The SaaS Operating Model : Demystifying Software Business Models

Software as a Service (SaaS) has changed the way that businesses think about software. Learn more about SaaS operating models. Start here!

The question of what distinguishes SaaS from software has been asked for years. The answer to this is not entirely clear, but it can be concluded that hybrid models are possible in which the vendor offers both a SaaS operating model and also sells its product as traditional downloadable or installable versions.

What does it all mean?

It’s not a good idea to use the same SaaS operating model for different industries. If you do, it will be difficult with organizational complexity and increased internal politics.

It might be better to divide your company into separate functions or even entire P&Ls so each line of business can run properly. Click To Tweet

In this article, the author goes on to describe how each software distribution SaaS operating model arises from a different aspect of economics. The first is that computer data has become cheaper and more common every day as it becomes easier for people to copy, move, or transform information without any cost. This means that if an application lends itself well towards self-referential automation then there will be lower costs in distributing it via Internet or offline methods.

There are many different ways to distribute software, and each one is impacted by how much it costs.

saas operating model

If you want to keep your company afloat, it is important that the SaaS operating model of the software aligns with what customers need. The perfect alignment will never happen because technology and customers’ needs always change. However, if you choose wisely in both areas then success should follow.

Businesses that adopt the latest technology distribution SaaS operating models will find themselves at a competitive advantage and more profitable.


If you have done everything right, customers will come. The way to make sure that this happens is by selecting the approach for your SaaS operating model based on what would be best for the customer. If they are looking for an online service and don’t want one because it isn’t well executed or doesn’t fit their needs then chances of success are slim.

You need to think about what your customers want and align that with the company’s SaaS operating model.

The following are some examples: Does your company derive a competitive advantage from the application? Can you automate processes in order to gain an edge over competitors? Is there risk associated with this app and can it be transferred back onto us if something goes wrong, etc?


Starting with the customer and working your way back to a SaaS operating model is usually much clearer than starting from technology.

Starting with what you need, not how it can be used in an innovative way will lead to more success. Click To Tweet

The technological pressure to go completely online will become more and more irresistible as the costs of data replication, transformation, and distribution continue to decrease. For companies that need customers’ needs addressed in unique ways or for complex risks involved with their customers’ businesses, on-site software is still preferable.


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