Software as a Service (SaaS) companies are everywhere today — from the tools you use to send emails to the software businesses rely on to manage teams, customers, and finances. But many people still ask a simple question: what do SaaS companies actually do, and how do they work?
In this complete guide, we’ll break everything down in a clear, human-friendly way. You’ll learn how SaaS companies operate, how they serve customers, how they grow, and what makes them successful in the long run. For a deeper dive into revenue and profitability, check out our comprehensive guide on how SaaS companies make money.
What Is a SaaS Company?
A SaaS company builds cloud-based software that users access over the internet. Instead of installing software on a computer and paying once, customers usually pay a monthly or yearly subscription to use the product.
This means:
- No manual installations
- Automatic updates
- Access from anywhere
- Ongoing customer support
This model has completely changed how software is built, sold, and used.For more industry insights and definitions, visit Gartner’s SaaS glossary.
What Do SaaS Companies Do?
At their core, SaaS companies solve ongoing problems using software. Their goal is to make tasks easier, faster, or more efficient for individuals or businesses.
Common things SaaS companies do include:
- Building online tools for daily business tasks
- Automating repetitive work
- Managing data and workflows
- Helping teams collaborate remotely
Common Types of SaaS Products
SaaS companies exist in almost every industry. Some popular examples include:
- CRM software for managing customers
- Marketing tools for email, SEO, and social media
- Accounting & finance software
- HR and payroll systems
- Project management platforms
As businesses move online, demand for SaaS tools continues to grow. Explore more SaaS guides and tutorials on our homepage for in-depth resources.
How Do SaaS Companies Work?
SaaS companies operate using a cloud-based infrastructure. Users sign up online, create an account, and start using the software through a browser or app.
Behind the scenes, SaaS companies manage:
- Servers and cloud hosting
- Software updates and bug fixes
- User accounts and permissions
- Data security and backups
This setup allows SaaS companies to serve thousands — or even millions — of users at the same time.
The SaaS Delivery Model Explained
Most SaaS products are delivered through:
- Web browsers (no download required)
- Mobile apps
- Desktop applications synced with the cloud
Many SaaS companies also provide APIs so their software can connect with other tools. This makes SaaS products more powerful and flexible for users.
For insights on how these operational choices translate into revenue, read our guide on how SaaS companies make money.
How SaaS Companies Acquire Customers
Customer acquisition is a major part of how SaaS companies work.
Popular customer acquisition strategies include:
- Free trials or freemium plans
- Content marketing and SEO
- Paid advertising
- Referral and affiliate programs
- Partnerships with other SaaS tools
Most SaaS companies focus on educating users first, then converting them into paying customers.
How SaaS Companies Support and Retain Users
Unlike traditional software, SaaS companies must keep customers happy every month. If users stop seeing value, they cancel.
That’s why SaaS companies invest heavily in:
- Smooth onboarding experiences
- In-app tutorials and guides
- Customer support teams
- Regular feature updates
Why Retention Matters More Than Sales
In SaaS, retaining customers is often more important than acquiring new ones. Long-term users generate more revenue and reduce marketing costs.
Key metrics SaaS companies track include:
- Churn rate
- Customer lifetime value (LTV)
- Engagement levels
Learn more about revenue and profitability in our pillar article how SaaS companies make money.
Key Departments Inside a SaaS Company
Even small SaaS companies usually have multiple teams working together.
Typical SaaS departments include:
- Product & engineering – building and improving the software
- Marketing – attracting new users
- Sales – converting leads into customers
- Customer support & success – helping users succeed
- Operations & finance – managing costs and growth
Each department plays a role in delivering a smooth customer experience.
What Makes a SaaS Company Successful?
Not every SaaS company succeeds. The most successful ones share a few common traits:
- Strong product-market fit
- Clear pricing and value proposition
- Easy onboarding process
- Low customer churn
- Continuous improvement based on feedback
Successful SaaS companies focus on long-term relationships, not quick sales. Check out our homepage for more SaaS guides and insights.
Challenges SaaS Companies Face
While SaaS is a powerful business model, it comes with challenges:
- Intense competition
- Rising customer acquisition costs
- Data security and compliance requirements
- Keeping users engaged over time
Companies that fail to manage these challenges often struggle to grow sustainably.
How SaaS Companies Scale Their Business
Once a SaaS product finds traction, scaling becomes the next goal.
Common scaling strategies include:
- Adding advanced features
- Expanding into new markets
- Offering enterprise pricing plans
- Upselling and cross-selling
Because SaaS is cloud-based, scaling is usually faster and cheaper than traditional businesses.
SaaS Companies vs Traditional Software Companies
There are major differences between SaaS and traditional software models:
- SaaS uses subscriptions instead of one-time sales
- Customers receive continuous updates
- Revenue is predictable and recurring
- Companies focus heavily on retention
These advantages explain why many businesses prefer SaaS solutions today. For a full breakdown of SaaS revenue, see how SaaS companies make money.
Conclusion
SaaS companies build cloud-based software that solves real problems through recurring subscriptions. Their success depends on customer retention, continuous improvement, and scalable systems.
As more businesses move online, SaaS companies will continue to play a critical role in shaping the future of software and digital services. For an in-depth guide on revenue streams, read our pillar article how SaaS companies make money and explore more SaaS resources on our homepage.
Frequently Asked Questions About SaaS Companies
Do SaaS companies need coding skills?
Yes, strong technical skills are essential, though no-code tools are becoming more popular.
Can a small team run a SaaS company?
Yes. Many successful SaaS startups began with small teams before scaling.
Are SaaS companies profitable long-term?
Yes, especially those with strong retention and recurring revenue. Learn more about profitability on our homepage.