Platform as a Service business model – How Does It Work?

In recent times, most platform-based businesses have dominated the market and have been highly successful. These platforms have garnered a great reputation and success. For companies that operate business models based on platforms, their platform is the primary source of revenues. Another business model associated with platforms is the Platform as a Service (PaaS) business model.

What is the Platform as a Service (PaaS) business model?

The Platform as a Service (PaaS) business model is closer to the Software as a Service (SaaS) business model. However, as compared to it, the PaaS business model is fresher. PaaS companies offer enterprise-ready infrastructure, systems and tools to high-level clients. Most experts believe it as the next step to SaaS-based business models.

PaaS involves providing a readily-deployable set of cloud computing services. These services are scalable to meet the needs of the user. Similarly, the prices that companies charge for these services depend on the scale that each user requires. These services have garnered positive attention in recent years, and more businesses are using it.

Since the business model is fresher, there aren’t many companies that use it. There are only a few names in the industry that dominate the market. However, more companies are entering the market at a steady pace. Most tech-giant companies have already entered or are working towards entering the market for PaaS services. These companies already have the resources or the financial prowess to operate a PaaS business model.

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How does the Platform as a Services (PaaS) business model work?

The Platform as a Service (PaaS) business model works by allowing customers to use an online platform. It is one of the many business models made possible through the internet. It comes directly as a result of the Software as a Service (SaaS) business model. However, the services and scale of this business model are significantly larger than the SaaS model.

The PaaS business model allows customers to use an online platform often hosted on a cloud network. The end-user does not receive the ownership of the software. Instead, they can use it as a service and pay accordingly. Therefore, companies and businesses of various sizes can benefit from using the platform. These platforms have a size-based cost, thus, allowing customers to pay only for the services it uses.

The Platform as a Service business model also brings various software solutions under one roof. Therefore, customers can sign up to a single service and continue to use it as an integrated solution. It allows them to manage their software and build internal integration among them effortlessly. Therefore, the value created for most customers is also significant through these platforms.

Through PaaS services, customers can obtain various IT solutions. These may include security, server software or backup services. Due to the online nature of these services, customers can usually receive these service throughout various locations.

What are the advantages and disadvantages of the Platform as a Service (PaaS) business model?

The Platform as a Service business model, although new, has solved various needs for customers. However, there are still some challenges that companies face while using it. Some of the top advantages and disadvantages of using the PaaS business model are as follows.

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Advantages

The Platform as a Service (PaaS) business model allows for substantial cost savings for companies. Most of the solutions provided through the business model come through the cloud. The costs related to hosting these solutions are relatively lower. Usually, the benefits that come from these services significantly outweigh the related expenses.

PaaS companies also offer services that cater to a wide range of customers. These platforms are web-based, which means customers from several locations can use them at the same time. Similarly, the services don’t need a specific operating system, making it available to all users.

This business model is also highly scalable. Due to the low-costs and software-based services, companies can scale their operations accordingly. The more customers companies have, the more they can scale their operations.

Disadvantages

The PaaS business model limits users and creates a dependency on the provider. Customers may find themselves linked to a specific seller, without the option to change it. Similarly, there are limited suppliers in the market right now, making it challenging for customers to receive better prices.

PaaS services also expose customers to security problems. Putting the structure on a cloud can result in security breaches from hackers or unauthorized parties. For clients that handle a significant amount of sensitive user data, the services may introduce an unwanted threat.

Examples

Microsoft Azure and Amazon Web Services are two of the biggest names in the PaaS services industry. These companies offer various online cloud-based solutions to customers. Due to their early adoption, they have become the most prominent names using this business model. Other tech companies such as Google, IBM and Oracle also offer similar services.

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Conclusion

Based on the Software as a Service (SaaS) business model, the Platform as a Service (PaaS) business model has also become relevant. The scale of the PaaS model is significantly larger. Through this business model, companies can offer dedicated high-scale services to customers. These are cloud-based solutions accessible to a large number of customers.

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