SaaS, HaaS, and On-Premises: Different Go-to-Market Models for Software Developers and ISVs
Independent software vendors (ISVs) and developers devote time, attention, and resources to developing applications that address their markets’ challenges and pain points. An ISV’s success depends on achieving those objectives. However, it’s equally important to determine the best way to deliver software to consumers and take it to market.
The Software as a Service (SaaS) model is an increasingly popular choice. Grand View Research predicts the SaaS market, valued at $165.9 billion in 2021, will grow at an 11% compound annual growth rate (CAGR) through 2028 to reach more than $382 billion, while overall software growth predicts a 4% CAGR in the same timeframe.
The benefits to users, developers, ISVs, and their partner channels are driving SaaS growth faster.
The Benefits of SaaS vs. On-Premises
SaaS has several advantages over on-premises software delivery for users. Compare the two options, point-by-point:
- Maintenance: When a business buys a software license and uploads an application onto an on-premises server, that business is responsible for software maintenance, patches, and updates. With SaaS, the vendor typically handles software maintenance at no added cost, making it easier on customers.
- Upfront costs: SaaS usually offers users more flexibility with lower upfront costs. It’s perfect for businesses just starting, or those looking to reallocate funds to other focuses like R&D. Users often pay for the first month to begin using the software, plus a one-time integration or onboarding fee. SaaS pricing models often enable lower costs than paying for the software outright.
- Free trials: One SaaS business model example allows ISVs to use a product-led marketing strategy. Users can try the software risk-free to ensure it meets their needs and provides value – and when it does, they can subscribe with just a few clicks. This option isn’t possible with on-premises software.
- Flexibility: Technology is advancing at a fast pace. So much so that it’s hard for some on-premises software users to get their money’s worth from a license before the application is outdated. SaaS software vendors can add features and update their software with the times, allowing users to take advantage of the latest and greatest tech.
- Remote access: SaaS products usually reside in the cloud, allowing users to log in and use them from internet-connected devices. On-premises software requires a VPN or other means of securely connecting to the server to use it remotely.
SaaS Business Model Benefits ISVs & Channels
The SaaS business model also has benefits for ISVs and their channels. SaaS solutions are already provisioned. In many cases, users can install them on their own and get up and running in minutes, saving your team time.
SaaS products also typically reside in a multitenant, cloud environment, helping keep your costs low and allowing you to scale up or down easily. Developing via microservices architecture in the cloud also makes it simple for you to create and test new features. You can have multiple instances and migrate incrementally to minimize risk and disruption.
Additionally, ISVs and their channel can benefit financially by the ability to build a steady, monthly recurring revenue stream (MRR) from SaaS subscriptions. With a solution customers love, MRR will build as sales reps close additional deals. It’s a much easier path toward growth than making one-time sales, and it helps level out cash flow.
Keep in mind, however, that some markets prefer on-premises software. Examples include embedded point-of-sale (POS) software, MedTech solutions that must be installed in healthcare facilities, and railroad or intermodal transportation signaling. The key is to know your market and the delivery method they require.
SaaS with HaaS: Bundle Software and Hardware
Another option ISVs should consider, particularly for complex business applications, is to take your software to market by bundling it with hardware. Users appreciate simplicity. Bundling eliminates the need for them to find hardware certified with your solution that provides them with the necessary functionality. They also have the assurance that everything works together the way it’s supposed to out of the box.
Moreover, depending on the business model you choose, you may be able to offer users Hardware as a Service (HaaS) as well as SaaS. This may be even more attractive to customers as they “lease” your software and your integrated hardware, sparing them the hassles of seeking out and buying any hardware. Bundling HaaS and SaaS can bring you considerable revenue you can rely on.
If the bundle is relatively easy to deploy and set up, you could consider selling directly. However, if it requires IT expertise, you may benefit from selling the bundle through a channel that can provide the end user with the proper service and support. Another option is to work with a value-added distributor that bundles solutions for ISV and hardware partners. In either case, partnerships are vital to raising brand visibility and increasing SaaS or on-premises software sales. Make sure you and your partners are on the same page with sales goals, responsibilities, pricing, and margin to build a mutually beneficial relationship.
How Does Inflation Factor in Your Decision?
If you’re about to launch a new solution in an uncertain economy, it’s wise to factor that into your launch strategy. An economic downturn may make pricing models for SaaS or HaaS solutions more attractive to end users because it allows them to upgrade or refresh their technology without significant capital expenditure. It can enable them to make IT a manageable monthly operating expense, which can have tax benefits.
Suppose your application is designed to save money, such as offering automated processes that help decrease labor hours, incorporate self-service, or solve other pain points in your market. In that case, more businesses could choose your solution because of an economic downturn based on the ROI.
Also, remember the software delivery cost to your organization, whether SaaS, a HaaS bundle, or on-premises, and choose to take your application to market most cost-effectively and successfully.
As always, making an informed choice that’s best for your business and market makes all the difference.