What is SaaS?

SaaS is the dominant model for delivering business software today. Instead of purchasing a software license and installing it on local computers, SaaS customers subscribe to software hosted on the vendor's infrastructure and access it through a web browser or mobile app. The vendor manages all infrastructure, security, maintenance, and updates — the customer just pays and uses it.

From a business model perspective, SaaS shifted software from a one-time purchase to a recurring revenue stream. This benefits customers (lower upfront cost, always on the latest version, accessible from anywhere) and vendors (predictable, compounding revenue, continuous improvement cycles). The SaaS model is evaluated on metrics like MRR (Monthly Recurring Revenue), ARR (Annual Recurring Revenue), churn rate, and LTV (Lifetime Value) per customer.

SaaS products typically offer tiered pricing: a free or freemium tier for acquisition, a core paid tier for individuals or small teams, and an enterprise tier for large organizations requiring custom contracts, SSO, compliance features, and dedicated support. Startups often grow bottom-up (individual users adopt the product, then companies pay to expand usage) or top-down (enterprise sales to IT departments).