Which businesses do we consider SaaS?
SaaS: Software as a Service
For us to consider a company as SaaS, it needs to have
- A subscription based model, and/or
- be a productivity software,
- delivered from the "Cloud". A unique codebase is used by multiple tenants.
As the business model and metrics are the same, we also look at non-software subscription businesses.
Check out our maps of SaaS businesses
How significant is SaaS?
The biggest SaaS company, which kind of invented the model, is Salesforce.com. Founded in 1999, the company nows employees more than 13,000 people, generates more than US$4bn of revenues (in 2013) and is valued more than US$30bn. It provides a powerful CRM with deep integration in businesses workflow processes.
The second biggest one is LinkedIn, which is valued more than US$25bn. The company recorded more than US$1.5bn of revenues in 2013.
So, yes, SaaS businesses can reach significant size and be Fortune 500 companies. SaaS impacts millions of entrepreneurs, SMEs as well as big companies.
What do the abbreviations used stand for?
For revenue trend:
MRR: Monthly Recurring Revenue
ARR: Annual Recurring Revenues (ie. MRR * 12)
For value of each customers:
Depending on the pricing strategy, one might use one of the following:
ARPA: Average Revenue per Account
ARPU: Average Revenue per User
Churn rate: loss of customers
LTV: LifeTime Value (calculated: ARPA / churn rate)
CAC: Customer Acquisition Cost