SaaS Migration: Why your business should move to SaaS and how to do it

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Key Takeaways

• SaaS offers predictable revenue streams through subscriptions (monthly, quarterly, or annually), unlike traditional software sales that rely on one-time purchases. .
• Cloud businesses maintain full control over their software, allowing frequent updates and improvements based on customer feedback, which keeps their offerings competitive.
• Migrating to SaaS offers predictable revenue, rapid growth, a wide customer base due to flexible pricing, automatic updates, and lower operational costs compared to on-premise systems.

Some time ago, downloading and installing software was the only way to use it. Supporting and updating a program on a variety of devices wasn’t easy both for users and vendors. However, new technologies allow running the software on the cloud, making it easily accessible and configurable.

It gave rise to a new breed of businesses, using the SaaS business model (Software as a Service). The global SaaS market is steadily expanding, expected to grow from $243.02 billion in 2024 to $253.58 billion in 2025, with a 4.3% CAGR.

One of its key advantages lies in the subscription-based model, which provides companies with predictable revenue streams while giving customers access to continuously updated services.

How does the SaaS business model work? Read on, and you will find out about its peculiarities and benefits of cloud-based software with our own case studies. Using insights from 175+ delivered cloud computing solutions and consultations, we will tell you how to move your application to the cloud right.

What is the SaaS business model?

SaaS is a business delivery model in which a company hosts cloud-based software and sells customers access to it. The company is responsible for all elements, allowing subscribers to use its product: servers, data, etc.

Leading cloud providers like Microsoft 365, Zoom, and Shopify exemplify this approach, offering scalable, cloud-based solutions with flexible pricing plans. The best thing is that such a model applies to different industries — from fintech and logistics to healthcare and hospitality.

The subscription plans of a SaaS business may vary considerably. Some companies may offer many applications within their products. Available services (access to API, for instance) depend on the subscription plan.

Since the model revolves around a subscription-based approach, it ensures steady revenue streams through monthly, quarterly, or annual payments, with MRR (monthly recurring revenue) as a key metric. However, revenue recognition depends on service delivery — payments received upfront cannot be fully accounted for until the company fulfills its obligations.

Additionally, SaaS companies maintain full control over their software, enabling frequent updates and enhancements. This flexibility allows them to quickly respond to user needs, continuously refining their offerings to stay competitive.

The benefits of SaaS business models

We’ve described how the SaaS business model works. Some business leaders might feel uneasy without total control over the infrastructure of their products. Let’s dive deeper and look at the advantages of on-premise to SaaS migration.

Predictable revenue

A subscription model provides predictable revenue, shielding your business from seasonal fluctuations. Recurring contracts ensure financial stability, as customers support your company simply by staying subscribed.

Unlike traditional models, you don’t rely on repeat purchases. While monthly performance may vary, historical data allows reliable forecasting.

Swift growth

With the right architecture and funding, SaaS businesses can scale rapidly.

For instance, Atlassian reported a 21% year-over-year revenue increase in Q2 2024, reaching $1.28 billion, driven by products like Jira and Trello. Also, SaaS Capital finds that an 80% growth rate is common for companies generating $3 million in annual revenue, highlighting the model’s potential.

A wide variety of potential customers

SaaS companies offer multiple pricing tiers, from basic to premium, catering to both small and large businesses. This allows experimentation with pricing while maximizing customer reach. Additionally, standard product options reduce the need for customization, saving time and resources.

Free updates

SaaS providers offer automatic, free updates, ensuring businesses always have access to the latest features and security patches without extra costs. In contrast to on-premise solutions rewuiring manual upgrades, SaaS updates occur seamlessly, minimizing downtime and IT workload.

Streamlined operations

SaaS simplifies IT management by handling software installation, maintenance, and updates, reducing the burden on internal teams.

When moving from on-premise to SaaS, companies see lower operational costs and improved productivity, as they have the ability to focus on core activities. With minimal infrastructure requirements, cloud solutions ensure seamless performance, freeing businesses from managing hardware or troubleshooting system issues.

Accessibility and flexibility

One of the benefits of SaaS migration is that cloud solutions offer seamless scalability, giving you the freedom to expand computing power instantly without managing infrastructure. Its accessibility improves as users can work from anywhere using desktops or mobile devices.

Better security measures

By embracing cloud migration, you can enhance data protection with encryption, access controls, and compliance certifications, safeguarding sensitive information from cyber threats.

In 2024, SaaS cyber threats soared, with 7,000 password attacks blocked per second in Entra ID (up 75%) and phishing attempts rising 58%, leading to $3.5 billion in losses. Thus, cloud providers invest heavily in sophisticated security measures for robust defenses against breaches.

The future of SaaS: why businesses are shifting from on-premise

Modern SaaS migration is increasingly about aligning with transformative industry trends that enhance functionality, security, and user experience. In fact, SaaS adoption is no longer just about reducing costs or improving efficiency.

Artificial Intelligence and Machine Learning integration

The adoption of AI and ML in SaaS broadens its set of capabilities. These technologies optimize operations, enhance customer interactions, and drive intelligent automation. AI-powered tools, such as chatbots and predictive analytics, provide live insights that contribute to intelligent decision-making.

Generative AI further revolutionizes content generation, workflow automation, and personalization, delivering superior user experiences while reducing manual intervention.

For instance, AI-assisted shopping solutions use advanced algorithms to analyze consumer preferences and behavior, offering personalized product recommendations.

The rise of vertical SaaS

Vertical SaaS solutions are tailored to meet the specific needs of niche industries, providing highly specialized functionalities that generic SaaS platforms may lack. In contrast to traditional horizontal products, vertical SaaS offers customized workflows, regulatory compliance support, and industry-specific analytics.

Industries such as healthcare, finance, and manufacturing are increasingly migrating to a SaaS business model with vertical functionality to optimize their processes. For example, cloud-based solutions for pharmaceutical companies foster compliant drug development and clinical trials.

Strengthened data security and compliance

Sophisticated cybersecurity practices and compliance initiatives keep businesses and their customers protected against data breaches, unauthorized access, and legal complications.

SaaS companies are investing in secure cloud hosting solutions, encryption protocols, and AI-driven threat detection to fortify their platforms. Compliance with regulations such as GDPR and HIPAA not only enhances security but also fosters customer trust.

As enterprises continue moving from on-premise to SaaS environments, they benefit from robust security frameworks that mitigate risks while maintaining regulatory adherence.

Step-by-step SaaS migration plan

You’ve chosen to move from on-premise applications to cloud-based SaaS. What should you do?

Even if the benefits are obvious, you should act carefully to make the transition seamless. Here are the steps you should take to make migrating to SaaS smooth for you.

1. Assess your architecture

Before starting migrating applications to SaaS, you should make sure that your product is scalable. Different components of your app will have to grow independently to meet customer demands. If you can split it into several microservices, you are ready for migration. Otherwise, you will have to rebuild your software.

The more parts of your application are self-contained, the more you’ll benefit from cloud migration. Besides, such a granular structure will allow you to change specific elements without tearing the whole app down and rebuilding it.

2. Select the migration model

There are several ways how to migrate to a SaaS business model. Your approach will depend on the peculiarities of your business case. Here we will discuss the three most common options.

• Silo migration (Single-Tenant Model). Each tenant has a dedicated infrastructure, allowing for enhanced data security and customization.
  • Pros: Minimal redesign required, strong security, and greater flexibility for end-users.
  • Cons: Higher operational costs due to isolated infrastructure, limited scalability.
• Layered migration model: SaaS migration occurs in stages, moving different layers of the application to a multi-tenant structure over time.
  • Pros: Controlled transition, allowing for gradual optimization while maintaining service continuity.
  • Cons: Can be complex to manage, requiring both single-tenant and multi-tenant support during the migration period.
• Data Migration model: Moves data storage to a multi-tenant structure while keeping other components in a single-tenant architecture.
  • Pros: Balances modernization with stability, allowing businesses to leverage cloud efficiencies without a full-scale transformation.
  • Cons: May require additional effort to maintain interoperability between data and application layers.

3. Migrate data

Tenant data optimization and transfer is the next step in migrating to a SaaS business model. Every option has its pros and cons. The way your migration happens will depend on the strategy you choose.

4. Choose a modernization strategy

Companies must decide whether to modernize their application before launching the SaaS offering or prioritize speed to market with incremental improvements afterward.

a) Modernize first, release later

This approach focuses on rewriting, refactoring, and optimizing the application before launching it as a SaaS solution.

• Pros:
  • Delivers a highly scalable and efficient system from the outset.
  • Avoids accumulating technical debt by addressing architectural improvements early.
  • Enhances long-term operational efficiency and agility.
• Cons:
  • Delays time-to-market, potentially limiting early customer feedback.
  • Requires a higher upfront investment without immediate revenue.
  • Works best for companies that can afford a longer development phase.

b) Shift now, modernize later

This strategy prioritizes launching a minimally modernized SaaS solution quickly, with ongoing enhancements post-release.

• Pros:
  • Accelerates time-to-market, allowing for early customer feedback and revenue generation.
  • Enables a quicker transition to a SaaS business model.
  • Encourages early organizational changes, especially in sales and customer support.
• Cons:
  • Requires continuous modernization, which can be complex and resource-intensive.
  • May lead to technical debt, making future upgrades more difficult.

Challenges of software migration to SaaS

While drawing your SaaS migration roadmap, you should remember that this process may be tricky. These challenges can be grouped into technical, cost, and security categories. Pay attention to the following challenges you may face.

Cloud configuration complexity

While SaaS eliminates the need to manage physical infrastructure, configuring cloud services can be intricate. Cloud providers such as AWS, Google Cloud, and Azure offer a range of modules and configuration options, which can lead to misconfigurations without the right expertise.

Businesses with limited cloud experience may benefit from using PaaS solutions, which provide predefined templates and guidelines for easier deployment.

Architecture modifications

Migrating to SaaS requires aligning the application’s structure with cloud-native principles. A balance must be struck between making necessary modifications and avoiding excessive reengineering.

Rebuilding an application entirely for the cloud can be time-intensive and costly, while migrating without any architectural adjustments may limit the benefits of scalability and flexibility. A phased approach — migrating first and optimizing over time — can be a practical solution if you’re not ready to invest in SaaS product development.

Cost estimations

The long-term cost of cloud services can be difficult to estimate. Differently from traditional on-premise infrastructure with fixed costs, cloud expenses accumulate over time and vary based on usage. Businesses must consider not just initial SaaS migration expenses but also ongoing operational costs, such as data storage, compute power, and third-party integrations.

Cost optimization strategies, including selecting the right service tiers and monitoring usage, can help manage expenses effectively.

Managing security in the cloud

While cloud providers implement robust security measures, businesses remain responsible for securing their applications and data. SaaS cloud migration requires organizations to assess and strengthen their security posture, including data encryption, access controls, and compliance with industry policies.

Obtaining third-party security reports and certifications from cloud vendors is crucial to understanding the security responsibilities shared between the provider and the organization.

Migrating to SaaS best practices

As you’ve seen, moving to the cloud has its peculiarities. What is the best way to do it? Here are some of the practices you might want to induce into your SaaS migration strategy:

Pay attention to the Total Cost of Ownership

The flexibility of SaaS makes calculating a fitting TCO difficult. Research all the factors influencing the cost of running a SaaS product. The list may include computing capacity, traffic, number of users, storage volume, etc. Include these factors into your planning — and you’ll get a much clearer idea of your TCO from the beginning.

Inspect your Service Level Agreement carefully

An SLA determines the relationships between a service provider and a client. Both parties agree upon specific aspects of the service such as availability, quality, responsibilities. By signing this agreement, you get the guarantee that your SaaS software will function properly. In the worst-case scenario, the SLA can serve as a cornerstone of legal action.

Simplify vendor relationships

Managing multiple vendors can be complex. At this point, it’s important to consolidate your service providers to reduce costs and improve integration. Choosing a strategic set of vendors ensures smoother collaboration and more reliable support for your SaaS infrastructure.

Transitioning to the cloud will allow you to enter the market faster, deploy more easily, and develop new features for scaling quicker.

Implement SaaS governance

Establish clear policies for data security, compliance, and software usage. Governance frameworks help control expenses, mitigate risks, and ensure regulatory adherence. Setting guidelines early prevents operational inefficiencies and enhances system reliability.

Consider flexible pricing models

Different customers have varying needs and budgets. Implement tiered, usage-based, or subscription pricing to cater to diverse audiences. A well-structured pricing model maximizes revenue and customer retention while giving you the opportunity to scale.

Move to SaaS with Acropolium

Acropolium has been helping businesses leverage the power of SaaS for over 16 years, refining its approach through collaboration with nearly 80 clients. With deep industry expertise, our team understands the technical, financial, and operational challenges that come with SaaS migration and is committed to ensuring customer success.

Explore our case studies to see how our methodology translates into tangible results for businesses undergoing transformation through SaaS outsourcing:

SaaS warehouse management system development

A third-party logistics provider needed a cloud-based WMS to replace its outdated, manual-entry system, which lacked automation and integration capabilities.

Solution

Acropolium developed a scalable SaaS WMS to support the client’s digital transformation and enhance operational efficiency. The solution included:

• Automation of manual tasks to improve productivity and accuracy.
• Real-time tracking and visibility for seamless data exchange across multiple warehouses.
• Integration flexibility to incorporate third-party software and scale with business growth.
• Security and compliance features to protect sensitive freight data.

Results

• 31% faster order processing through precise inventory tracking.
• 17% reduction in operational costs due to automation.
• 29% increase in warehouse efficiency, enabling higher order volumes.

Cloud-based staff management system

A major German airport handling over 40 million passengers annually needed a more efficient staff operation system. To overcome this limitation, Acropolium migrated the system to the cloud, ensuring seamless performance and scalability.

Solution

Our SaaS developers engineered a cloud-based staff operation platform using JavaScript, jQuery, PHP, PostgreSQL, and AWS, ensuring scalability and reliability. Over a 12-month development period with a team of six specialists, we delivered:

• A real-time tracking system for staff location monitoring.
• An automated task management system with an operation diary and access control.
• An integrated flight information board for better coordination.
• A video surveillance module and a unified rescue service system to enhance security.

Results

• 40% reduction in staff administration costs.
• 90% decrease in response time delays.
• 100% improvement in security and data protection.

Final thoughts

The SaaS business model has some considerable advantages. With the right architecture, you can scale your business easily, which contributes to a swift growth. The subscription model can bring you predictable revenue, where your business doesn’t have to spend much effort maintaining costly infrastructure.

Specializing in cloud-based app development and more, Acropolium will be your guide to unleashing the true power of SaaS architecture. You can subscribe to your success with our subscription-based cooperation model, where your budget and goals are top priorities.

Contact us, and together we will make your business more agile and profitable!

Sources of information

• SaaS Growth Benchmark — SaaS Capital
• The Global SaaS Market Report — The Business Research Company