What is SaaS? Concept, life cycle and benefits

Share on facebook
Share on google
Share on twitter
Share on linkedin
Share on email

Over the years, consumers have changed their way of consuming, today the model of services he is employed in many different lines of business, and with the software it was no different. But before talking about SaaS (software as a service), what is the service model?

When we need to get somewhere, just pick up your cell phone and ask for an Uber, within a few minutes you'll arrive at the desired place and more, you won't have to worry about parking your car, property tax, maintenance and more. With this practical example we can understand how services attracted thousands of consumers to their model as they objectively deliver their desire or necessity.

The services in their nature aim at remuneration through value deliveries for the customer, shortening the path to their goal. As a result of this model, companies hire the service model for many functions and thus manage to meet their needs. Such as security, marketing, tax and other teams. Long live service providers! SaaS? How does this model work?

As Software could not be left out of this global trend came the concept of Software as a Service (Software as a Service) or as it is popularly known as SaaS.

SaaS is a software access sales & distribution model by paying a monthly subscription, this subscription (use license) while active will guarantee right of use (access) to the software, if the customer does not want to use the application, simply cancel the subscription at the manufacturer's administration center, in this way you cancel your access to the software/service and reduce the recurring payment for the application.

Another very important point when we talk about the SaaS model is that when we sign a software, we are only signing the final application, in other words, all IT infrastructure, servers, updating and maintenance of servers is of manufacturer's responsibility, providing greater focus on what matters, use the application!

What are the benefits of using SaaS?

Now that we understand the concept of the SaaS model, what are the benefits?

SaaS offers:

Software Upgrade

If the manufacturer updates the Software during your subscription period, you will be entitled to use the newest version, this update in most cases occurs automatically without generating operational cost for the IT team, after all the application is stored in the cloud.

Fast implementation

As the application infrastructure is the responsibility of the manufacturer, it is not necessary for the customer to implement servers and other resources within its infrastructure. The end user with their credentials quickly logs in and uses the application.

Low Initial Cost

The SaaS charging model allows the initial application costs to start economically and assertively. By assigning the software license to some users, it is possible to analyze whether the SaaS solution has a feat with the business model, thus avoiding operational costs for the IT staff.

On-Demand Software

If the customer does not wish to use the application, simply cancel their subscription at the administration center and in this way you will optimize the monthly income. With well-defined processes we optimize the use of signatures for users who really use the application and the correct version/edit.

Centralized Management

SaaS applications have a centralized portal (tenant) where we manage all users with active subscription, we can quickly request new licenses, reallocate, cancel and perform other administration tasks.

Popular SaaS Applications & Enterprises

Software from different segments is available in the SaaS model, adding value and solving problems. We can highlight:

  • Office 365 – Microsoft – Productivity Applications
  • Creative Cloud – Adobe – Creative Applications
  • Salesforce – Sales Force – CRM Platform
  • Netflix – Netflix – Video Streaming
  • Dropbox – Dropbox – File Storage and Sharing
  • Spotify – Spotify – Streaming audio
  • Autodesk – Architecture and Engineering

Example of SaaS companies in Brazil:

  • RD Station – Applications for Inbound Marketing
  • RunRun.it – Project Management Application
  • Lilu – App for pet services at home

Surely you have already used or heard of any of these applications, the increasing number of users of these tools increasingly reinforces the trend towards this software model.

How to manage SaaS applications?

The ease of SaaS implementation has caused a very large increase in the frequency of contract renewals, today it is estimated that large corporations perform more than 15 contract renewals per week. However, SaaS Asset Management teams have to deal with the impact of automatic renewals and underutilized software. Following the article, we will delve into practical steps on how to manage SaaS renewals to better leverage the company's investment.

SaaS renewal flow

For an efficient renewal we must understand that all SaaS contracts have a lifecycle, this lifecycle is divided into 3 stages:

  1. Registration: At this stage we will map key criteria that will be used in contract renewal.
  2. Management: In this step, the active monitoring the use of the Software.
  3. Renewal: At this stage, we will use the information collected in the monitoring phase to carry out an efficient renewal.

1. Registration

The registration stage starts as soon as the contract or subscription is acquired by the organization. Ensure the purchaser's engagement, as that way we'll be able to register key information faster.

Key information for registration:

  1. Application name: What is the application name?
  2. Usage Rights: How many users, assets, computers or devices will be able to use the application within the park? In order to reach this rationale, it is important to identify the Software metrics.
  3. Values: Identify the total cost of the contract and the unit cost of each license, with this information the team will build a prioritization order for the flow of renewals and will act more efficiently in dimensioning the budget.
  4. Relevant dates: The registration of dates is crucial for planning renewals, so your team can set up a calendar, forecast peak periods and plan actions.
  5. Additional Terms: If applicable, add additional terms of your contract to the registration, such as grace terms, advance notice of contract cancellation, minimum conditions, among others.
  6. Application usage: Who uses the application? What is the functionality and category of the software? How critical is he to the business?
  7. Responsible: Who is responsible for the application?
  8. Manufacturer: Are you a strategic partner for the company? What contract models does the manufacturer offer?

2. Management

Once we have SaaS registered within the organization, it is necessary to focus on tracking software usage. In this new stage, we must monitor the application's development within the organization, information about the application use and yours features to determine the volume in the next renewal, if we identify that users use few features, we can look for a leaner product subscription, if the application is being little used, we can renew different amounts of the product. SaaS providers charge renewals based on the use of the Software, if you know your organization's usage trend, it is a great opportunity to reap the rewards of your management.

Another important process during the management stage is the Usage Review , this process identifies why some employees do not use or use the software very little. Does the user use another solution? Is training required to use the Software? The Software is not compatible with your needs? Can we proceed with the non-renewal of this license?

Key information for Management are:

  1. Active Users: Who uses the application? How long is the application used?
  2. Inactive Users: Who does not use the application? Who owns this license? Do we have a schedule to carry out the Usage Review?
  3. Features Used: What features are used? What key features (which change the license profile) are used?
  4. Available Licenses: What licenses are available? How many licenses are available?
  5. Workarounds: Are users already using any workarounds for that Software? Should we consider the alternative solution for renovation?

3. Renewal

Now that we have all the key information for an efficient renewal, let's go through the standard process for every SaaS renewal. Using the information acquired, let's go to first renewal questions:

  • What do we have?
  • What are we using?
  • What we need?
  • What will be the scope of the renewal?
  • What are the goals of this scope?

Companies have many weekly renewals and clearly do not generate a good cost-benefit ratio. SAM manage all SaaS renewals for an organization. Today there are platforms such as ServiceNow and Snow Software that do this management, but just having a platform is not enough.

We will then determine criteria to identify where the SAM team should be involved. These criteria should include:

  • Contract value
  • Criticality for the business

The highest value contracts deserve your attention, as well as critical contracts for the organization. More and more, the team will improve the efficient renewal process and will carry out deliveries more quickly, thus opening room for analysis of other contracts. At this stage the renewal calendar will be your greatest ally, so it will be possible to identify renewals in which the team SAM will have time to add value.

With the scope and goals defined, the next step is to contact the reseller or manufacturer to start the renewal process. By starting the renewal process early, you will have more time to negotiate with the supplier, and they will have time to consider how they will meet their business goals with you or another customer. Building a partnership with the SaaS provider is important as you don't have the option to opt out of purchasing the Software. In SaaS software if you don't pay you lose full access to SaaS solution.

understanding the manufacturer

When negotiating, it is important to understand the key success metrics from the manufacturer. Usually SaaS providers have well-defined metrics, know your partner and don't forget to use metrics to your advantage. Models of metrics:

  1. Renewal Rate
  2. Contract and customer retention
  3. customer success
  4. Customer Lifetime value (CLV) rate
  5. Churn Rate or Bounce Rate

Trading example using the metrics:

If you analyzed the data collected in the Registration & Management step and identified that the adoption of the software is high and will increase over the next 3 years, please negotiate this deadline with the SaaS partner. With this negotiation you will help the seller in their metrics and undoubtedly have greater price flexibility.
The art of negotiation is to arrive at a win-win situation, in which case you have made it. It entered into a low-cost per license agreement that will accompany the organization's growth and that met all of the manufacturer's metrics used in the model previous.


This article aimed to: In its first step, demystify the concept of SaaS with a conceptual and introductory approach and, in its sequence, present advanced techniques for teams that need to manage this asset.

Mastering the SaaS renewal process is another step towards achieving SAM maturity and as in every SAM, we must reinforce the 3P's: Processes, People and Platforms. With the 3P's aligned, we will have effective information collection, processes that impact the organization and specialized technical staff to perform all necessary routines and rituals.

Did you like this content and are interested in Software and Technology Management? Visit our blog.

TAG ID: cost reduction, customer service, acquisition costs, saas benefits, what are the benefits, customers pay, free materials, saas companies in brazil, difference between saas companies, customer life, saas solutions, data protection, integration with other systems, saas platforms, saas metrics, ab testing, customer relationship, core segments, traditional model, through payments, private network, create solutions, data governance, software distribution, security flaws, core models, iaas paas, cloud computing, hybrid cloud, private cloud, which are the main ones, accessed remotely, hosted in the cloud, microsoft azure, customer acquisition, red hat, web apps, saas in brazil, business model, mobile devices, small businesses, saas Brazilian companies, social networks, databases, information security, customer acquisition, inside sales, which are the main ones, cloud computing, public cloud, digital marketing, tax conversion, customer success, recurring payments, cloud storage, churn rate, what are the benefits, license to use, creative cloud, software model, need to worry, saas offers, it infrastructure, software licenses, software model billing, saas software, monthly revenue, it teams, business examples, start-up costs, sales model, bounce rate, computer or device, key metrics

Related Posts