SaaS Glossary: Demystifying the World of Software as a Service
This SaaS glossary will equip you with the key terms to navigate the world of SaaS.
Delivery Model:
SaaS (Software as a Service): Software accessed over the internet, with a subscription fee instead of a one-time purchase.
PaaS (Platform as a Service): A platform for building and deploying applications, also delivered via subscription.
IaaS (Infrastructure as a Service): The basic building blocks of cloud computing, like storage and servers, offered on demand.
Billing and Pricing:
Subscription: The recurring payment model for accessing SaaS products, often monthly or annually.
MRR (Monthly Recurring Revenue): A key metric for SaaS companies, representing predictable monthly subscription revenue.
ARR (Annual Recurring Revenue): MRR multiplied by 12, showing annual predictable revenue.
ARPU (Average Revenue Per User): Total revenue divided by the number of users, indicating average customer value.
Product and User:
Freemium: A model offering a basic product version for free, with paid plans for additional features.
Free Trial: A temporary access to the product’s full functionality to evaluate its value before subscribing.
Minimum Viable Product (MVP): A basic version of the SaaS application with core features to validate market demand.
Product-Market Fit: The sweet spot where the product features align perfectly with customer needs.
DAU (Daily Active Users): The number of users actively using the product on a given day.
MAU (Monthly Active Users): The number of users actively using the product in a given month.
Customer Acquisition and Retention:
Customer Onboarding: The process of getting new users familiar with the SaaS product and maximizing their value.
Customer Lifetime Value (CLTV): The total revenue a customer is expected to generate over their relationship with the company.
CAC (Customer Acquisition Cost): The cost of acquiring a new customer, including marketing and sales expenses.
Churn Rate: The percentage of customers who cancel their subscription within a given period.
Additional Terms:
API (Application Programming Interface): A way for different software applications to communicate with each other.
SLA (Service Level Agreement): A formal agreement defining the level of service a customer can expect from the SaaS provider.
Cloud Computing: The on-demand delivery of IT resources like servers, storage, and databases over the internet.
Scalability: The ability of a SaaS product to handle increasing user base and data volume.
