Software as a Service (SaaS)

Software as a Service (SaaS) is a software delivery model where applications are hosted by a provider and accessed by customers over the internet, typically through a web browser. Instead of installing software on local computers, users log in to access the application, with the provider handling all infrastructure, maintenance, and updates.

Why SaaS Matters for Revenue Teams

For finance and RevOps professionals, SaaS fundamentally changed software procurement and billing operations. The shift from perpetual licenses to subscription revenue models created entirely new categories of financial processes, from revenue recognition under ASC 606 to managing recurring billing at scale.

This model also affects how you buy software. Rather than negotiating six-figure upfront licenses, you evaluate monthly or annual subscriptions, which changes budget planning, cash flow management, and vendor risk assessment.

How SaaS Works

The core mechanism is straightforward: a provider runs a single application on their infrastructure, and multiple customers access it simultaneously. Most SaaS applications use multi-tenant architecture, where one application instance serves many customers while keeping their data isolated.

When you log into a billing platform like Meteroid, you're accessing a shared application. The provider manages:

• Server infrastructure and networking

• Software updates and patches

• Data backups and disaster recovery

• Security and compliance certifications

• Performance monitoring and optimization

Your responsibility is limited to configuring the application for your business and managing user access.

SaaS Pricing Models

Understanding how SaaS companies price their products is critical whether you're building a SaaS business or buying SaaS tools.

Per-User Pricing

The most common model: monthly fee per user account. Simple to understand and implement, but can discourage broader adoption within organizations since each new user increases cost.

Usage-Based Pricing

Charges based on consumption: API calls processed, data stored, transactions handled. This aligns cost directly with value but requires precise metering infrastructure. Companies like AWS and Twilio built their businesses on this model.

Tiered Pricing

Features bundled into packages (Starter, Professional, Enterprise). This balances simplicity with revenue optimization by pushing customers toward higher tiers as they need more capabilities.

Hybrid Models

Many successful SaaS companies combine approaches. A CRM might charge per user with usage-based fees for email sends or data storage beyond certain thresholds.

Implementation Considerations

When evaluating SaaS solutions for your billing and revenue operations stack:

Integration Capabilities
Check API documentation before committing. Your billing system needs to connect with your CRM, ERP, payment processors, and analytics tools. Poor API design or rate limits can break critical workflows.

Data Access and Portability
Ensure you can export your data in usable formats. You need this for migrations, analysis, and regulatory compliance. Ask vendors specifically about data export capabilities and any associated costs.

Service Level Agreements
Review uptime guarantees and support response times carefully. For revenue-critical systems like billing platforms, 99.9% uptime means approximately 43 minutes of downtime per month. Know what compensation the vendor offers for SLA breaches.

Pricing Alignment
Match the pricing model to your usage pattern. If you have stable headcount but growing transaction volume, per-user pricing might be better than usage-based. Run scenarios with actual numbers before committing.

Common Challenges

Internet Dependency
SaaS applications require connectivity. While major providers maintain excellent uptime, outages do occur. Have contingency plans for accessing critical data during downtime.

Customization Limits
SaaS platforms offer configuration but rarely deep customization. If your billing processes have unique requirements that don't fit standard workflows, you may need to adapt your processes or consider other options.

Vendor Lock-In
Switching SaaS providers involves data migration, retraining, and workflow reconfiguration. Before selecting a vendor, understand the exit process and associated costs. This is especially important for core systems like billing platforms.

Compliance Complexity
For companies handling payment data or operating in regulated industries, ensure your SaaS vendors maintain relevant certifications (SOC 2, PCI DSS, ISO 27001). If you operate in the EU, verify GDPR compliance and data residency options.

SaaS vs Traditional Software

The financial implications differ significantly:

Capital vs Operational Expense
Traditional software requires upfront capital expenditure for licenses and hardware. SaaS converts this to operational expense with monthly or annual subscriptions, improving cash flow but creating ongoing cost commitments.

Maintenance Responsibility
With on-premise software, your IT team handles updates, security patches, and infrastructure management. SaaS shifts this to the vendor, reducing internal IT burden but also reducing control over timing and implementation of changes.

Scaling Economics
Adding capacity with traditional software often means purchasing additional licenses and hardware. SaaS typically allows immediate scaling up or down, though costs scale proportionally.

When to Use SaaS

SaaS makes sense for most business applications, particularly when:

• You need rapid deployment (days rather than months)

• Your team is distributed geographically

• You want to avoid managing infrastructure

• The application isn't deeply integrated with proprietary systems

• You prefer predictable subscription costs over large capital outlays

SaaS may not fit if you require extensive customization, have strict data residency requirements that providers can't meet, or operate in environments with limited internet connectivity.

Security Considerations

For billing and finance systems handling sensitive data, security evaluation is critical:

Encryption
Verify data encryption both in transit (TLS 1.2 or higher) and at rest. This is standard for reputable providers but should be confirmed.

Access Controls
Look for role-based access control (RBAC) that lets you restrict who can view or modify different data types. For billing systems, you need granular controls over who can process refunds, adjust invoices, or access customer payment information.

Audit Trails
Comprehensive logging of all user actions is essential for compliance and investigating discrepancies. Ask vendors what audit capabilities they provide and how long logs are retained.

Compliance Certifications
For revenue operations tools, SOC 2 Type II is increasingly standard. PCI DSS compliance is mandatory if the system handles or stores payment card data.

The Impact on Billing Operations

SaaS transformed how companies handle revenue operations in several ways:

Subscription Billing Complexity
Managing recurring revenue requires specialized capabilities: proration logic, upgrade/downgrade flows, renewal automation, and failed payment handling. Traditional invoicing systems weren't built for this.

Revenue Recognition
ASC 606 and IFRS 15 require specific treatment of subscription revenue. SaaS companies often need dedicated billing platforms that can handle recognition rules, deferred revenue calculations, and integration with accounting systems.

Usage Metering
For usage-based pricing, you need infrastructure to collect, aggregate, and bill for consumption data. This requires real-time or near-real-time data pipelines and the ability to handle high data volumes.

Global Expansion
SaaS companies often serve international customers from day one, requiring multi-currency pricing, localized payment methods, and automated tax calculation for different jurisdictions.

These requirements led to the emergence of specialized billing platforms like Meteroid that handle the complexities of modern SaaS revenue operations.