SaaS vs Subscription Comparison: Pros, Cons, and When to Choose Each

SaaS vs subscription

Octobits Blog – With technology playing such a big part in our lives, the debate between SaaS vs subscription models affects everything from how we consume entertainment to how businesses manage their operations.

As we all know, the Software as a Service (SaaS) model and the subscription business model are two of the most significant innovations in recent business history.

They both help businesses make more money and keep their customers loyal.

That’s why we’re going to look at both business models so we can keep up with the changing market.

What is SaaS and How Does It Work?

Software as a Service (SaaS) is a cloud-based service model where software applications are hosted by a third-party provider and made available to customers over the internet.

With SaaS, you don’t have to worry about buying a licence upfront and installing it on your own hardware. It’s a more convenient approach because you don’t have to worry about that stuff.

SaaS lets businesses switch to a model where they make money from customers over and over again.

This means they can focus on keeping customers happy for the whole time they’re using the software, rather than just trying to get them to buy it in the first place.

In their Harvard Business Review article, Frank V. Cespedes and Jacco van der Kooij talk about how software licencing is changing and moving towards this cloud-based delivery model.

This means the software provider takes care of all the technical bits and pieces, like infrastructure, updates, and security, so you can focus on using the software to benefit your business. 

Lots of companies, like Adobe with Creative Cloud, have had great success using SaaS to give users a smooth and continuous experience.

Customers get the latest software updates and don’t have to worry about maintenance. 

As Annu Baral points out in a Forbes article, the convenience and flexibility of SaaS are key to its success in a wide range of sectors, from entertainment to essential business functions.

For your additional insights on SaaS, kindly read “Comprehensive Guide to SaaS Subscription Billing Solutions in 2024.”

What is a subscription model in business?

A subscription model is a business approach where a company sells a product and gets paid on a recurring basis, usually once a month or once a year.

The subscription model is all about keeping customers instead of getting new ones. This makes the lifetime value (LTV) of the customer over time.

The idea is to build long-term relationships with customers who keep paying for access to a product. This model is different from traditional business models, which often rely on one-off purchases.

Subscriptions keep cash flowing and help build stronger customer relationships.

From entertainment to manufacturing, businesses of all kinds are using this model to keep up with consumer demands for convenience and flexibility.

B2B businesses, as highlighted by Oracle, have also seen the benefits of subscription offerings, with more chances to sell additional products and services to customers.

This means you can count on a steady income and fewer customers leaving you.

But subscription models aren’t just about giving customers access to a product. They’re also about building and maintaining relationships with customers so that they keep finding value in what you’re offering.

SaaS vs Subscription: Key Differences

It’s easy to see how SaaS and subscription models seem pretty similar at first. But there are some key differences between them.

Delivery Model vs Pricing Model

One of the fundamental differences between SaaS and the subscription model is their core focus.

SaaS is mainly about getting software to users in the cloud.

It uses a subscription pricing model, but its main selling point is how it delivers software without any hiccups.

Then there’s the subscription model, which is a pricing model used in pretty much any industry, whether it’s for digital products like Netflix or physical ones like a mealbox service.

Ownership and Control

The way SaaS works is different from other subscription services because of the concept of ownership and control.

In a SaaS model, users don’t actually own the software. They’re given a licence to use the software for as long as they’re subscribed.

The provider keeps ownership and control of the software, its infrastructure, and updates.

With a subscription model, it depends on the type of subscription as to who owns and controls it.

Sometimes, like with SaaS, ownership stays with the provider.

In other cases, like car subscriptions, the user might have temporary ownership or control of a physical asset during their subscription period.

Infrastructure Requirements

SaaS models rely a lot on having the right infrastructure in place, particularly cloud services, to deliver their products.

SaaS users need to have the proper infrastructure in place to support the software they’re using.

They also need a device with internet access to use the software.

Meanwhile, SaaS providers need a solid cloud hosting setup, which might mean investing a lot in server infrastructure and cybersecurity.

On the flip side, subscription businesses have different infrastructure needs.

For digital services like streaming platforms, users only need an internet-connected device.

For subscriptions involving physical goods, the provider is responsible for managing the supply chain, warehousing, and delivery infrastructure.

For instance, a physical goods subscription like Dollar Shave Club needs warehousing and logistics, which are different kinds of operational investments.

Customization and Integration

SaaS customisation options differ from one SaaS provider to another. Some have lots of configuration and customisation features, while others provide a more standardised product.

Some SaaS solutions also have great integration capabilities, allowing you to link up with other business apps with ease.

On the other hand, most subscription models are all about standardised products delivered over and over again, with not much room for customisation.

For example, while Audi’s car subscription lets you choose your car, it doesn’t offer the same level of tailored software integration as SaaS platforms.

So, the SaaS subscription model is a bit of a mystery to many, so we’ve put together another quick guide in “SaaS Subscription Model Explained: Growth, Types, and Key Benefits.”

Benefits of SaaS Over Traditional Subscription Software

There are lots of reasons why SaaS is better than traditional subscription software.

These benefits below have led to a huge growth spurt in the SaaS market in recent years.

Lower Upfront Costs

SaaS means you don’t have to spend a fortune upfront on software licences and hardware, so it’s a great option for businesses of all sizes.

Traditional subscription software often requires a big upfront payment, which can be a problem for smaller companies or startups.

SaaS lets businesses spread the cost of software over time, which helps with cash flow.

Accessibility and Scalability

SaaS solutions can be accessed from anywhere with an internet connection, which gives users more flexibility and the option to work remotely.

This is great for businesses with teams spread out across the globe or employees who need to get their work done while they’re on the road.

SaaS is also really easy to scale up or down, so businesses can quickly adjust their subscriptions to fit their needs.

As businesses needs increase, they can add more users or features, and similarly, they can scale down if necessary.

Automatic Updates and Maintenance

SaaS providers take care of software updates, patches, and maintenance, which lightens the load for in-house IT teams.

This means that businesses always have the latest version of the software without having to worry about complex installation and update processes.

With traditional subscription software, it’s often down to businesses to install updates and make sure they work with their existing systems.

Simplified Deployment

SaaS solutions are usually quick and easy to get up and running. They don’t require a lot of setup time or effort.

Users can usually get started with the software pretty quickly.

This quick and easy setup means businesses can start reaping the benefits of the software much faster than they would with traditional installations.

Focus on Customer Success

A lot of SaaS providers are all about making sure their customers are happy and offer lots of support to help users get the best value for their subscriptions.

This customer-centric approach often involves dedicated customer success teams that help with things like onboarding, training, and ongoing support.

The focus on customer success fits in with the recurring revenue model of SaaS, as retaining customers is essential for sustained growth and profitability.

When to Choose Subscription Software Over SaaS

While SaaS provides many advantages, there are some cases where traditional subscription software might be a better fit.

If you’re an organisation in need of greater control over your software environment, subscription software can offer more direct ownership.

As Annu Baral says, some industries like to have their software on-site because of regulations or data privacy issues.

Take healthcare and finance, for instance. They often have to stick to strict regulations, which makes cloud-based solutions a bit tricky.

Another great thing about subscription software is you can access it offline, which is useful in places or industries where the internet is unreliable.

SaaS needs an internet connection to work, but traditional subscription software can do its thing without one, which makes it perfect for fieldwork or remote locations.

How Octobits Help You in SaaS Subscriptions?

Ever feel like you’re drowning in a sea of SaaS subscriptions? You’re not the only one.

A lot of businesses find it tough to keep on top of all their software subscriptions, which can lead to wasted money, security risks, and a lot of admin.

That’s why Octobits offers a centralised solution to make your IT operations more efficient.

Octobits is a SaaS management platform designed to make your software ecosystem easier to manage, cut costs, and improve security through a single, centralised dashboard.

This one-stop solution makes life easier for IT managers and managed service providers (MSPs), as they can manage everything from billing to device oversight with ease.

But don’t wait. This chance to make your IT workflows easier with a free, all-in-one dashboard is only around until December 2024.

In Closing

The evolution of SaaS and subscription models has completely changed the way businesses operate and consumers access products and services.

If you know what your business’s strengths and weaknesses are, you can make decisions that fit with your goals.

Because at the end of the day, the key is finding the right balance in the SaaS vs subscription debate to best serve your business needs.

Article Sources:

  • Baral, A. (2022, September 12). The Evolution of the Subscription Model and What’s on the Horizon. Forbes. Retrieved from https://www.forbes.com/councils/forbesbusinessdevelopmentcouncil/2022/09/12/the-evolution-of-the-subscription-model-and-whats-on-the-horizon/
  • Cespedes, F. V., & van der Kooij, J. (2023, April 18). The Rebirth of Software as a Service. Harvard Business Review. Retrieved from https://hbr.org/2023/04/the-rebirth-of-software-as-a-service
  • Oracle. (2021). Essential Strategies for Subscription Business Models in B2B. Retrieved from https://www.oracle.com/a/ocom/docs/subscription-business-models-b2b.pdf
  • Tarver, E. (2024, April 19). Subscription Business Model Defined, How It Works, Examples. Investopedia. Retrieved from https://www.investopedia.com/ask/answers/042715/how-do-subscription-business-models-work.asp
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