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Software as a service is the new software licensing or distribution model where companies do not have to install the software or tool on their own systems. The software is usually installed on one central server by the provider and based on the plans subscribed by their customers, access levels are granted.

The software is delivered as a “Service” vs “Ownership”. The consumer is a “tenant” vs “buyer”.

In traditional business economy, the revenue was based on initial costs only. There weren’t any key metrics to predict the revenue or business growth. Scaling the business was challenging without a constant stream of revenue.

That’s why the business model shifted to subscription economy. There are many benefits of this model:

  • No initial heavy payments- You usually pay-as-you-go, so there is no setup fee and huge investment. Anybody can easily start.
  • Pay for what you want- With access levels and permissions, it is very easy to pay for the features that you want. You don’t have to buy the whole tool.
  • Automatic updates- You don’t have to worry about the software updates or security fixes, as this process is automatic and happens at the backend.
  • Availability- SaaS companies usually provide very competitive server up time, so you do not have to worry about the availability.
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