What Is SaaS: Business Model, Metrics and the Kazakhstan Market

SaaS (Software as a Service) is a model in which software runs on the vendor’s servers, and the customer uses it through a browser or an app and pays a recurring subscription. Installation, updates, backups and infrastructure security are the vendor’s responsibility. Cloud CRMs, task trackers, accounting services and video conferencing tools are all SaaS.

This article is for two kinds of readers. The first are executives who choose services for their company and want to understand what they are paying for. The second are founders and product managers launching their own SaaS product in Kazakhstan. We will cover how SaaS differs from PaaS, IaaS and boxed software, how subscription economics work, which metrics to track, what changes in the Kazakhstan market and where to start a launch.

How SaaS works

Classic software is sold as a license: a company buys a copy, installs it on its own computers or servers and maintains it from then on. With SaaS, the customer does not get a copy. They get access to a running service and pay for as long as they use it.

Technically, most SaaS products are built as multi-tenant systems: one instance of the application serves many customers, and each customer’s data is isolated. So the vendor ships an update once, and everyone gets it immediately. The customer does not need to plan new version installs.

For the customer, this means three things:

• Fast start. Sign-up takes minutes, with no server or administrator required.
• Predictable costs. Instead of a large license purchase, there is a recurring payment that grows with the team.
• Vendor dependency. The vendor controls the data, availability and product roadmap.

Many products today come in two versions. For example, Jira, Plane and Twenty CRM are available as cloud services and (in the case of Plane and Twenty) as a self-hosted version that a company installs on its own server. The cloud version is SaaS; the self-hosted one is closer to on-premise.

Types of SaaS products

SaaS products differ along two axes. The first is who buys. B2B SaaS is sold to companies: CRMs, task trackers, accounting systems, HR and support tools. Several people make the decision, the deal takes longer, but the customer pays more and churns less. B2C SaaS is sold to individuals: tools for learning, health, creative work and file storage. The decision is fast and emotional, and the main work is retention in the first weeks.

The second axis is the breadth of the problem. Horizontal SaaS solves one problem for companies in any industry, such as a task tracker or a video conferencing service. Vertical SaaS covers the processes of a single industry in depth: clinics, schools, logistics, restaurants. In a small market, a vertical product is easier to sell through industry communities and referrals, but the number of potential customers in the niche is limited, and you need to estimate it in advance.

SaaS, PaaS, IaaS and on-premise: what is the difference

Cloud models differ in which layer the vendor takes on. The definitions are set out, for example, in NIST SP 800-145, which is often used as an industry reference.

Model	What the vendor provides	What the customer manages	Who it suits	Example categories
IaaS (Infrastructure as a Service)	Virtual servers, networks, storage	Operating system, applications, data	IT teams building their own system	Cloud servers and storage
PaaS (Platform as a Service)	An environment to run applications, databases	Application code and data	Developers who do not want to administer servers	Application deployment platforms
SaaS (Software as a Service)	The entire ready-made application	Settings, users, their own data	Business users	CRMs, task trackers, accounting
On-premise (own server)	A license or open-source code	Everything: servers, updates, security	Companies with data control requirements	Self-hosted product versions

The higher in the table, the more control and the more work for the customer. SaaS is the simplest option for the user and the one that demands the most trust in the vendor.

How SaaS makes money: subscriptions and plans

A SaaS company’s revenue is recurring payments. The customer pays monthly or a year in advance, often with a discount for annual billing. The one-time sale barely matters: what matters is how much the customer pays and how long they stay.

The main pricing models:

Model	What the customer pays for	Upside	Risk
Per user	Number of seats on the team	Easy to understand and calculate	The customer saves on seats and shares one login
Tiered plans	A set of features in a package	A clear growth path for the customer	Too many plans cause confusion
Usage-based	Volume of operations, documents, requests	The price grows with the value	The bill is hard to predict
Freemium	Nothing, as long as the free version is enough	Low barrier to entry	Users stay on the free plan
Free trial	Nothing during the trial period	The customer sees value before paying	Without help in the first days, the trial is wasted

In practice, models are combined: tiered plans with per-user pricing and a free start for small teams. The specific numbers depend on the market and the customer’s alternatives. We covered how to set prices in tenge when part of your costs is in dollars in our article on SaaS pricing in tenge.

SaaS metrics: MRR, ARR, churn, LTV, CAC

A subscription business cannot be judged by monthly revenue alone. A company can sell actively and still lose money if customers leave before they pay back their acquisition cost. That is why SaaS tracks several related metrics.

Metric	What it shows	How it is calculated
MRR (monthly recurring revenue)	Recurring revenue for the month	Sum of monthly payments from all active subscriptions; annual ones are divided by 12
ARR (annual recurring revenue)	Recurring revenue on an annual basis	MRR multiplied by 12
Churn	How many customers or how much revenue is lost	Customers lost in a period divided by the base at the start of the period
LTV (lifetime value)	How much a customer brings in over their lifetime	Average payment adjusted for margin, multiplied by average customer lifetime
CAC (customer acquisition cost)	How much it costs to acquire a customer	Marketing and sales spend for a period divided by new customers
CAC payback period	How many months it takes a customer to pay back acquisition	CAC divided by monthly margin per customer

How to read these metrics together:

• LTV vs. CAC. If acquiring a customer costs more than they bring in over their lifetime, growth only increases losses.
• Churn matters more than sales. With high churn, new customers merely replace the ones who left. First figure out why customers leave, then scale acquisition.
• Customer churn and revenue churn are different things. You can lose small customers and still grow as large ones move to higher plans.
• CAC by channel. An average acquisition cost hides the fact that one channel pays off while another eats the budget.

For B2B products, one more metric is useful: net revenue retention (NRR). It shows how much revenue from last year’s customer cohort remains a year later, accounting for churn, downgrades and upgrades. If net revenue retention is above one hundred percent, existing customers grow faster than they leave, and the company increases revenue even without new sales.

Note: the formulas are simple; the hard part is the data. For metrics to be honest, your CRM and billing need clean customer statuses and subscription dates.

Pros and cons of SaaS for the customer

For a company choosing a service, SaaS is a trade-off between speed and control.

Pros:

• A fast start with no servers or administrators.
• Updates and new features arrive automatically.
• Costs grow gradually along with the team.
• Access from anywhere and from any device.
• The vendor handles infrastructure security, and large vendors hold certifications.

Cons:

• Data is stored with the vendor, often outside the country.
• The vendor changes prices and terms, and migrating to another system takes time.
• The features you need may not match the product roadmap.
• The service is unavailable without internet.
• Subscription costs over several years may exceed the cost of your own solution.

The main practical risk is dependency. Before choosing a service, check whether you can export data in an open format and whether the product has an API. That is your insurance in case you switch vendors.

SaaS business in Kazakhstan: what to consider

Kazakhstan’s B2B software market is small, and SaaS sells differently here than in large markets. The “sign up and buy on your own” model works for simple tools, but corporate customers more often want to talk to a person, see a demo and get a contract.

What matters for a SaaS product:

• Payment in tenge. Companies expect a contract, an invoice to their LLP, a completion certificate and VAT. Individuals and small teams are used to paying via Kaspi and bank cards. A dollar price without documents cuts off part of your corporate customers.
• The business owner makes the decision. In small and mid-sized companies, the owner signs, and they care about clear benefits, speed of implementation and trust in the team.
• Bilingualism. An interface, website and support in Russian are the minimum. A Kazakh version builds trust and is required in some segments.
• WhatsApp. Many customers ask questions and agree on terms in the messenger. Support and sales need to be where the customer is comfortable.
• Partners. Integrators and consultants who already work with your segment can sell and implement the product.

A separate note on B2B sales. The market is small, so a narrow segment may contain only a few suitable companies, and reputation spreads quickly. The first deals usually come from direct conversations, referrals and pilots with clear success criteria. Self-serve card payment works well for small teams, but a large customer needs a manager, a demo and ready answers to questions about security and data storage. That is why many Kazakhstan SaaS products combine both models: an easy self-serve start for small teams and an assisted sale for corporate customers.

Kazakhstan context. Some customers, especially corporate ones, ask for their data to be stored in Kazakhstan. For SaaS, this is an architecture question: where to deploy the service or part of it, how to separate data and what to put in the contract. For a local product, data storage in Kazakhstan becomes a sales argument against foreign services that store data abroad and accept payment by card in dollars.

We covered the channels that actually bring customers to a SaaS product in Kazakhstan, and the order in which to add them, in our article on GTM for SaaS in Kazakhstan.

How to launch a SaaS: the steps

Launching SaaS is not only about development. Most products stumble not on code but on demand, pricing and sales. A sequence that saves time and money:

1. Validate demand before development. Interviews, search analysis, a landing page, a prototype, a manual service or presales. How to do this in two weeks is described in our article on validating demand for an IT product.
2. Pick one segment and one problem. SaaS “for everyone” does not sell. The first version solves one problem for one type of customer.
3. Build an MVP. Only the core scenario, with a minimum of roles and integrations. We covered what makes up the budget and what can be cut in our article on MVP costs in Kazakhstan.
4. Sort out payments and data. A legal entity, a contract, accepting payments in tenge, hosting that takes into account where customers want their data stored.
5. Run pilots with the first customers. A limited timeframe, a pre-agreed success criterion and terms for converting to a paid subscription.
6. Set up metrics from the first customer. CRM, subscription statuses, reasons for rejection and churn. Without them, you cannot calculate churn or payback.
7. Define the sales model and channels. Who owns the deal, where the customer finds the product, which channels to test first.
8. Scale what has been proven. Increase the acquisition budget once it is clear that customers stay and pay back.

How we do it

Gotomarket works with IT products: SaaS, web services, mobile apps and IT studios. For SaaS, we start with a free basic diagnostic and map the customer journey from sign-up or inquiry to paying the first invoice and renewing. We look at where the business owner makes the decision and where the user does, and which model works better: self-serve purchase, a demo with a manager or a pilot.

Then we build a GTM model: the priority segment, the offer, the pricing logic, channels and metrics, including churn and acquisition cost for each channel. We test the model on real deals following a 30-, 60- and 90-day plan. Learn more about the format on the GTM for IT products page.

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Sources. NIST SP 800-145: The NIST Definition of Cloud Computing; Plane; Twenty CRM.

Terms in plain words

SaaS (Software as a Service)

Ready-made software that runs on the vendor's servers. The customer uses it in a browser and pays a subscription, while the vendor handles updates and maintenance.

On-premise

Software installed on a company's own servers. It gives full control over data but requires your own infrastructure and specialists to maintain it.

MRR and ARR

Recurring subscription revenue for a month (MRR) and annualized (ARR). The main measure of a SaaS business's size, excluding one-time payments.

Churn

The share of customers or revenue lost over a period. High churn means new sales go toward replacing lost customers rather than toward growth.

LTV (customer lifetime value)

How much money a customer brings in over the entire subscription, accounting for margin. It shows how much you can spend to acquire one customer.

CAC (customer acquisition cost)

Marketing and sales spend divided by the number of new paying customers in the same period. It is compared with LTV to see whether the economics work.

Freemium

A model where the basic version of a product is free and advanced features are paid. It lowers the barrier to entry but needs a clear reason to upgrade to a paid plan.

Multi-tenant

An architecture where one instance of the application serves many customers while their data stays separated. This is what lets SaaS update for everyone at once.