A changing market: This is why software vendors should rely on the SaaS model

Published July 16, 2020
Estimated reading time 4 min

Christina Elbert Business Development Manager d.velop

SaaS Model Header

Software-as-a-Service (SaaS) is a licensing and sales model that enables software applications to be offered and used via the cloud – as a service. The SaaS business model can be understood as follows: The responsibility for the software application is transferred from the company to the SaaS operator. According to industry association Bitkom, 46 percent of all companies in Germany already use SaaS offerings such as Office 365. The SaaS model is suitable for companies of all sizes, from start-ups to global corporations.

Companies list numerous reasons for switching to cloud-based SaaS solutions, including easy and automatic updates, scalability, low configuration and infrastructure costs! The bottom line is greater profitability.

This is also confirmed by the 2016 Forrester study commissioned by AWS.

Reasons for cloud-based SaaS solutions

Customers want SaaS! And manufacturers must react

According to Forrester, 90 percent of the vendors surveyed confirmed that they are responding to customer demand with their SaaS offerings. This is followed by the interest in expanding the existing business model (e.g. through online trading) with 85 percent. 71 percent of decision-makers also say that improving competitiveness is the main motivation for integrating applications and cloud services. The point of cost reduction is also reflected with 78 percent. This shows that the factor “cost reduction” is only one of many.

Customer demands in cloud solutions

But despite the advantages, by no means all software houses have aligned their business model to SaaS.

Why is it worthwhile for a software manufacturer to develop SaaS solutions?

Worldwide, the forecast for cloud services by 2020 is estimated at more than 400 billion US dollars (in addition to SaaS, also areas such as PaaS, IaaS & Cloud Advertising). If one focuses on the development and forecast for Software-as-a-Services, Gartner predicts a constant growth in revenue for cloud services.

Global revenue forecast for cloud applications by Gartner

Stagnation is not in sight. On the contrary: the average growth rate is estimated at around 20 percent. By 2021, the consultants expect an increase of 60 percent. This means that software manufacturers are expected to achieve sales of around 117 billion US dollars (about 103 billion euros) with SaaS.

The figures are an example of the current market trend. German software manufacturers must prepare themselves for the fact that the willingness of their customers to invest in cloud or cloud apps will increase. Customers today no longer ask whether cloud technologies are the better choice, but only when and how much they want to invest.

More sales with the SaaS model through regular revenue streams

This is worthwhile for all software providers who succeed in offering SaaS services in demand: Regular revenue streams allow for better planning and thus far better cost and profit planning.
Large providers, such as Microsoft or Salesforce, are showing the way. With Office 365, local installations and updates are a thing of the past.
SaaS solutions can generate regular income from formerly one-off license revenues (which often put off customers).

Optimized resource utilization: SaaS model manages resources automatically

SaaS solutions take full advantage of the scalability of cloud resources. The advantage is that, unlike client-server applications, they are able to manage processing power and storage space as required by the load and number of users. In fact, a multi-tenant application does not reach its limits if its operation is parallel and distributed on a server farm. High availability of the services is thus guaranteed for the users.

This is not the case with client-server applications in their own server room: If you want to supply more clients, you have to invest – and consequently keep resources available even when they are no longer needed.

With the cloud, resources can be provided according to demand and also billed according to demand. Economies of scale that providers achieve in their data centers keep costs in check – both for SaaS providers and the customers of the services.

d.velop supports partners on the way to the SaaS business

What do software vendors do when they want to meet customer needs and enter the SaaS business? With targeted new programs, d.velop AG supports all ISVs, start-ups, IT system houses and software developers as partners. For example, a d.velop Hackathon is regularly organized, which pursues the goal of imparting know-how for app development on the basis of the d.velop cloud. The d.velop cloud experts do not only help with the development, but also accompany up to the start of the SaaS solution operation and beyond. Specially developed apps can be made available on the d.velop platform in a store.

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