Ever since 2019, Software as a Service (SaaS) has been the biggest and fastest-growing industry in the world. And by the end of 2022, the industry is projected to expand at its fastest rate, reaching a value of $171.9 billion.
So, it is an unquestionable fact that software as a service is one of the most desirable business ventures of today’s world.
But what exactly is a SaaS company? How can you follow the SaaS business model? And which are some of the most successful SaaS companies of 2022?
That’s exactly what we will be answering throughout our guide, along with everything else you need to know about the fast-moving industry of SaaS.
Read along to learn about:
- What is a SaaS Company?
- How to Follow the SaaS Business Model?
- B2B vs B2C SaaS Companies
- 10 Biggest SaaS Companies in 2022
- 10 Fastest-Growing SaaS Companies in 2022
- Pros & Cons of the SaaS Business Model
What is a SaaS Company?
Software as a service (Saas) also referred to as “on-demand software” or “Web-hosted software”, is a cloud-based application that users can gain access to through the internet or a web-based app.
SaaS companies are the ones responsible for developing, hosting, and updating such software and making it available to customers. Generally, SaaS customers pay a recurring subscription fee – often monthly or annually – to access the software, which they can then use from any device.
Some of the most popular types of SaaS applications include:
- Customer Relationship Management (CRM) – a central place for companies to store and analyze customer and prospect data.
- Enterprise Resource Planning (ERP) – integrates all of the processes necessary to run a company.
- Project management – helps groups organize, track, and execute work within a project.
- Communication platforms – used for file sharing, instant messaging, video calling, etc.
- Human resource software – tracks employee work hours, schedules interviews, automates onboarding and payroll, and offers other HR services.
How to Follow the SaaS Business Model?
There are three main stages that lead to the success of a SaaS business model: setup, growth, and stability.
Let’s take a look at how each stage works, one by one.
The setup stage is when you build the foundation for your SaaS company. Specifically, during this stage, you have to go through the following steps:
- Market research. Who is your target audience? What cloud computing model have your competitors adopted? What are the latest SaaS trends?
- Problem and solution definition. What is a concrete problem that your software is able to solve?
- Test your prototype. Before building your actual SaaS product, test its prototype with friends, family, colleagues, potential customers, or investors. This will help you identify areas of improvement.
- Choose your pricing model. Are you going to offer flat-rate pricing, per-storage pricing, product-line pricing, or a free application supported by ads?
- Build your brand. Define your company’s mission, name, slogan, and logo.
- Financing. You can finance your product through existing resources, a loan, crowdfunding, borrowing from friends and family, angel investors, etc.
- Choose a marketing strategy. You can run a PPC marketing campaign, leverage SEO and content marketing, incentivize referrals, or get your SaaS products featured on review sites.
- Manufacture and launch your SaaS product.
Yay, you’ve successfully launched your software! But that’s only the starting point; you need to continuously measure its success and steer it towards growth, in hopes of building a loyal customer base.
This is the second stage of the SaaS business model, known as the growth stage.
During this stage, you have to be continuously tracking and making efforts to improve some core SaaS metrics, including:
- The churn rate – measures the rate at which customers stop using your services.
- Annual Recurring Revenue – the revenue that a business expects to receive from its subscriber base each year.
- Average Revenue Per User – measures the revenue your company receives per one user.
- Customer Acquisition Cost – measures total sales and marketing costs that it takes to acquire a new customer.
You can grow and improve the above-mentioned metrics by implementing customer service software, marketing automation, product updates, and other revenue growth strategies.
The last stage of the SaaS business model is stability, which is also referred to as the maturity stage. During this stage, growth slows down, but the business continues to attain new customers without any additional costs because it should already be well-established in the market.
B2B vs B2C SaaS Companies
Business-to-Business (B2B) SaaS companies sell their products and services to other companies. B2B SaaS tools are usually used for accounting, marketing, office productivity, customer relationship management (CRM), and other work-related activities.
MailChimp is an example of a B2B SaaS company – it’s a marketing automation platform that allows users to manage mailing lists and apply email marketing campaigns to customers.
Business-to-Consumer (B2C) SaaS companies, on the other hand, sell to consumers. If you use your internet to listen to music, stream movies, chat with friends, shop online, or more, you’re probably using a B2C SaaS software already. Netflix, WhatsApp, Spotify, Canva, Facebook are all examples of B2C Saas Companies.
That said, it’s also possible for a company to offer both a B2B and B2C SaaS product. Amazon, for instance, is a B2B and a B2C retailer. Because of the wide range of products accessible on Amazon, a growing number of small businesses are turning to the site for supplies.
10 Biggest SaaS Companies in 2022
Everybody knows, uses and loves Google.
Currently, Google is the biggest B2C and B2B SaaS company in the world, offering over 137 Internet-related services, including document creation and editing, searching the web, online advertising, and more.
One of the most successful SaaS tools during the Covid-19 pandemic has been the web conferencing platform, Zoom. The company is growing at over 100% a year and is expected to hit $43.1 billion by 2022.
#3. Microsoft 365
Microsoft 365 doesn’t need a formal introduction. The tech giant is one of the oldest, and biggest, SaaS companies in the world, famous for its contribution to the world of computing with tools like Excel, Word, and Windows.
#4. Adobe Creative Cloud
Up next, we have a SaaS tool specifically useful to designers. With 20+ desktop and mobile apps, Adobe Creative Cloud allows both companies and users to publish layouts, edit images, videos, and audios, handle PDF documents, and use animation and visual effects, amongst other things. In 2022, Adobe is expected to reach $10 billion worth of revenue.
Do you have a Netflix subscription?
If so, you’re one of the 222 million users that currently subscribe to the streaming service. From these subscriptions, Netflix makes an estimated $7,48 billion, per year.
Salesforce is always at the top of the most successful SaaS businesses list. The tech-giant and world-leading CRM software provides cloud-based applications for over 150,000 companies and has a market capitalization of $117.8 billion.
If you value customer feedback, then you’ve probably heard of SurveyMonkey and how useful it is.
As its name suggests, SurveyMonkey is an online survey tool that helps users create surveys in different styles, ranging from multiple-choice surveys to video questionnaires. The platform empowers over 17 million active users and has generated over $45 million in cash flow.
Canva is a graphic design platform based in Australia that allows users to create social media infographics, slideshows, flyers, brochures, and other visual content. In the United States alone, the online graphic design sector generated $15 billion in 2019. And by 2025, Canva is estimated to reach $280.15 billion.
Mailchimp is an American marketing automation tool that helps businesses manage and talk to their clients, customers, and other interested parties. Specifically, companies can use MailChimp to create ads, emails, landing pages, social media posts, postcards, and more, without ever leaving the platform. MailChimp currently has around 11 million customers and is worth $700M.
Shopify Inc. is a subscription-based Canadian multinational e-commerce company that anyone can leverage to set up an online store and sell their products. It comes with a variety of tools, such as a logo maker, QR code generator, purchase order maker, profit margin calculator, and more, that help its users analyze every aspect of your online store.
10 Fastest-Growing SaaS Companies in 2022
Hopin is an all-in-one event management platform that allows its users to host events of any type or size, sell event tickets, engage with attendees, and analyze data from the event.
Revenue growth rate: 24900%
#2. Virus Geeks Inc.
Virus Geeks is a SaaS mobile app that is helping large populations gain access to molecular diagnostic testing as well as providing organizations with the right technology to efficiently manage data.
Revenue growth rate: 11567%,
Everlance is an easy, accurate, and automatic tool that tracks tax-deductible business mileage & expenses.
Revenue growth rate: 10534%
Founded in 2016, Yanu is the world’s first contactless robot bar – it serves drinks, handles payments, and communicates with clients.
Revenue growth rate: 8340%
#5. Plausible Analytics
Plausible Analytics is a fully open-source web analytics tool, similar to Google Analytics. It has no cookies and is fully compliant with GDPR, CCPA, and PECR standards.
Revenue growth rate: 5650%
Locale.ai is an end-to-end SaaS platform designed for making operational decisions. It optimizes business operations using strong map-based analytics and detailed metrics.
Revenue growth rate: 3900%
#7. Radius Agent
Radius Agent is a flat-fee, full-service, modern brokerage with over +75,000 members, currently worth $2M.
Revenue growth rate: 3536%
#8. Casebook PBC
Casebook PBC initially only provided child welfare solutions but has since expanded its services to provide a SaaS platform servicing the whole of Human Services.
Revenue growth rate: 3400%
Knapsack is a SaaS tool that helps companies easily build and maintain a design system through in-built tools such as theme management, pre-built content blocks, automated package updates, and more.
Revenue growth rate: 3355%
Coralogix allows businesses to monitor, visualize, and analyze all of their observability data. This is made possible through a cutting-edge pipeline known as Streama, which analyzes data in real-time and creates snapshots of the system state for long-term trend analysis.
Revenue growth rate: 3233%
|Want to learn more about the fastest-growing SaaS companies in 2022? We’ve got a full ranking of the top 500 SaaS companies you can check out.|
Pros & Cons of the SaaS Business Model
No business decision should come without careful consideration.
The SaaS business model is no exception as, just like anything else, it comes with its own set of advantages and disadvantages.
To help you fully understand these benefits and inherent risks, we’ve compiled a list of the main pros and cons of moving forward with the SaaS business model.
SaaS Model Pros
For companies that develop and host SaaS products, there are multiple benefits that contribute to their success in the industry:
- Wide-reaching audience. SaaS products are compatible with all platforms that use a contemporary browser, including Android, iOS, Windows, macOS, Linux, and X, making them accessible to a wide audience.
- Rising market demand. The demand for SaaS solutions is currently growing by 18% each year, with 80% of businesses already using at least one SaaS application.
- Recurring revenue. For SaaS businesses, subscriptions offer the opportunity to create a long-lasting loyal customer base, earn recurring revenue, and spend less time and money on acquiring new customers.
For customers and businesses purchasing from SaaS companies, benefits include:
- Cost-saving. Most SaaS companies charge subscription fees, which help spread out the cost of the application over time.
- Low effort. SaaS companies update and maintain their software when necessary.
- Mobility. SaaS products are accessible any time, anywhere, as long as the device has a stable internet connection.
- Scalability. If a SaaS customer wants to expand its capacity or add users, it doesn’t have to purchase new hardware or install new software. SaaS companies can quickly make that possible, for an increased subscription fee.
SaaS Model Cons
While recurring revenue and a wide audience are nice, there are a few risks associated with launching a SaaS business:
- Expensive to implement. SaaS businesses are extremely profitable, yet, expensive to implement. All stages of the SaaS model require a variety of expenses, such as salaries for web developers and UI designers, staff training, maintenance, overhead costs, security testing, taxes, and more.
- Technology risk. In a SaaS development project, there can be hundreds of technological challenges. Poor architecture, a lack of capacity, complex coding that’s hard to maintain in the long term, and other concerns can all raise the overall cost of your project and prolong the time it takes to develop it.
- Lack of trust. Security should be your top priority considering that SaaS products handle a lot of sensitive data about organizations and their consumers. A security breach or violation could be your company’s first and last error, as customers are unlikely to forgive you.
There are also risks associated with being a SaaS user, which include:
- Security issues. Using cloud-based SaaS tools is convenient, but it does come with a handful of cloud security issues, ranging from unauthorized access to confidential data to stolen credit card information and identity theft.
- No control. As applications are entirely controlled by developers, users have no control over the software’s design and interface. This does have an upside, however, as developers handle automatic updates and thus customers don’t have to worry about going through the process of installing the new version.
- Incompatibility. After a software upgrade, there could be incompatibilities. A software upgrade implemented by either you or the SaaS provider may introduce new vulnerabilities or disable earlier functionality.
And that’s a wrap for our SaaS guide!
Here are some of the main points we’ve covered:
- SaaS stands for software as a service. SaaS companies develop and launch different types of software and usually charge a recurring subscription fee to their users.
- SaaS users can be businesses and/or consumers. That’s why we divide SaaS companies into two main types: Business-to-Business (B2B) SaaS and Business-to-Consumers (B2C).
- For developers, launching a SaaS product creates the opportunity for ongoing recurring revenue and an unlimited, worldwide audience. However, building such software can be costly to implement and comes with a handful of security issues.
- SaaS users, on the other hand, automate a variety of services with minimal cost and effort. It does come with its disadvantages, though, such as high-security risk, no control over the interface, and incompatibility issues.