SaaS, which stands for software as a service, is a software deployment model in which a third-party provider builds applications on cloud infrastructure and makes them available to customers via the internet.
This means software can be accessed from any device with an internet connection and web browser, rather than just on the local machine where it’s installed, as with traditional software. In simple terms, SaaS is a software model that delivers applications to end-users through an internet browser.
SaaS vendors host services and applications for customers to access on-demand. With a SaaS offering, you do not have to think about how the service is maintained or how the underlying infrastructure is managed; you only need to think about how you will use the software.
Another typical aspect of a SaaS model is pricing that’s paid on a subscription or pay-as-you-use model instead of purchasing all functionality at once in one big chunk.
A common example of a SaaS application is a third-party web-based email application, where you can send and receive emails without having to manage feature additions to the email product or maintain the servers and operating systems that the email program is running on.
Let’s venture more into what SaaS is all about.
The SaaS Business Model: How A SaaS Company Works
A SaaS company maintains servers, databases, and software that allow the application to be accessed over the internet, most likely by web browsers. Users can access the software from almost any device.
SaaS customers usually pay a subscription fee, often monthly, to access the application. Some subscriptions are based upon how much data needs to be stored, the number of users who will access the application, or the level of technical support desired.
What Are Some Commonly Used SaaS Applications?
There are several commonly used types of SaaS applications, including:
- Customer Relationship Management (CRM)
- Enterprise Resource Planning (ERP)
- Email marketing software
- Accounting software
- Human resources software
- Security software
- Collaboration tools
- Document editing services
- Communication software
- Contact Center software
Examples Of SaaS Products
- Google Workspace
- Netflix
- Trello
- Salesforce
- Hubspot
- Asana
- Zendesk
- Quickbooks
- Slack
Benefits Of SaaS
While the history of SaaS was undoubtedly shaped by the pandemic, the industry is sure to continue to increase in popularity over the coming years as more companies choose to streamline their operations.
One of the important benefits of SaaS is that it gives businesses access to powerful software that would previously have been too expensive or energy-intensive to run in on-premises environments.
The SaaS vendor manages the hardware, the software tools, and the application in its own data center or cloud environment. You can access the software directly from the browser or mobile application. The subscription-based model of SaaS also means you can scale your use of software up or down as your business needs it.
Other Benefits of SaaS include the following:
1. Flexible Payments
Rather than purchasing software to install or additional hardware to support it, customers subscribe to a SaaS offering. Transitioning costs to recurring operating expense allows many businesses to exercise better and more predictable budgeting. Users can also terminate SaaS offerings at any time to stop those recurring costs.
2. Scalable Usage
Cloud services like SaaS offer high vertical scalability, which gives customers the option to access more or fewer services or features on demand.
3. Automatic Updates
Rather than purchasing new software, customers can rely on a SaaS provider to automatically perform updates and patch management. This further reduces the burden on in-house IT staff.
4. Accessibility And Persistence
Since SaaS vendors deliver applications over the internet, users can access them from any internet-enabled device and location.
5. Customization
SaaS applications are often customizable and can be integrated with other business applications, especially across applications from a common software provider.
6. Cloud Accessibility
You can access your SaaS from any device with an internet connection. Under more traditional software models, you could only access business applications from the workstations on which they were installed. This accessibility is increasingly in-demand because of hybrid and home-based working models.
7. Scalability
If a SaaS customer needs to expand capacity or add users, it doesn’t need to purchase new hardware or install new software. A SaaS company can increase capacity quickly with cloud technology and cloud storage, but it most likely will come at an increased subscription fee. In fact, 20% of companies have seen an average improvement in time to market, leaving their competitors using on-premise solutions in the dust.
8. High Security Levels
According to a study by LogicMonitor, 66% of IT professionals say security is their greatest concern in adopting an enterprise cloud computing strategy. Since the SaaS vendor is responsible for the maintenance of data that a customer entrusts them with, the security issue becomes highly serious, and customer data becomes super protected.
The SaaS vendor’s livelihood depends on data security, so it is only natural that safeguarding the app is paramount. That is why SaaS providers have their servers scattered in multiple geographical locations and have automatic backups, ensuring a higher level of security than your own enterprise itself would be able to provide.
The cloud is secure and your data is safe. In fact, according to Gartner, 95% of cloud security failures are due to human error.
Challenges of SaaS
Not surprisingly, the number one advantage to using SaaS is also the number one challenge—needing an internet connection. If you have a strong, reliable connection, then it’s a pro. Obviously, you already know what the con is.
With the increasingly wide availability of broadband and high-speed networks, like 5G, this is becoming less of an issue. But there are a few other scenarios to consider before deciding to go with a SaaS solution.
Other challenges may include the following:
- Loss of Control: The vendor manages everything, making you dependent upon the vendor’s capabilities
- Limited Customization: Most SaaS applications offer little in the way of customization from the vendor
- Slower Speed: SaaS solutions can have more latency than client/server apps
- Security Risks: While the SaaS provider secures the application itself, strict measures should be taken with sensitive data
How SaaS Business Operates
1. Subscription-Based Revenue Model
The subscription revenue model generates revenue by charging customers a recurring fee that is processed at regular intervals. In Subscription-Revenue, long-term relationships are built with customers who will pay regularly for access to the product or service.
In subscription revenue, growth compounds over time. Instead of remaining flat month to month, revenue accumulates with each new subscriber. As long as companies acquire new subscribers faster than they lose them, revenue grows exponentially.
Customers become more valuable the longer they use your product or service. Companies that focus on keeping their customers will save on acquisition costs since retention is cheaper than acquisition.
2. Subscription-based access
In the SaaS model, users or organizations subscribe to the software, typically on a monthly or annual basis. Instead of purchasing a perpetual software license, they pay a recurring fee to use the application.
Conclusion
There are multiple benefits of SaaS. Businesses around the globe are moving to the cloud, where they can easily rent services and enjoy a worry-free life.
When it comes to SaaS adoption, the key benefits are:
- The absence of IT-related troubles, meaning that the user does not need to buy, install or maintain any hardware;
- No large upfront license fees, especially additional payments for maintenance and upgrades;
- Easy customization as SaaS offers a flexible and scalable IT solution that is compatible with a range of other business tools.