Hosted delivery
The provider operates the application instead of requiring every customer to install and maintain it independently.
Tinypoke Learn topic
SaaS
Learn how Software as a Service is delivered, how recurring access works, and what common SaaS business metrics mean.
Overview
What is SaaS?
Software as a Service, or SaaS, is a way of delivering software over the internet. The provider operates the application and its supporting infrastructure while customers access the software through a browser, mobile app, or connected client.
Many SaaS products use monthly or annual subscriptions, although pricing can also be based on usage, features, or the number of users.
Ongoing access
Customers retain access while their account, subscription, or usage agreement remains active.
Continuous operation
Updates, reliability, security, and customer support become ongoing parts of providing the service.
Common SaaS terms
These measurements help describe recurring revenue, customer acquisition, and customer retention.
MRR
Monthly Recurring Revenue
Recurring subscription revenue normalized to a monthly amount.
ARR
Annual Recurring Revenue
Recurring revenue expressed as an annual amount, often calculated from MRR.
CAC
Customer Acquisition Cost
The average sales and marketing cost associated with acquiring a new customer.
LTV
Customer Lifetime Value
An estimate of the value or gross profit a customer may contribute during the relationship.
Churn
Customers or revenue lost
The proportion of customers or recurring revenue that leaves during a defined period.
Retention
Customers or revenue retained
The proportion of customers or recurring revenue that remains through a defined period.
Putting it together
A SaaS product is also an ongoing service
Launching the application is only the beginning. A SaaS provider must continue operating the product, supporting customers, improving the experience, and protecting the information entrusted to the service.
Business metrics are useful when they help explain whether that service is creating durable value for customers and can be operated sustainably.
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