With the SaaS industry growing at an impressive 25.9% per year, according to Datacity, SaaS is clearly redefining the way businesses operate. If you’ve used Netflix or Google Docs, you’re already familiar with Saas!
Curious about how these companies work, grow and scale? Read on.
What is a SaaS Company?
At its core, SaaS stands for “Software as a Service.” This is a type of business that provides software or an application as its main product. A great example is Adobe, which relies on offering its Creative Cloud Apps as a subscription.Â
Common Features of SaaS Platforms
SaaS software often shares a few common characteristics. Let’s dive into what users tend to find:
1. Multi-tenancy architecture
Multi-tenancy architecture refers to the way that the software was built and its ability to support multiple users at the same time while keeping their data separated, secure and cost-effective. SaaS platforms need to be able to be used simultaneously by multiple users to be considered functional software.Â
2. Integration with other tools and systems
Functional software should also be able to connect seamlessly with other tools and systems, such as Customer Relationship Management (CRM) tools, email platforms or project management software. This allows an application to maximise its operations and becomes a useful tool for user productivity.
3. Provider-managed infrastructure and centralised application management
Though they should be released to the public in their most completed form, applications are never technically complete. They are constantly managed and updated by developers behind the scenes, where they will be able to release ‘quality of life’ or even functionality updates to their user’s applications over the internet.Â
4. Accessibility via the Internet
Most SaaS applications can be accessed from any device using a working internet connection. This allows users to work remotely on the go without the need for extra hardware or physical installations.Â
5. Subscription-Based Pricing
SaaS products often use subscription-based pricing models where paying customers will pay monthly or annually for the service. This makes SaaS cost-effective by receiving recurring revenues from each user while eliminating the need for large initial purchases, hardware investments and more. Below, we delve deeper into specific pricing models.
6. Scalability
SaaS solutions are usually able to scale without the requirement for physical upgrades. Whether it’s adding more storage, providing more functionality, improving performance or more, SaaS platforms can easily scale to accommodate the needs of growing businesses.
7. Data Security and Compliance
As SaaS software gains access to large amounts of user data, they must prioritise the privacy and security of their clients. This means complying with data protection regulations like GDPR or HIPAA. This is crucial for businesses that handle customer information.
8. Customisation and User-Friendly Interfaces
A successful SaaS application will always prioritise the user experience by providing user-friendly pages that help non-technical users navigate easily. For more complex, specialised software, users may also be able to customise their dashboards and integrations to fit their requirements and uses.
9. Real-Time Data Access and Collaboration
A common function in SaaS software is real-time updates that synchronise your work with multiple users and/or devices. This allows for collaboration across geographical locations and time zones, as well as the ability to use more than one device at a time.Â
Services Typically Offered by SaaS Companies
SaaS companies are some of the most popular and common businesses available in day-to-day professional and personal life. Below are some of the more prevalent SaaS categories.Â
Customer Relationship Management (CRM)
CRM software helps businesses stay on top of interactions with both current and potential customers. It consolidates customer data, tracks sales leads, automates follow-ups and enhances customer service through tools like email and live chat.
Enterprise Resource Planning (ERP)
ERP systems integrate essential business operations – like finance, supply chain management, human resources and manufacturing – into one platform. This helps streamline processes and offers real-time insights for better decision-making.
Accounting and Invoicing
SaaS platforms simplify financial management by automating tasks such as creating invoices, tracking expenses and managing payroll. These tools ensure accurate bookkeeping and help businesses comply with tax requirements.
Project and Team Management
These tools are designed to improve team collaboration by organising tasks, managing deadlines, sharing documents and enabling real-time communication. Popular examples include Trello and Asana.
Human Resources Management
HR software handles employee-related processes such as hiring, payroll, attendance tracking and performance evaluations. It helps HR teams focus on strategic tasks by reducing their administrative workload. Browse our list of top HR SaaS tools here.
Data Storage, Analytics and Security
Cloud-based platforms offer secure storage for large amounts of data, tools for analysing business metrics and features to safeguard sensitive customer information. They often include advanced security measures like encryption and real-time backups.
What are the Main Differences Between IaaS and PaaS?Â
laaS, short for Infrastructure as a Service, refers to online virtualised computing resources that are typically used by businesses to launch their SaaS software. This includes servers, storage and networking capabilities.Â
IaaS allows businesses to manage and control their IT infrastructure without the need for physical hardware. A popular example of IaaS is Amazon EC2.
Meanwhile, PaaS stands for Platform as a Service. PaaS businesses provide platforms that developers use to create, launch and manage applications without needing to handle the underlying infrastructure handled by IaaS companies.Â
PaaS includes essential tools such as databases, frameworks and operating systems, making the development process more efficient. A common example of PaaS is the Microsoft Azure Apps collection.
Examples of SaaS Companies
FinTech
Stripe
- Founded: 2010
- Annual Revenue: Estimated $14 billion
- Employees: Approximately 7,000
- Description: Stripe is a SaaS brand specialising in payment processing for e-commerce businesses and platforms. It provides APIs and software for online transactions, fraud prevention and subscription billing.
Paypal
- Founded: 1998
- Annual Revenue: $27.5 billion
- Employees: Approximately 30,000
- Description: PayPal is a leading SaaS platform in the FinTech industry, providing secure online payment services for businesses and individuals. It processes billions of transactions annually and offers services like PayPal Checkout and Venmo.
Square
- Founded: 2009
- Annual Revenue: $19.7 billion
- Employees: Approximately 12,000
- Description: Square provides SaaS solutions for payment processing and point-of-sale (POS) systems. It serves small to medium-sized businesses with tools for invoicing, payroll and e-commerce integration.
Intuit (QuickBooks)
- Founded: 1983 (QuickBooks launched in 1992)
- Annual Revenue: $14.4 billion
- Employees: Approximately 17,000
- Description: Intuit’s QuickBooks is a leading SaaS platform for accounting and financial management. It helps small businesses track expenses, manage payroll and generate reports.
Robinhood
- Founded: 2013
- Annual Revenue: $1.8 billion
- Employees: Approximately 1,400
- Description: Robinhood is a SaaS platform for commission-free stock trading and investing. Its intuitive interface and real-time market data make it popular among younger investors entering the stock market.
Wise
- Founded: 2011
- Annual Revenue: $1.3 billion
- Employees: Approximately 4,500
- Description: Wise is a SaaS platform for international money transfers, offering low fees and transparent exchange rates. It caters to individuals and businesses needing to send or receive money globally.
Travel & Hospitality
Airbnb
- Founded: 2008
- Annual Revenue: $8.4 billion
- Employees: Approximately 6,800
- Description: Airbnb is a SaaS platform that connects travellers with hosts offering lodging and experiences. Its software supports booking management, payments and user reviews, making it one of the most recognised names in the sharing economy.
Booking.com
- Founded: 1996
- Annual Revenue: $17.1 billion
- Employees: Approximately 22,000
- Description: Booking.com is a SaaS platform that facilitates online travel and accommodation bookings. It offers a vast inventory of hotels, vacation rentals and travel experiences.
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Expedia Group
- Founded: 1996
- Annual Revenue: $12.5 billion
- Employees: Approximately 16,000
- Description: Expedia Group operates several SaaS platforms, including Expedia, Hotels.com and Vrbo. These platforms help users book flights, accommodation and vacation rentals, offering tools for price comparison and itinerary management.
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Tripadvisor
- Founded: 2000
- Annual Revenue: $1.5 billion
- Employees: Approximately 2,200
- Description: Tripadvisor provides SaaS services for travel reviews, hotel bookings and destination planning. It combines user-generated content with booking features.
Entertainment
Netflix
- Founded: 1997
- Annual Revenue: $32.1 billion
- Employees: Approximately 12,800
- Description: Netflix is a global leader in subscription-based streaming services, offering a vast library of TV shows, movies and original content. It uses SaaS to provide on-demand video streaming to millions of subscribers worldwide.
Spotify
- Founded: 2006
- Annual Revenue: $15.8 billion
- Employees: Approximately 9,000
- Description: Spotify is a music streaming SaaS platform that offers on-demand access to millions of songs and podcasts. With features like personalised playlists and music discovery algorithms, Spotify delivers audio streaming to over 500 million active users worldwide.
Disney+
- Founded: 2019
- Annual Revenue: $6.4 billion
- Employees: As Disney+ is part of The Walt Disney Company, the company employs a total of approximately 220,000
- Description: Disney+ is a subscription-based video streaming platform that hosts Disney’s extensive content library, including Marvel, Pixar, and Star Wars.Â
YouTube Premium
- Founded: 2015
- Annual Revenue: Around $8 billion
- Employees: Again, as YouTube is part of Google, this company employs around 190,000 employees
- Description: YouTube Premium offers ad-free video streaming, offline access and exclusive content. It extends the core YouTube platform with additional features for subscribers.
MarTech
HubSpot
- Founded: 2006
- Annual Revenue: $2.1 billion
- Employees: Approximately 7,400
- Description: HubSpot provides an all-in-one SaaS platform for marketing, sales and customer service. It offers tools for email marketing, CRM, lead management and analytics.
Mailchimp
- Founded: 2001
- Annual Revenue: $800 million
- Employees: Approximately 1,200
- Description: Mailchimp is a SaaS platform for email marketing and automation. It helps businesses create and send targeted email campaigns, track performance, and integrates with other marketing tools.
Salesforce Marketing Cloud
- Founded: 2000
- Annual Revenue: Included in Salesforce’s $31 billion revenue
- Employees: Part of Salesforce, with approximately 80,000 total employees
- Description: Salesforce Marketing Cloud offers SaaS solutions for digital marketing, including email marketing, social media management and customer engagement analytics.
Semrush
- Founded: 2008
- Annual Revenue: $254 million
- Employees: Approximately 1,500
- Description: Semrush is a SaaS platform for digital marketing analytics and SEO. It provides tools for keyword research, competitor analysis and website audits.
Hootsuite
- Founded: 2008
- Annual Revenue: $150 million
- Employees: Approximately 1,000
- Description: Hootsuite offers a SaaS platform for social media management. It enables businesses to schedule posts, monitor engagement and analyse performance across multiple social media platforms.
What is the SaaS Business Model?Â
SaaS is built around providing software to the public via the internet, allowing users to access applications whenever they need without the need for extensive hardware and infrastructure.Â
The model focuses on three key elements:Â
- Scalability
- Recurring revenue
- Customer retention
Here are the primary ways SaaS companies generate their revenue:
Subscription-Based Pricing
A subscription model is a cornerstone of most SaaS companies. Customers pay a recurring fee – usually monthly or annually – to use the software. This approach offers advantages for the SaaS business as well as the user:
- The SaaS company gets predictable and steady revenue streams, which helps plan for long-term sustainable growth.
- Users don’t have a large upfront cost to pay, making the software more affordable and accessible.
For example, Adobe successfully transitioned to a subscription model with its Creative Cloud suite. This shift increased revenue by making the software more accessible to a wider audience.
Freemium Models with Paid Upgrades
The freemium model provides a basic version of the software at no cost while then offering additional features or advanced capabilities for a fee. This strategy helps attract a wide audience and encourages users to first trial the product, get a feel for it, and then upgrade as their needs increase.
- Free tiers allow users to try the software, experience its value and build trust with the brand.
- Paid upgrades are then designed for power users or businesses that require advanced tools and extended functionalities.
For example, Zoom’s free plan supports unlimited 40-minute meetings. However, businesses often upgrade to paid plans to access longer meeting durations and premium features.
Pay-Per-Use or Tiered Pricing Structures
Some SaaS companies use flexible pricing strategies to cater to a more diverse customer base with differing needs:
- Pay-per-use models bill customers based on how much they use the service, which works best for businesses that prioritise flexibility and want to scale their usage as needed.
- Tiered pricing is similar to freemium models with paid upgrades. There are multiple plans with varying levels of service, which opens up the appeal to a wide range of customers – from startups to large enterprises.
For example, Amazon Web Services follows a pay-per-use model for its cloud services, allowing customers to pay only for what services they use. Meanwhile, HubSpot uses a tiered pricing approach for its marketing tools, providing options tailored to businesses of different sizes and needs.
Focus on Recurring Revenue for Sustainability
Recurring revenue is the backbone of SaaS businesses. It provides financial stability and supports scalability. Focusing on customer retention and encouraging long-term subscriptions allows companies to lower the cost of acquiring new clients over time.
Some key strategies SaaS companies use to boost recurring revenue are:
- Loyalty programs offering discounts for annual plans to encourage long-term commitments.
- Providing additional features or services to enhance the value for customers.
- Regularly investing in software development improvements based on customer feedback.
For example, Salesforce prioritises customer success to maintain loyalty rates, ensuring a steady flow of recurring revenue that supports sustainable growth.
How to Structure a SaaS Company for Success
A well-organised structure is essential for the long-term success of a SaaS business. The right structure will make sure operations are smooth, and employees are empowered to collaborate and innovate.
Here is a breakdown of the six key teams needed for a successful SaaS company:
1. Product Development Team
This team is responsible for designing and building the SaaS product. It includes developers, UX/UI designers and product managers who ensure the product meets market demands and customer expectations. It’s responsible for implementing product updates and feature iterations to make sure the product stays competitive.Â
SaaS companies that prioritise product development and innovation often achieve faster growth. According to ChartMogul, SaaS businesses with a net retention rate exceeding 100% experienced a 54% growth rate over the past 12 months.
2. Sales Team
Sales will be focused on acquiring new customers and expanding existing accounts, using both outbound and inbound strategies. Key roles include account executives and customer success managers who drive growth.
Implementing effective sales strategies is essential for scaling a SaaS business. According to SaaS Capital, private SaaS companies report a median growth rate of 30%, emphasising the critical role of a dedicated and focused sales team in driving expansion and revenue growth.
3. Marketing Team
This team generates demand through strategies like content marketing, SEO, social media and paid advertising. Marketing works closely with sales to maintain consistent messaging and align on objectives.
A good marketing strategy plays a vital role in driving growth. According to DevSquad, the global SaaS market is expected to grow from $273.55 billion in 2023 to a staggering $908.21 billion by 2030, which highlights the high potential for well-marketed products to capture and expand their share in this booming industry.
Learn more about how to structure a successful B2B SaaS marketing team here.
4. Customer Success Team
Dedicated to helping customers achieve their goals with the product, this team reduces churn and boosts retention. Customer success managers often identify opportunities for upselling and cross-selling additional features or plans.
Companies with strong customer success teams often achieve higher net revenue retention rates, a key metric for ensuring long-term success. By helping customers achieve their goals and stay satisfied, these teams play a critical role in driving growth and ensuring recurring revenue.
5. Operations and Finance Team
Responsible for overseeing daily operations, budgeting and financial planning, this team ensures sustainable growth and compliance with regulatory requirements.
Efficient operations and financial management are essential for SaaS companies as they grow. Key roles for this might include a finance director, operations manager and financial analyst.
6. IT and Support Team
This team provides technical customer support and ensures the platform remains secure and reliable. They play a critical role in building trust and ensuring customer satisfaction.
Interestingly, according to a study by PwC, 32% of customers will stop doing business with a company after a single instance of poor service. This demonstrates just how crucial a responsive IT and support team is to maintain a positive customer experience.
How Teams Work Together
- Collaboration, Planning and Organisation: Marketing, sales, and product teams put their efforts together to create cohesive messaging and define the product roadmap.
- Feedback Loops: Customer success teams share user feedback with product, marketing and sales teams to drive continuous improvement.
- Data Sharing: Operations and marketing teams share insights and analytics to refine strategies and enable scalability.
Example:
Slack is a good example of effective cross-functional collaboration. Their product teams work closely with customer success teams to enhance the user experience. This approach contributed to their impressive 143% customer retention rate during their early years.
How SaaS Companies Scale
Strategic planning and execution are essential when scaling a SaaS business. Here are the main areas SaaS companies should concentrate on to scale sustainably:
Marketing and Customer Acquisition Strategies
- Content Marketing and SEO: Companies like HubSpot leverage educational blogs and tools to attract customers, achieving exponential growth.
- Paid Advertising: Investing in platforms like Google Ads or LinkedIn helps SaaS businesses drive qualified leads effectively.
- Referral Programs: Dropbox experienced an impressive 3900% increase in conversion rates in 15 months by incentivising users to invite others.
Expanding to New Markets or Industries
- Localisation: Tailoring products and marketing efforts to suit new regions, such as translating interfaces or adapting to cultural norms.
- Partnerships: Collaborating with local vendors to build trust and establish a presence in new markets.
Improving User Engagement and Reducing Churn
- Onboarding Programs: Providing tutorials and support during the adoption phase helps users get started smoothly.
- Proactive Customer Success: Regular check-ins ensure customers are getting maximum value from the product, fostering loyalty and reducing churn.
Hiring as You Scale Your SaaS Company
As SaaS companies grow, hiring the right talent at the right time is imperative for sustainable success. Below are key roles to prioritise during different stages of growth:
Early-Stage Growth
- Software Engineers: Focus on building and refining the core product to meet initial market demands and launch strong – first impressions matter!
- Product Manager: Ensure product development aligns with customer needs and the company’s business goals.
- Marketing Specialist: Drive brand awareness and generate leads through targeted campaigns.
Scaling Roles for Established Growth
- Customer Success Manager: This person will be dedicated to retaining customers and identifying opportunities for client expansion.
- Sales Development Representative: This person manages prospecting and lead qualification to support the sales team.
- Data Analyst: A data analyst will deliver insights and analytics to inform strategic decision-making.
Example:
Zoom effectively scaled its customer success and engineering teams to meet the demands of explosive growth, ensuring an exceptional user experience and reliable service.
Get Help Hiring for Your SaaS Company
Need expert assistance to build a successful SaaS team? We specialise in SaaS recruitment for roles in FinTech, MarTech, InsurTech and more. Don’t wait to scale your team for success. Contact us today to discuss your hiring needs.
