SaaS: Software as a Service

Salesforce launched in 1999 with a heretical pitch: software should not need a disc, a server, or a six-month implementation. Oracle and SAP ruled the world with long contracts, on-premise installs, and armies of consultants. Salesforce showed up with a browser-based CRM billed monthly under the banner "No Software," and meant it literally. The economics looked worse at first, because a perpetual license is a big upfront check and a subscription is a small monthly one. But the recurring revenue compounded, and Shopify later showed the endgame: a merchant signs up for one plan, then buys Payments, Capital, Shipping, and Plus until the platform becomes infrastructure nobody wants to rip out.

For founders and operators, the metric that decides everything in SaaS is not new logos, it is whether your existing customers spend more this year than last, even after the ones who left. Cross a certain threshold and your installed base funds your growth on its own; fall below it and you are bailing out a leaky bucket. High gross margins let you pour money into sales and product, but only if the foundation holds. The exact number that flips a SaaS business from leaky bucket to flywheel, and what it has to clear, is what the app holds back.