What Is Software as a Service (SaaS)?

Software as a service (SaaS) provides subscription-based access to software programs via the internet, often within a web browser. The SaaS industry has experienced rapid growth over the past few years and includes everything from email and productivity software to customer relationship management (CRM) tools.?

Once upon a time, businesses needed to either visit a store or place an order with a company to buy physical copies of computer software. Each computer or user required an individual license, and the time it took to distribute the software could be hours or days, depending on the number of installations needed.

Thankfully, those days are long past. Companies no longer need physical access to computer software. Instead of installing and maintaining software through physical releases, companies can use web applications and internet-based services to replace them. This model, known as software as a service (SaaS), simplifies many aspects of managing the tools companies use to do business.

What Does SaaS Stand For?

SaaS stands for software as a service. SaaS describes a way of delivering applications over the Internet.?

SaaS providers manage and monitor application access for individuals and organizations. This includes important aspects of the software such as security, performance and availability.

How Does Software as a Service Work?

Most SaaS products work as a form of cloud computing. Most users access SaaS platforms via an internet browser, such as Google Chrome, Mozilla Firefox, Microsoft Edge or Apple’s Safari.?

Users (organizations or individuals) typically pay for access to the SaaS as they go. Instead of charging upfront for a permanent installation, SaaS companies charge subscription fees. In exchange, the public cloud provider provides automatic updates and handles deployment.

Because most SaaS platforms rely on fast internet connection speeds, the quality of the physical computer used to access them may not matter as much as network hardware. Many SaaS vendors partner with public cloud service providers like Amazon Web Services (AWS), Azure or IBM Cloud to manage their cloud environments.

Key Features of SaaS

According to Salesforce — leaders in the customer relationship management (CRM) space — users might consider a bank when thinking about SaaS platforms. Banks protect their customers’ privacy while providing reliable service at scale. Bank customers use the same systems and technology but do not worry about others accessing their personal information.?

The key characteristics of SaaS products include the following:

• Multi-tenant architecture: All users and applications share infrastructure and a centrally maintained code base. Vendors can then innovate and save development time because all users share the most recent iteration of code.
• Customization options: Each user can customize the application to fit their unique needs without impact to the shared infrastructure. Each customer’s customizations are unique to them and preserved, even after updates or upgrades. This allows SaaS providers to upgrade more often without impacting cost or elevating risk.?
• Improved access: Any networked device has access to the SaaS, which allows users to manage access privileges and ensure all team members have proper access and information availability.
• Consumer web framework: Most SaaS applications follow a set of conventional design choices that take their cues from websites like Amazon.com. That means many users can pick up the software much easier than older distribution models.

Benefits of SaaS

SaaS offers plenty of benefits to customers who want a robust software platform. Users who choose a SaaS solution over packaged software options reap advantages, including the following:

Lower Upfront Costs

SaaS products eliminate the need for expensive hardware or middleware. Because delivery occurs via the web, network speeds are the primary performance factor. Most SaaS platforms offer a “pay-as-you-go” model with significant discounts for long-term billing. That helps businesses save money by not wasting money on outdated software.

Simplified Data Storage

SaaS platforms routinely save data in the cloud, which keeps everything shared between users in an organization up to date. This also translates to ease of use across devices. Users can jump between machines without losing progress on a project or document. In addition, regular data backup and revisioning allow users to revert changes without needing physical file storage.

Scalability and Accessibility

SaaS products scale quickly. Users can adapt their requirements to the number of people in an organization or the volume of data it needs to process. Many SaaS companies allow users to customize plans based on their business needs, including single-user, small-business or enterprise solutions.

New Upgrades and Releases

SaaS providers can offer timely improvements and a regular release cycle. Many of these companies solicit feedback from users to inform future releases. This frees up companies’ internal information technology (IT) departments to focus on other needs.

Increased Security

SaaS providers invest heavily in security technology because they must. They handle hundreds of companies’ sensitive data and information. Protecting that information is paramount.?

Challenges of SaaS

SaaS platforms are powerful and accessible tools but are not without risks. Some common challenges that SaaS customers can encounter include the following issues.

Increased Security Risk

While SaaS providers invest in security protocols, the ease of access that SaaS provides users can often lead to security risks. SaaS products typically require a username and password, with additional two-factor authentication (2FA) recommended. Users who do not follow best practices with information security could risk data loss or exposure.

Slower Speed

Because SaaS platforms rely exclusively on cloud distribution and internet access, slow connections can impact performance. Users of SaaS products may experience more latency — the time it takes for one data packet to travel from one point to another — than they would if the program was on their device.

Integration Issues

Even though SaaS products offer simple onboarding and ease of maintenance, sometimes integration issues occur. Some SaaS applications can work together, but a lack of interoperability can become a significant challenge. Companies that use multiple web-based apps may need to find ways to have them work together or use workarounds like Zapier.

Sometimes companies opt to overcome these challenges by investing in all-in-one solutions that handle multiple jobs simultaneously.?

Lack of Control

Sometimes not having control over product releases is less beneficial than it may seem. Users of SaaS products are often at the mercy of the developers with features. Because companies do not handle the distribution and installation of SaaS products, those users or organizations may lose functionality if the software provider discontinues support. This loss of control may cause issues for organizations that rely on SaaS products.

SaaS vs. PaaS

Within the “as-a-service” model, SaaS is not the only type of product users have at their disposal. Platform as a service (PaaS) describes on-demand access to a complete cloud-hosted platform. Its primary purpose is application development and maintenance.

With PaaS products, a cloud provider hosts, manages and maintains all hardware and software on the platform. These include:

• Servers
• Operating systems
• Storage
• Networking
• Databases
• Frameworks
• Development tools
• Other related services

The primary difference between SaaS and PaaS platforms is that PaaS offers organizations more control over product development. Enterprise companies use it to streamline workflows on a single project staffed by multiple development teams.

What Is a SaaS Company?

SaaS companies are organizations that specialize in using software to offer a service. They develop, host and maintain their products. One benefit of the SaaS business model is full access to a global market. SaaS companies may start small but can quickly scale without significant increases in delivery costs.?

Examples of SaaS

SaaS platforms are everywhere. Most software companies offer their products as a service. Some of the most prominent players in the SaaS space include:

• Microsoft 365: Productivity software including Excel, Word, Outlook, Teams and PowerPoint (Microsoft owns LinkedIn)
• Google Workspace: Productivity software including Mail, Calendar, Docs, Sheets, Slides
• Salesforce: CRM
• HubSpot: CRM, inbound marketing, email marketing tools
• Slack: Enterprise messaging software

The Future of SaaS

Over the past few years, the explosive growth of SaaS as a distribution model has led to a practical abandonment of old models. SaaS allows companies to scale quickly, receive continuous updates and enjoy a secure environment for their work. In short: SaaS is software’s future, and the future is today.

SaaS products support a whole host of job opportunities, too. From sales and marketing to development, new SaaS platforms require significant work to leave the ground, which means excellent professional growth opportunities.

Top Takeaways

• SaaS, or software as a service, is a distribution model for software that takes place over cloud networks and web browsers.
• SaaS products allow companies to scale their needs quickly and reduce the time and overhead needed to install them.
• SaaS products have some drawbacks, including a lack of organizational control over features.
• Most modern software companies sell their services via the SaaS model.

(Reporting by NPD)