SaaS/Private SaaS: Modern Software Delivery strategies on the Web 🌍
Jun 27, 2024
1.9 million businesses are operating in one of Healthcare, Financial services, and Education sectors/industries today across US, Europe and Asia. Due to data protection and other regulations, most of them cannot use software as a service (SaaS), the widely popular delivery model today.
Retool scaled their ARR (Annual recurring revenue) multi-fold by investing on on-prem deliveries.
Retool scaled to 10s of millions of dollars in ARR just by investing on on-prem deliveries. Checkout this post from its Founder/CEO - https://retool.com/blog/building-a-modern-on-prem-software-business.
If you are building software for other businesses, this growth story could be your growth story, when you learn more about the other delivery strategies available and adopt some of them to expand your Target customer base / TAM and of course revenue.
While we know that SaaS is the most popular method today, let us explore and compare all the other prominent ways, keeping customer benefits in the forefont:
SaaS (most popular)
Dedicated Infrastructure
Cloud-prem (Bring your own cloud / BYOC)
Classic on-prem
Self hosting
#3 and #4 are togethered referred as Private SaaS deployments. Software is delivered privately to customers yet managed as a service by software vendor for maintenance and upgrades.
TLDR? Here is a comparison of all the delivery strategies:
If you are building B2B SaaS, we are planning to publish a series of posts here on how to practically adopt each of these delivery strategies for your customers at your organization. You can subscribe to this blog (see bottom right) to receive email alerts whenever we publish new posts.
SaaS:
This is the most popular delivery option today. Developers host their applicaiton on a server and get customers to signup.
Customers don't have to install or update their software. They just signup online, pay a monthly subscription fee and use the software as a service. This became a widespread deployment model in early 2000s and it has aged quite well in the last two decades.
It is the cheapest & fastest option to adopt any software today. Cheapest at least in the short run.
Customers get to compromise & trade off on performance, privacy and control. All customer accounts live in a single shared server. Co-living and co-operating with each other on resources provisioned by the software vendor. Customers put up with few performance hiccups or downtimes here and there, if there is a specific account using more server resources than the other (noisy neighbour). All data is shared with the software vendor, compromising on data privacy. And the hosting environment's security is left to the software vendor to set up. Many small businesses don't care about these concerns as much as slightly more successful & serious businesses do and hence this is the most popular option.
Dedicated Infrastructure:
Customers get to have dedicated servers (or their own Virtual private cloud/VPC) within software vendor's cloud environment (say on AWS) to exclusively host their account. Software vendors still host & manage these accounts within their cloud environment.
Performance centric customers who cannot afford to co-live with other customers on the same server, request for this option. For example, financial services companies or large e-Commerce companies ask for it because their account cannot go down or slow down anytime to avoid losing payment transactions. It in turn could lead to a greater revenue loss for them.
Customers favouring this option are often not price sensitive and are ready to pay a higher subscription fee to cover for dedicated infrastructure and additional support they get.
Checkout how AuthZed does this: https://authzed.com/pricing
Cloud-Prem / Bring your own cloud (BYOC):
Customers wanting even more Privacy want to bring their own cloud account say AWS or Google cloud or Azure to the software provider and want the software installed & run in that account. Or sometimes, the data involved is too huge and its practically in-feasible to move it across to SaaS vendor's environment. It is easier in these cases to move the application inside customer's cloud environment.
Software is installed, managed and supported on customer's cloud environment by the software vendor. And sometimes even with uptime SLAs.
If you are a Developer tools maker, I'm sure you have come across this ask from customers. Companies like PlanetScale, MongoDB offer this deployment option. These tools are often required to run closer to the customer's other software that wants to utilize the tool being offered, either in same network or in a neighbouring VPC/network. Primarily to avoid long data read/write latency in the process. This is the same case for developers offering FaaS (features as a service), API as a service for other companies to build on top of a subset of features they have built.
Customers host the app, pay for the corresponding infrastructure but offload installation & maintenance to the software provider / Developer.
In this method, software providers get to pass through IT/security due diligence far more easily as Retool did. Because software providers don't store any data in their servers.
Customers here are not price sensitive either and are ready to pay a higher fee to cover for software providers installing and maintaining the software this way, in their specific cloud.
There is a huge opportunity for software vendors to simply boost their revenue multi-fold, by offering Dedicated Infrastructure for performance centric customers and BYOC for privacy centric customers. There by sell to industries that are otherwise untapped by SaaS.
Checkout how Airbyte does this today: https://airbyte.com/pricing And Planetscale: https://planetscale.com/pricing.
Classic On-prem:
Just like BYOC, customers get to use software from their own cloud environment. The difference here is that, customer's IT team would be solely involved in setting up and managing the application themselves in their private cloud/on-prem custom hardware.
Software vendors provide a portable package (like how Retool did with their Docker package) and support the in-house IT team remotely via documentation, email or calls.
Customers that are super serious about security & data privacy opt for this option. They need not favour this just for one of performance, privacy, security and control. They most likely look to check ALL boxes.
These customers are again not price sensitive and are ready to pay a premium fee to cover for guaranteed timely updates and additional support provided by developers.
Retool cracked this model through docker/docker compose and earned a significant growth in their ARR.
Retool pricing page: https://retool.com/pricing (See Self-host tab).
Highly regulated industries like Financial services, Healthcare favour for BYOC and Classic On-Prem because most of them cannot satisfy all the regulatory obligations otherwise on plain SaaS delivery.
Self hosting:
Software involved here is usually open source and is available for customers to download and install freely from the web. Just like Classic On-prem, customers get to install software in their own cloud environment. Customer's IT team would be solely involved in setting this up and managing the application themselves in their private cloud (on-prem custom hardware) or public cloud (like AWS).
The difference here from Classic On-prem is in the support level offered by Software providers. With a paid license, software providers can choose to provide support for installation, upgrade and maintenance. But vast majority of customers here often expect the open source community to guide them first, before opting for paid license.
Developers make a portable package (Docker) available for anyone to install in their servers. They often give more than one package option for anyone to pick and install easily.
See how Chatwoot does it today: https://www.chatwoot.com/deploy. And Tooljet: https://www.tooljet.com/pricing
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Most companies in regulated industries such Healthcare, Finance, Education, Energy, Telecom in most countries prefer to consume software in any method other than SaaS.
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Cloud-native technologies like Docker and Kubernetes have made it easy and fast to package your service to run in any cloud and make these non-SaaS deliveries.
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So there is a huge opportunity now more than ever to adopt one of these non-SaaS delivery models to quickly tap into industries that are otherwise not reachable by SaaS and increase revenue.
In the next set of posts, we will go deeper on how to offer these delivery methods and charge for them appropriately. If you are making software for businesses, please subscribe to this blog to receive email alerts when we publish new posts.
Cheers.