B2B Software as a Service (SaaS)

The way we use software has fundamentally changed. Users expect instant access, seamless updates, and pricing that scales with usage, especially if it's something their business relies on. 

This shift—from rigid, on-premise installs to flexible, cloud-based delivery—has been driven by Software as a Service (SaaS). 

What Is B2B Software as a Service? 

Software as a Service (SaaS) is a way to deliver software where the provider hosts the application, and users connect to it through the internet, often paying a recurring fee. Business-to-business (B2B) SaaS applies this model to business customers.

Some popular platforms include:

• Slack for team messaging

• Mailchimp for email marketing

• Zoom for video calls

• Zendesk for customer support

• Canva for graphic design

• Dropbox for file storage 

B2B SaaS works across the board, powering everything from HR systems and customer relationship management (CRM) solutions to the tools developers need to build applications in sectors like edtech, dating, and more. 

How Does B2B SaaS Work?

With SaaS, companies don't install or maintain software on their own servers. Instead, they access it through a web browser while the provider manages everything behind the scenes, including security, performance, uptime, and storage. This reduces overhead for IT teams and frees them up to focus on more strategic, high-value projects.

Let's break down how SaaS functions from a technical perspective.

Technical Foundation of B2B SaaS  

Cloud Hosting and Infrastructure

Cloud hosting replaces traditional on-site servers by renting computing power, network, and storage from cloud service providers like Amazon Web Services (AWS) or Azure.

They offer automatic scalability, so when more users access an app, the system instantly allocates extra computing capabilities. They also come with backups, security updates, and global availability since many cloud providers operate data centers worldwide.

Multi-Tenancy vs. Single-Tenancy

Many SaaS platforms use a multi-tenancy model, where several customers use a single version of the app simultaneously. This can be cheaper to manage since software updates and new features can be rolled out to everyone at once.

However, some companies may need more control and privacy, especially in finance and telehealth. For them, single tenancy can work better. In this setup, each customer has their own separate environment.

Security and Compliance

Providers employ many methods to strengthen security and protect customer data.

Most encrypt data when it's transmitted and stored. This means even if someone intercepts the data, they can't read it without the proper decryption keys.

They also use multi-factor authentication (MFA), which involves more than one way to verify a user's identity. This keeps accounts safe even when passwords are compromised.

Additionally, role-based access control lets companies decide who can access what. For example, the accounting staff may have access to financial data but not human resources records.

Many providers verify every access request, regardless of where it comes from. This includes requests from their own employees or systems.

They also maintain incident response procedures for security breaches and allow customers to export their data when switching platforms.

In terms of compliance, companies that build this software will have requirements that vary by industry, country, and region, such as the GDPR and HIPAA.

Regardless of a software company's location or that of its data centers, it will need to adhere to GDPR if it works with EU resident data. Similarly, SaaS designed for US-based healthcare organizations must comply with HIPAA if they require access to Protected Health Information (PHI).

Continuous Updates and Maintenance

With traditional software, a business's IT team has to wait for and install updates, which can be slow and disruptive.

With SaaS, new features, security fixes, and other updates deploy automatically in the background. Users always have access to the latest version.

User Access, Integration, and Customization

Subscription and User Access

Cloud-based software largely operates on a subscription-based model with monthly, annual, and multi-year plans being the most common. Providers often offer other billing options, like employee- or usage-based models. They may also provide add-ons, like enterprise support.

The most common way users access this software is through their browser. Depending on the specific product, they may be able to use a desktop or mobile version, which is lighter than on-premises installations due to most of the storage and computing being handled in the cloud.

Service Level Agreements (SLAs)

For organizations that depend on these products, SLAs set expectations for uptime, support response times, disaster recovery plans, and more. They're important for earning and keeping user trust.

APIs and SDKs

Businesses often need their SaaS products to work with other tools.

Application Programming Interfaces (APIs) enable communication and data transfer across systems. Software Development Kits (SDKs) give developers pre-written code components and other tools to simplify this process.

For example, a company may use an API to pull data from a sales platform to an accounting product, or the provider may use an SDK to add chat features powered by real-time communication tools.

UI and UX Design

Like all successful software, developers of cloud-based apps try to build user-friendly UIs and facilitate smooth UX.

Devs must balance intuitive navigation, responsive performance, ease of use, and more while designing for business customers accessing the app on their computers, phones, and tablets. They must also consider factors like user locations, proximity to the data centers, connection quality, resource limits, and local regulations.

Even an app that could help businesses save on costs and time will struggle to retain users if it has frustrating issues like frequent connectivity problems.

Localization and Accessibility

Providers often localize their products into multiple languages to attract a worldwide audience and enable users to work in their preferred language.

They may also include accessibility features to accommodate people of all abilities, such as colorblind-friendly UI themes, screen reader support, and keyboard-only navigation.

Customer Support and Documentation

Like on-premises software, these apps often come with documentation that teaches customers how to use them effectively or troubleshoot common issues. There may be developer-specific documentation for customizing the product or integrating it into other apps.

Customer support may exist in the form of self-service knowledge portals, chatbots, and human agents. In addition to standard user frustrations, they might also help with SaaS-specific questions related to areas like billing or internet connectivity issues.

Optimization Through Analytics and AI

Analytics and Insights

Most SaaS platforms provide built-in dashboards and reports. These help businesses understand how they use the tool and how they can optimize resource utilization and spend.

For instance, real-time dashboards may be able to track current activity in an app, and usage reports show which features people are using the most. Similarly, behavior tracking can help spot drop-off points and pain areas.

The provider may also track key metrics like:

• Churn rate: This helps understand the number of users who stop using the platform in a given time.

• Customer Lifetime Value (CLTV): This measures how much revenue a client brings over time through avenues like subscription and additional resource spend.

• Monthly Recurring Revenue (MRR) and Annual Recurring Revenue (ARR): These monitor income trends.

• Customer Acquisition Cost (CAC): This measures how much it costs to bring in a new subscriber.

AI/ML and Personalization

While more common in B2C SaaS, these apps can also use artificial intelligence (AI) and machine learning (ML) to make the user experience smoother and smarter.

Chatbots are one of the most common implementations of AI in this area, especially for customer service use cases. Instead of waiting hours for a human agent, clients can interact with a bot that instantly responds to common questions.

For example, if an e-commerce platform merchant asks, "How do I issue a refund?", the chatbot can immediately guide them through the steps or even trigger the action if permissions are in place.

Another powerful use case is recommendation engines that suggest products or content based on past behavior.

B2B SaaS vs. On-Premises Software

SaaS runs on remote infrastructure and updates itself. There's no need for local installs or dedicated hardware.

By contrast, on-prem software runs locally and needs in-house or outsourced maintenance. This setup often requires a large capital expenditure (CAPEX) upfront for licenses, hardware, and other infrastructure. In contrast, SaaS falls under operational expenditure (OPEX), with flexible, pay-as-you-go pricing.

While on-prem offers full control and deeper customization, it can be expensive and harder to set up and maintain. Updates are slower, and remote access is limited. Still, it's sometimes the better choice for companies with strict regulatory or data control requirements.

Some businesses benefit from both models with hybrid infrastructure where some functions of their business or specific software are cloud-based and others are on-premises. A large company, for example, may integrate an online CRM tool with its locally hosted enterprise resource planning (ERP) environment.

"As a Service" as a Broader Cloud Concept 

This type of software sits within a broader cloud services landscape. The cloud industry offers different service levels depending on how much control businesses want.

With SaaS, they get ready-to-use cloud applications. Users can log in and start working.

Everything as a Service (XaaS) is the umbrella term for this entire trend. It represents how almost any business function can be delivered as a cloud service rather than something that has to be built and maintained independently.

Platform as a Service (PaaS) targets developers who want to build applications without managing servers. Services like Heroku and Google App Engine handle the infrastructure and provide the development environment, meaning developers upload their code, and the platform runs it.

Infrastructure as a Service (IaaS) provides basic computing resources like servers, storage, and networking that users configure on their own. AWS and Azure rent virtual machines that developers can set up however they need them.

In addition to these, there are also specialized service models like Chat as a Service (CaaS), Communications Platform as a Service (CPaaS), Video as a Service (VaaS), and Unified Communications as a Service (UCaaS) that power modern application infrastructure, enabling everything from containerized deployments to embedded communication and video conferencing capabilities.

Furthermore, enterprise SaaS has emerged to address the needs of large organizations, while micro SaaS has gained traction among indie developers and startups.

B2B SaaS Revenue Models 

Cloud-based software providers use different pricing models depending on what they offer and who they serve. Some of the most common models include:

• Free: Offers basic features, often with strict resource limits, at no cost to attract new clients.

• Ad-based: Generates revenue by showing advertisements to users when they use the app.

• Flat rate: Charges a single and fixed fee for all users and features.

• Per user: Bills the business based on the number of active users.

• Per user tier: Provides pricing based on groups of users (tiers), with each tier unlocking additional features or capacity.

• Storage tier: Charges according to the amount of data stored or transferred.

• Pay-as-you-go: Bills based on actual usage, such as the number of messages, API calls, or minutes used.

• Per active user: Only charges for users who are active during the billing cycle.

• Feature-based tiers: Unlocks advanced capabilities at higher price points.

Freemium: Core features are free, with advanced or premium features available as paid upgrades.

Frequently Asked Questions