This document provides an overview of competitive advantage in software-as-a-service (SaaS) models. It discusses two main sources of competitive advantage for SaaS businesses: 1) achieving low costs through internet-enabled economies of scale by aggregating customers onto a single infrastructure, and 2) differentiation through internet-enabled processes like automating support and enabling network effects. It also covers topics like alignment of business models with technology and customer needs, and examines how data can both lower adoption costs and raise switching costs over time through application discovery. The document aims to help SaaS entrepreneurs understand the economic fundamentals needed to create successful long-term SaaS businesses.