3 Ways How SaaS Subscription Model Works During and After the Pandemic
October 3, 2022
Despite the COVID-19 pandemic causing havoc across the world, one industry that is resilient in the face of this storm is Software-as-a-Service (SaaS) subscription model. This is largely due to their business model. Well, that doesn’t mean all SaaS companies will survive. But those with a strong product will manage to cruise through, once the pandemic ends.
The subscription model of selling products is something that SaaS companies successfully used, albeit in its, early days during the 2008 global financial crisis. In the current crisis, we can check its effectiveness. The assurance of financial flexibility offered by SaaS companies through subscription-based payment has become relevant during the pandemic. As customers rethink their expenditure, including on software, as their own financial robustness have taken a hit or they are just adopting a cautious approach.
Although the overall business sentiments have spiraled downwards, SaaS will likely see growth, economic pundits are predicting. It will probably be among the few industries, other than healthcare and e-commerce, that will find fresh rounds of investment coming in. According to the India Private Equity Report 2020 by Bain and Co., and Indian Private Equity and Venture Capital Association (IVCA), the Indian SaaS market is expected to grow more than threefold in three years- from $6 billion in 2019 to more than $20 billion by 2022.
Here are 3 reasons why it has been BAU (business-as-usual) for SaaS companies during the pandemic, and why the trend will continue in the post-crisis phase as well.
1. Pay Per Use/Pay-As-You-Go Method Works For All
Unlike the technology sector, or any other business for that matter, where the customers have to pay either in advance or after a service has been delivered. There is no upfront costs or license fees payment for buying SaaS product. Moreover, clients don’t need to purchase a complete product. They can, instead, invest in a particular piece of the product for a limited duration, and pay only for that period. The client can cease the subscription at any point and not have to pay for the remaining days. There is no risk of paying-but-not-using for the buyer at any stage. This is the first big advantage of the SaaS subscription model. Pandemic or not, this model of subscription works well at any given time with customers.
2. Globally Accessible
Another advantage of the SaaS subscription model is that it is cloud-based. This makes it possible to use or access the product from any part of the world. Traditionally, licensed software is device or location restricted. Hence its utilisation are in a particular geography or on a limited number of computers. In some cases, you may require the services of the license provider’s engineers to come to your location to help you install the product. While this may be touted as a cost-free service, you may still be billed by the service provider, adding to your cost incurred.
With SaaS, this aspect is completely done away with. You can access and use the product from just about anywhere, be it at office, while traveling or anywhere on the go. This gives customers freedom and mobility. That’s not all. Customers can also receive free updates or upgrades everytime the product gets a dressing up.
It doesn’t work the same way with licensed software installed on computers. With these software, you will have to remember/set a reminder for the date and time of scheduled updates and get someone from the product’s customer service team to do it for you. Since SaaS products are cloud-based, this process becomes completely automated, enhancing the end-user experience.
3. SaaS Subscription Model Leads to Growth
All businesses are vulnerable to losses, especially in these economically uncertain times. However, companies that use a predictable subscription-based revenue model find it much easier to cruise through such situations. This is primarily because their investments are low and totally flexible. Plus, they can invest in further growth and innovations depending on the requirement and financial capacity of the company at that point of time. Even though the market has multiple players today, SaaS is a key sector that is continuing to grow.
SaaS firms that subscribe to a subscription-based revenue model have lower up-front costs, higher flexibility, better delivery mechanisms, and a greater sense of the customer’s requirement. These factors allow SaaS firms to grow at a three-time faster rate than traditional technology companies, who license their software. Top companies in the SaaS sector have proved that well-managed subscriptions give growth.
Although the times are tough and many businesses aren’t registering profits, SaaS businesses have to some extent registered growth. This growth graph will continue towards an upward trajectory. Eventually, as companies invest in technology tools to stay ahead of the curve. This underlines the value they see in the SaaS business model.
A business must always challenge itself and work towards delivering better products and services. SaaS companies, with their subscription-based revenue service, have been innovators. In the way, SaaS applications are delivered and used by customers.
The SaaS subscription model has evolved over time. Customers have also seen merit in the model— which offers cost-efficiency, flexibility, scalability, timely upgrades and releases. For companies, it has brought predictable revenue streams. This will ensure that SaaS companies continue to be a crucial and important part of future technology trends.