If your SaaS app shuts down, even for short periods of time, the last thing your customers want is to renew their subscription or get money back. Instead, they may only want to terminate the subscription plan. Also, customers may not be interested in signing up for an SLA. Instead of guaranteeing future performance with an SLA, they may be more interested in your app`s past performance by using public due date data and performance metrics. Often, a customer buys a subscription agreement that their company doesn`t use. The value of the subscription is spread over the lifetime. However, customers may consider that they will not continue to pay the subscription fee if they resign halfway. They may also consider that they should be reimbursed for an unused portion. If the contractual language is vague and ambiguous, the customer may be right in the end. In addition, because resource requirements can vary from period to period, recurring revenue companies may be less scalable than saaS and subscription companies. First, it`s probably a good idea to spend a few lines on the difference between subscription and SaaS.
SaaS stands for software as a Service. The software is provided online via a browser and hosted by the software publisher (or any other third party). The customer does not need to set up an expensive IT infrastructure such as the server, data center or administrative staff. Thus, the user buys (rents) and uses not only the software, but also the necessary infrastructure, maintenance and support, new versions, etc. The user buys (or will rent again) the full service, not just the software. These services are sold in the form of subscriptions, that is: the right to use the service for a given period (usually one year or another). This does not mean, however, that all underwriting companies are SaaS companies, a very common misunderstanding. Almost all small software vendors (and many large ones) that today sell on-prem software (software that must be installed behind the firewall in the customer`s data center or at their outsourcer) use a subscription model (technically limited license, but a temporary license does not include the maintenance part). There are many, many reasons why the software is used on-site in some cases, but providers have always discovered that, in many of these cases, a subscription model is more convenient for the buyer. BTW – I use On-Prem as an antidote to SaaS, but On-Prem can also be your own virtual data center that you run on AWS.
These are just a few interesting points and maybe I`ve forgotten a few important ones. But the trend is easy to pin down: startups start with subscription models and legacy companies move to subscription models. There is, however, some general confusion in the software market about the „SaaS“ label, which is sometimes misused for software products that have replaced the traditional permanent model with the increasingly popular subscription plan. Of course, your agreement can include both SaaS and on-premise software. A saaS provider can provide its main offering online, but also provide an application for customers` computers – something that helps these machines talk to the online service. . . .