MUBA Software
Software Business Models

Non-SaaS software company

What is a Non-SaaS Software Business?

A Non-SaaS software business is a company that develops and sells software products outside of the Software as a Service (SaaS) model. These businesses typically sell their products as one-time purchases, perpetual licenses, or other models that do not involve a recurring subscription fee. Examples of non-SaaS software businesses include companies that produce operating systems and companies that provide specialist packaged software for specific industries, such as architectural design. Even though they can also be purchased with one-time sales, we’ve excluded companies that build video games and companies that make mobile apps available for download on app stores, since those companies are covered in their own chapters.

Characteristics of Non-SaaS Software Businesses

Non-SaaS software businesses have certain characteristics that set them apart from their SaaS counterparts. These include:

  • Ownership: In a non-SaaS business model, the customer often owns a license to use the software, rather than renting access to the software through a subscription.
  • Upfront Payment: Non-SaaS software is typically purchased with an upfront payment. This contrasts with the SaaS model, where payments are spread over the subscription period.
  • Customization: Because the software is installed on the customer’s premises, it can often be extensively customized to meet the customer’s needs.
  • On-Premises Installation: Non-SaaS software is typically installed and run on the customer’s own servers or personal computers, rather than being accessed over the internet.

Examples of Non-SaaS Software Businesses

Companies that are in this group might refer to themselves and their products by different names. We have listed a few of these below. The terminology used can vary by region, industry, and over time.

  • On-Premises Software Companies: This term refers to companies that develop software which is installed and runs on the hardware within the premises of the person or organization using the software.
  • Licensed Software Companies: These are businesses that sell licenses to software, allowing the licensee (customer) to use the software but not own it. This is often a one-time purchase and the license can be for a fixed term or a perpetual license.
  • Perpetual Software Businesses: Perpetual software is software that you buy with a one-off payment and then own indefinitely, rather than paying a subscription fee.
  • Desktop Software Businesses: If the product is a software that is installed and run on individual desktop or laptop computers, it might be referred to as a desktop software business.
  • Packaged Software Companies: This refers to businesses that sell software “off the shelf”, where the software is designed to cater to a broad market with generic features suitable for many businesses.
  • Boxed Software Businesses: This is a slightly outdated term used when software was commonly sold in physical boxes containing a CD-ROM or DVD-ROM for installation. The term might still be used to refer to businesses that sell a physical product, like computer games companies, although this is less common now.
  • COTS (Commercial Off-The-Shelf) Software Businesses: This refers to ready-made software that is set up to accommodate the needs of multiple businesses. These businesses often cater to specific industries, offering solutions tailored to that industry’s unique needs.

Challenges and Benefits of a Non-SaaS Software Business

Running a non-SaaS software business comes with its own set of challenges and benefits. On the upside, the upfront revenue from software sales can provide a substantial influx of cash. This model also tends to foster deeper customer engagement and offers more flexibility and customization options.

On the downside, the non-SaaS model can lead to unpredictable revenue, as it relies on continual new sales rather than recurring subscriptions. Additionally, supporting on-premises software can be technically and logistically challenging, as the software must work correctly in a variety of customer environments.

Typical Costs and Inputs for a Non-SaaS Business

The costs associated with a non-SaaS business can be different from those of a SaaS operation. They include:

  • Software Development: This is a significant cost in both types of business. Non-SaaS companies, however, often have to invest more heavily in making their software customizable and compatible with a wide range of customer environments.
  • Distribution and Installation: Non-SaaS companies may incur costs for distributing physical copies of their software, or providing support to customers for installation and setup.
  • Support and Maintenance: While all software companies have support costs, these can be higher for non-SaaS businesses. This is due to the additional complexity of supporting software installed in a wide range of customer environments.

How Customer Acquisition Works

For non-SaaS businesses, customer acquisition often involves a higher-touch sales process than for SaaS companies. This is because the upfront cost for customers is usually higher, and the products can often be more complex and customizable. This may involve sales presentations, product demonstrations, and potentially a lengthy negotiation process. Marketing strategies can also differ, with a greater emphasis on highlighting the product’s features and customization possibilities, rather than on convenience and accessibility.

Functions in a Non-SaaS Business

The structure of a non-SaaS business can vary widely depending on its size and the nature of its products. However, some common functions include:

  • Product Development: This team is responsible for designing and building the software products. They work closely with other teams to ensure the products meet market needs and are competitive in their segment.
  • Sales and Marketing: This function is often particularly important in non-SaaS businesses, due to the high-touch sales process. The marketing team works to generate leads, while the sales team turns these leads into customers.
  • Customer Support: Because of the on-premises nature of non-SaaS software, a strong customer support function is crucial. This team helps customers install and use the software, and troubleshoots any issues that arise.
  • Operations and Finance: These functions manage the day-to-day running of the business and its financial health. This includes tasks such as budgeting, financial reporting, and ensuring the business has the resources it needs to operate effectively.