SaaS is neat because the code is managed on somebody else’s server and when there’s updates to the code you don’t have to do anything. It literally just gets better.
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Why Does SaaS Matter for You
If you’re a founder today, you can’t ignore SaaS. It powers the tools you use every single day, from project management to customer support to accounting.
And if you’re thinking about building a company, SaaS isn’t just a buzzword. It’s a proven model that allows you to scale faster, serve more customers, and create predictable revenue.
Let’s break it down so you know exactly what SaaS is, how it works, and why it’s such a powerful business model.
1. It is Subscription Based Revenue
The first core feature of SaaS is subscriptions. Instead of paying once for software on a CD or license, customers pay monthly or annually to keep using it.
This creates predictable revenue for the business.
It lowers the barrier to entry for customers since they don’t need a massive upfront payment.
It aligns incentives because the company has to keep delivering value month after month.
Think of Spotify, Netflix, or iTunes. Now apply that to business tools like accounting software, project management, or email marketing platforms.
If you’re building, subscriptions are your best friend because they create compounding growth.
It only means that you pay every month to get access to the technology.
2. It Is Hosted Remotely in the Cloud
Back in the day, software lived on physical servers. You’d freeze in a server room just trying to load updates from a CD. With SaaS, everything is hosted remotely on cloud providers like Amazon Web Services.
This matters for two big reasons:
No heavy upfront investment in servers or hardware.
Instant access without complicated installations.
For founders, this lowers startup costs and makes scaling possible. Instead of spending months configuring servers, you launch and iterate faster.
It wasn’t hosted remotely up in ‘the cloud’. Today it doesn’t require a major investment in hardware for you to buy software, to deploy it, to use it.
3. You Can Access It Through the Internet
One of the biggest shifts SaaS created is accessibility. Instead of being tied to a local network or VPN, you can log in from anywhere with a username and password.
This is what unlocked:
Remote teams using the same tools from different continents.
Faster adoption inside companies because employees only need a browser.
Trust in storing sensitive business data in the cloud, thanks to early pioneers like Salesforce.
Pretty much every one of the SaaS tools out there, you just log in using a username and password and you’re good to go.
4. It Is Scalable by Design
SaaS is built for scale. Whether you’re a solopreneur or a company with 10,000 employees, the software flexes to meet demand.
That means:
You don’t worry about servers or infrastructure.
Growth is frictionless. Just send team invites and go.
The product can handle sudden spikes in users without slowing down.
This scalability is what makes SaaS such a powerful model for founders. You can grow without breaking everything behind the scenes.
All SaaS companies have an auto scalable feature that it doesn’t matter if you’re one or 10,000. It will spin up the backend infrastructure so that it can keep up to the demand.
5. It Gets Better With Regular Updates
SaaS takes the pain out of software updates. No more CDs. No more IT teams manually updating servers.
Instead:
Updates roll out automatically.
Customers instantly get access to new features.
The product gets better without extra cost.
For founders, this is game-changing. You can ship improvements quickly, listen to feedback, and keep your customers happy.
As the years progress, you keep paying the same amount of money every month, yet the developers keep making the code better.
Now Build Smarter With SaaS
SaaS is more than just a type of software. It’s a business model that makes growth easier, lowers risk, and gives both founders and customers ongoing value.
If you’re a founder, don’t just use SaaS tools. Learn how to build with them, think about the problems they solve, and consider how you can create scalable solutions for your market.
Now is the best time to start.
Frequently Asked Questions
What is SaaS software as a service and how does it work?
SaaS software as a service works by delivering applications over the internet instead of installing them on local computers. With SaaS you pay a monthly subscription to access the software, log in through a browser, and use tools hosted remotely in the cloud. This makes SaaS simple to use, affordable, and accessible anywhere.
Why is SaaS better than traditional software?
SaaS is better than traditional software because SaaS applications are subscription based, hosted in the cloud, and updated automatically. Traditional software requires servers, CDs, and manual updates, but SaaS gives users instant access with no setup and constant improvements without extra cost.
What are the main features of SaaS software as a service?
The main features of SaaS software as a service include subscription pricing, cloud hosting, internet access from anywhere, scalability for teams of any size, and regular automatic updates. These SaaS features reduce cost, improve reliability, and make it easier for businesses to adopt new technology.
How does SaaS scalability benefit businesses?
SaaS scalability benefits businesses by allowing them to expand from one user to thousands instantly. With SaaS, servers and databases scale automatically, which means companies can onboard employees or customers quickly without investing in new hardware. This makes SaaS a flexible option for growing businesses.
What are examples of SaaS applications businesses use daily?
Examples of SaaS applications businesses use daily include project management tools, accounting software, workflow platforms, and email marketing tools. Popular SaaS examples are Salesforce, Slack, and Google Workspace. These SaaS platforms run entirely in the cloud and are billed monthly.
More Resources
Tools Mentioned
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Salesforce – One of the first major SaaS companies that proved businesses could securely run customer data in the cloud.
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Spotify – Consumer SaaS example that delivers subscription music streaming.
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Netflix – SaaS platform offering subscription streaming for movies and TV shows.
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Amazon Web Services (AWS) – Cloud provider that hosts much of today’s SaaS infrastructure.
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Slack – SaaS collaboration and messaging platform used by businesses worldwide.
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Google Workspace – SaaS productivity suite that includes Gmail, Docs, Sheets, and more.
Full Transcript
What Is SaaS? (Explained in 5 Minutes) – YouTube
https://www.youtube.com/watch?v=UEHdYNXiIUU
Transcript:
(00:00) What is SaaS? Software as a Service? I’m going to take 5 minutes to break it down, make it super simple for you so that you can finally understand all these people talking about SaaS, SaaS, SaaS. Why is it so much fun and why does it matter for you? I’ve been actually building software companies for 25 years. I started off writing code way before we called it SaaS.
(00:23) It was called essentially ‘the Internet’, and we were building applications on top of the Internet. And since then, I’ve personally built five companies. I’ve exited three. Two of them were venture backed out of Silicon Valley. I’ve invested in 50 plus and I’ve helped literally thousands of software CEOs start, grow and exit their software company.
(00:46) But I want to teach it for you so that you understand when other people are like, Yeah, I think we should work on this SaaS idea, you can understand what it is and what it’s not and help you explain it to other people. So let’s get into it. Number one, is it’s subscription based. It means that you pay every month to get access to the technology.
(01:05) Think about all the tools maybe you pay for like, you know, iTunes or Spotify or Netflix. These are consumer versions of subscriptions. But in the business world, B2B, these are the tools that all the businesses use to run their company. It’s the accounting software, it’s the merchant account, it’s the project management software, the spreadsheet software, the workflow tools, the email marketing tools.
(01:33) All of these are things that people, businesses pay for these applications every month on a subscription basis. Number two is that it’s hosted remotely. Now, I know for some of you guys you’re like, what do you mean it’s hosted remotely? Where else would it be hosted? When I first started writing software back in the day, back in my day, I used to spend a lot of time in server rooms because the way software was deployed, was literally on CDs and you would take those CDs and you’d go into the server room and you’d freeze your bum off,
(02:05) because the computer’s run better and it’s more efficient and you would just like load all the software onto these computers and then people would usually access the software through other terminal clients or other software on their computer through the network. It wasn’t hosted remotely up in “the cloud”, right? Which is what a lot of people do today, is that it is not installed on your servers, it’s installed in the company servers and it’s usually right now installed on Amazon.
(02:35) And that way it doesn’t require a major investment in hardware for you to buy software, to deploy it, to use it. Number three is that it’s accessible through the Internet. Now I know, some of you guys are like, well, how else would you access it? Truth was, is back in the day you would access the software through the local network.
(02:55) It was abnormal for a business to host their information on somebody else’s servers. It wasn’t till this cool company called Salesforce that came along and with their marketing and tens of millions of dollars of spend, convinced the business community that it is safe and okay for you to upload your sensitive customer information to their system and allow your team to access it through the Internet, through a traditional login, a username and password.
(03:29) Prior to that, there was VPNs required and deep security and all these other things, and it was just a no go for businesses to trust their proprietary customer data on somebody else’s system. And now this is how we do it. Pretty much every one of the SaaS tools out there, you just log in using a username and password and you’re good to go.
(03:52) Number four is it’s scalable. Here’s why I love this one. Scalable means that it doesn’t matter if you start off with one account and it’s just you and you’re using this software as a service or you have 10,000 team members that decide, you know what, we’re going to move everything from email over to Slack, right? Or whatever it is.
(04:15) You’re going to move all your project management from one software to this other software, and you can literally just invite everybody through a link and they all register and they start using this new product. All SaaS companies have an auto scalable feature that it doesn’t matter if you’re one or 10,000, it will spin up the servers, it will spin up the databases, it will spin up the backend infrastructure so that it can keep up to the demand.
(04:43) And that makes it powerful because prior to SaaS, you’d have to go and buy a physical server, go install the software, add it to the network and try to configure it for it to be load balanced. Now you think of none of that. You just send invites to your team to use the product and you don’t even think twice that it’s going to be available or fast once they sign up.
(05:05) Number five is regular updates. This is probably the coolest part that a lot of people take for granted. SaaS is neat because the code is managed on somebody else’s server and when there’s updates to the code you don’t have to do anything. It literally new versions just happen to get released or you log in and there’s a little notification window that says like, alert, new software update and it tells you about the two or three new features and you’re like, very cool, take a tour or accept the changes or whatever,
(05:35) and then the software just gets better. Prior to it being hosted, and being software as a service, you used to have to get the update on CD and then literally spend more time freezing your bum off in a server room and updating the code and then letting everybody know how all those changes were going to affect their workflow so that they didn’t get lost in their ability to keep doing their work at their computer.
(06:00) And it was just this big process of change management. With SaaS, the software just gets updated, it gets better. It’s clearly communicated. You don’t have to worry about CDs and updates and all this stuff. The companies take care of it so that like as the years progress, you keep paying the same amount of money every month, yet the developers keep making the code better.
(06:21) So that it’s actually an incredible deal because you get new innovation and new updates and new capabilities that you didn’t have to pay for, and it’s just part of the subscription. So there you go, a five minute breakdown of what is Software as a Service, SaaS. It makes it easy for businesses to pay monthly, hosted in the cloud, get updates without having to deal with anything themselves.
(06:45) It’s scalable. That’s what it’s about. And it’s a powerful way for you not only to build software, but also consume it so that you don’t have to spend a ton of money upfront and get very powerful tools and workflows to help you in your life. If you like this video, be sure to check out other videos I’ve done on SaaS, on writing code, on building companies, etc.
(07:07) They’re all available for you. I hope this finds you awesome and I’ll see you next week.