Tech Target’s Margaret Rouse defines Software as a service (SaaS) as a software distribution model in which a third-party provider hosts applications and makes them available to customers over the Internet.
Just imagine how easy it would be for a young millennial to invest their college savings in a SaaS startup as opposed to a traditional brick-and-mortar business. The latter allows them to kick-start their venture faster, smoother, and safer. The former? Takes ages to start, requires a lot of paper work, money, and bureaucracy.
So here are the reasons why investing in SaaS is a smart move for millennials.
Investing in SaaaS companies doesn’t require a huge amount of money.
It’s cost-effective, unlike going into a jewellery business or starting an export-import venture, for example. That’s a better option for Generation Y. Young, digital, and smart, millennials can pour in a large sum of their income into a SaaS business and improve their savings.
A millennial entrepreneur, for instance, can invest in cloud computing and digital file-sharing tools, such as Dropbox or Amazon Web Service (AWS) and improve their business productivity. They don’t have to build another million-dollar storage facility that they can’t afford.
Rather, they can simply subscribe to this service – and save more. Thanks to SaaS. ‘It removes the need for organisations to install and run applications on their own computers or in their own data centers,’ says Smallcap Discoveries, the emerging growth stocks newsletter based in Canada. “This eliminates the expense of hardware acquisition, provisioning, and maintenance, as well as software licensing, installation and support.’
There is a strong chemistry between SaaS business model and millennials.
Both are flexible: Young millennial entrepreneurs and investors are mostly digital nomads, and SaaS companies are not located in physical stores. They’re located on the World Wide Web, which means that a Generation Y entrepreneur can communicate with their employees via a SaaS-enabled application on the go.
And millennials with their Smartphone can work at any time using SaaS platforms. The ease of use, the smooth running of the business model and its, flexibility… these things make investing in SaaS businesses easier.
That’s what millennials love – easy-going businesses, apps, and stuff – and it makes sense when they invest in them. Not only that they’ll do more, but their operation cost won’t eat their savings.
Because they only pay for service costs as they use them.
Over the last three years, we have seen how SaaS costs are declining and their revenue and profits are rising.
One of the major reasons for this is that, the SaaS subscription model means that companies are more like outsourcing for services rather than buying the tools or manpower to help work for them. For millennials, that means, more saving, less spending, and less hassle.
And investors love companies that are growing rapidly. SaaS companies have high profits and revenues because of their increasing customer retention numbers. IDC, for example, forecasts that over the next five years, ‘SaaS revenues are projected to grow at 17.6 per cent per year compared to 3.1 per cent for on-premise. This will enable the SaaS penetration rate to increase from 17 per cent in 2013 to 28 per cent by 2018 of total software sales.’
Well, that’s one of the core reasons a smart millennial will invest in it.