The rapid proliferation and success of the SaaS (software as a service) business model over the past
several years is astonishing. The business model has many advantages over conventional software or services firms and it owes its sudden expansion primarily to infrastructure advances in bandwidth and increasingly sophisticated development platforms.
However, investors (particularly angel investors) as well as entrepreneurs should not confuse
"business model" with "pricing strategy". I come across several investors and entrepreneurs refer to SaaS businesses as a 'pay-as-you-use' business. This mix-up in terminology is not only misleading but will certainly lead to a bad investment.
SaaS is a business model that
delivers a particular information or service via the internet, which in
the past would require the end user to integrate/implement large amounts
of software on it's own servers. As is the case with any other
business model, various pricing strategies can be applied to an SaaS
business (pay-as-you-go, etc..).
