is based on a bespoke pricing model.
Most SaaS services are offered on a monthly subscription model, though a few offer annual contracts too. These are usually cheaper, if you are happy to be tied to the service. Nearly all SaaS pricing is per user/seat.
Simple pricing – and simple to forget
SaaS pricing is thus relatively simple, and designed to slip all but unnoticed into your monthly accounts. That’s its great strength, but it can also cause problems for companies who do not stay on top of their software licences. A mistake with SaaS management – paying for a user who no longer works for you, for example – is a waste that recurs every month.
Those costs add up. In the US, it has been estimated that companies waste an average of $247 per desktop on unused or rarely used software each year. Gartner has calculated that as much as 30% of software licences are wasted.
Or as ComputerWeekly puts it: “It is so easy to overspend with SaaS deployments…IT departments typically underestimate the number of SaaS apps in use by a factor of 15-20. This is a huge black hole in financial, compliance, regulatory and security risk.”
Soldo is the solution
Soldo is a prepaid card and expense management solution that has been designed specifically to help businesses keep track of spending. By linking prepaid virtual cards with a comprehensive administration platform, you can track and limit spending to avoid unnecessary software costs.
- Prepaid virtual cards can be restricted to SaaS spending.
- Card limits ensure that only legitimate and pre-agreed software is used.
- Finance staff have a real time view of what is being spent, when, and by who.
- Admins can see by role who is paying for what, making wasted software licences much less likely.
- By giving your staff controllable software budgets, you can also give them the freedom to equip themselves with the best tools for the job.
Find out more about virtual cards and prepaid cards for business here.
The future of SaaS
SaaS is a convenient, time-saving and (if well managed) cost-effective way for businesses to access the software they need. SMEs may be lagging behind, but SaaS take-up is only going in one direction. The near future of SaaS will see more sophisticated services being made available on a subscription model to any business with an internet connection.
Here’s what might be just around the corner…
- Oracle predicts that by 2025 “80% of all enterprise (and mission-critical) workloads will move to the cloud.” Where enterprise leads, SMEs will follow, if only because exploiting SaaS solutions gives them a better chance of competing with larger competitors.
- More and more SaaS solutions will incorporate sophisticated AI and machine learning, giving SMEs off-the-shelf apps to harvest and interpret huge amounts of potentially valuable data.
- AI-powered SaaS apps will let businesses automate an increasing number of customer interactions. Chatbots that make natural conversation and offer bespoke recommendations, while solving problems more quickly, will be available to all businesses on a SaaS model.
- These automations will significantly boost productivity, too. Oracle believes that AI and other emerging technologies, delivered on a SaaS basis, could double productivity by 2025.
- Integrated SaaS solutions may group together to offer one subscription to a connected universe of software solutions.
- Every year, billions of work hours are spent performing routine IT tasks. With so much business software managed and maintained in the cloud, on-premise IT teams will be free to focus on innovative projects that make the most creative use of SaaS applications.
Soldo is a sophisticated business expenses solution that empowers staff with controlled access to company money, while making expense tracking and management easier than ever. Take control of your SaaS spending and give your employees the tools they need in the most efficient and cost-effective way. Learn more at Soldo.com.