What Is SaaS?
SaaS (Software as a Service) is software delivered over the internet on a subscription basis — you pay monthly or annually instead of buying a license and installing software.
SaaS replaced the old model of buying software on a disc or paying a large upfront license fee. Today you log in to a browser, pay per month, and the vendor handles all hosting, updates, and infrastructure.
Why SaaS dominates:
- No installation or IT management for the customer
- Vendor ships updates to everyone simultaneously
- Predictable monthly revenue for the business
- Scales from 1 to 100,000 users on the same infrastructure
SaaS vs. traditional software:
| Traditional | SaaS | |
|---|---|---|
| Delivery | Download / install | Browser / app |
| Pricing | One-time license | Monthly subscription |
| Updates | Manual, paid upgrades | Automatic, included |
| Hosting | Customer's servers | Vendor's servers |
Common SaaS metrics founders track: MRR (Monthly Recurring Revenue), churn rate, CAC (Customer Acquisition Cost), and LTV (Lifetime Value). These are the four numbers that determine whether your SaaS is healthy.
What makes SaaS hard to build: Multi-tenancy (isolating data across customers), billing (Stripe subscriptions, proration, trial management), and onboarding (getting users to the "aha moment" before they churn) are the three hardest parts of any SaaS MVP.