What is Embedded SaaS and why it’s incredible?

TLDR: Embedded SaaS is a Software as a Service (SaaS) product built to be an integral part of other SaaS products, and not stand alone. It will allow SaaS companies to increase revenue, reduce churn, grow faster and provide a better solution to their users.

Starting from the beginning — Embedded SaaS 101

To understand Embedded SaaS you will need basic knowledge of SaaS and Vertical SaaS products.

Despite the recent stock market turmoil, SaaS products are the future. SaaS aligns incentives and allows for ongoing innovation. Specifically, Vertical SaaS will provide tremendous value and rule SMB software. Embedded SaaS will rapidly accelerate and enable this.

So what is Embedded SaaS?

Embedded SaaS is a Software as a Service (SaaS) product built to be an integral part of (Embeeded In) other SaaS products, and not stand alone. It’s build to be Embedded in other SaaS products.

For example: CheckHQ is an Embedded SaaS Payroll product that allows any other SaaS product to offer payroll. Squire — a one stop shop solution for running a barbershop, now offers payroll to its clients by Embedding CheckHQ. Squire’s clients only see that Squire has new payroll functionality and are happy to get more value from their product. At the same time Squire did not need to invest the massive costs required to build and maintain its an end to end payroll solution. Win-Win. New world of Embedded SaaS.

What’s the difference between Embedded SaaS and API integration?

API-based integration has existed for quite a while and has done amazing things for software delivery, Embedded SaaS takes this to the next level. Here are the main differences:

• Single System: Typically when two products are integrated via APIs the user still needs to log in to both systems and perform actions in one system or the other. The integration allows the products to communicate with one another, but they are still separate in nature. With Embedded SaaS the user only needs to use one application that contains the other.
• No “double” configuration: Embedded SaaS was built from day one to be delivered to the client within another product therefore will be tailor-made for that. For example, user management and configuration will not need to be “double” configured as is the case with simpler API integrations. This might seem simple, but in practice causes tremendous issues, requiring technical support and reducing much of the value from the integration.
• Embedded UI Components: In addition to APIs, Embedded SaaS provides UI Components making it much faster for host applications to Embed and launch. A UI component can be a window, visual element, or a set of screens that are presented to the user when they navigate to the relevant area in the host application.

The world of embedded SaaS is growing quickly, here are a few additional examples:

• Embedded Websites/Front ends: Duda.co
• Embedded Future of Work: This is a large category, but we see it growing daily, a simple example is Embedding Airtable Tables inside SaaS applications to get all of the Airtable functionality, look and feel etc. immediately.
• Embedded Fintech (Payments, Lending, Banking, Card Issuing, Banking, etc):

Embedded SaaS is amazing for Vertical SaaS

Embedded SaaS (and of course Embedded Fintech), will be incredible for Vertical SaaS and will massively increase the TAM allowing new Niche Vertical SaaS to be established. It will cause:

1. Increased Revenue + Higher Stickness = Higher LTV: By layering in Embedded SaaS products, Vertical SaaS players will increase customer lifetime value (LTV) significantly. Revenue from these Embedded SaaS products improves per customer monetization while reducing churn.
2. Higher LTV means the ability to increase spending on CAC: Once the LTV is higher you can spend more to acquire and implement customers. This means that Vertical SaaS players will now be able to invest further in customer acquisition, client training, and awareness.
3. New “better together” capabilities: Since a Vertical SaaS typically deals with the industries operational needs it will have tremendous insights as to how to help the business exactly when it needs it. If for example the Vertical SaaS sees a large order comes in which will require a large expenditure to finance it could offer a loan, that loan is underwritten automatically by the order, resulting in reduced rates and risk of default. Taking it a step further we may underwrite the loan with the order and connect the cashflows for automatic repayment.
4. All of these will lead to rapid growth of Vertical SaaS solutions: Massive value generated from a tailored one stop shop + increased investment in customer acquisition means that vast amounts of businesses will move to a Vertical SaaS solutions

Summary

Embedded SaaS is a revolution in software delivery and will create a Win-Win-Win for Embedded SaaS, Vertical SaaS and the Businesses who adopt these solutions.