What is SaaS?

Software-as-a-Service (SaaS) is a licensing and distribution model used to deliver software applications over the Internet i.e. as a service.

Users typically access applications on a subscription basis, making SaaS ideal for business software such as email, instant messaging and customer relationship management (CRM).

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What is the origin of SaaS?

The idea of centralising the hosting of business applications has been around at least since the 1960s. In the 1990s, it evolved with the rise of the internet into Application Service Providers (ASPs), with third-party applications managed and hosted by an ASP vendor, but some software still required to be installed on users’ computers.

SaaS is an evolution of the ASP model, with vendors and suppliers managing their own software and no installation required because software is distributed instantaneously over the internet -- via the cloud. Cloud computing allows businesses to consume computing resources over the internet as a utility – in the same way they do electricity or water.

The SaaS-based cloud model now offers businesses significant efficiencies and cost savings, but a number of developments were necessary before SaaS could become a viable option:

Increased access to high-speed internet connections. This has made standard internet connectivity speeds adequate for using SaaS applications. More widespread broadband connectivity has also made it easier for users to access services in different locations.
Standardisation of digital technologies. Common protocols make it easier to share, integrate and scale cloud-based programs and services, as well as provide better user experiences in a multi-device environment.
Growing popularity and usage of web-like interfaces. More and more users are happy to work in this way thanks to the familiarity, usability and simplicity of web-like environments.
Rapid and widespread adoption of mobile devices.
Growth of remote working. People want to be able to connect from anywhere, not just the office. SaaS solutions work well to meet this need.

Services in the cloud

Software-as-a-Service is now just one of several cloud computing solutions for business IT issues. Other ‘as-a-Service’ options include:

Infrastructure as a Service (IaaS) where the provider hosts hardware, software, storage and other infrastructure components
Platform as a Service (PaaS) which allows customers to develop, run, and manage applications without having to have the infrastructure associated with developing and launching an app
Managed Software-as-a-Service (MSaaS) where IT professionals support and upkeep their applications
Desktop-as-a-Service (DaaS) where virtual desktop infrastructure is outsourced to a third-party provider
Database-as-a-Service (DBaaS) which allows users to access a database rather than download or host it themselves
Security-as-a-Service (SECaaS) is where a service provider allows access to their security services as a subscription
Everything as a service (XaaS) which is essentially all the ‘as-a-Service’ tools neatly packaged together

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The benefits of SaaS

Businesses cite many reasons for turning to cloud-based SaaS solutions, including increased efficiency and cost-effectiveness, along with scalability, remote access to services, and automatic updates. Here’s a detailed look at the benefits of SaaS:

Low setup and infrastructure costs. No capital expenditure to be depreciated on the balance sheet over time.
Accessible from anywhere. Services can be accessed from any other connected device, which facilitates home working, reduces productivity loss from remote employees, and saves on office space.
Rapid implementation. Set-up is quick and easy compared with in-house IT.
Scalability. Access is typically a per-seat, per-month arrangement, so a business only takes on as much as it needs. Adding more seats and extending the applications as requirements expand means convenience and scalability too.
Industry-leading service level agreements (SLAS) for uptime and performance
Automatic, frequent updates. All updates, weekly or monthly, are taken care of by the vendor. No need to maintain or support legacy versions of the software.
Timely improvements are provided automatically by the vendor, informed by user feedback. This frees up the IT department for more business-critical tasks.
Security at the highest level required by any customer -- again, provided by the vendor.

According to a report in the Harvard Business Review, the head of marketing at one major credit card company was said to be “like a kid in a candy store when told it would take only five weeks to get a cloud application running”. Why? “IT had originally quoted 18 months.”

What does SaaS look like?

With SaaS that there is no dedicated hardware or software to buy, install, maintain or update – so as a customer there’s little to see until normal day-to-day work begins. Here are some common features of SaaS services.

Multi-tenancy cloud architecture, so that all users and applications share a common infrastructure that is centrally maintained.
Simple access via any connected device, making it easier to access data and information and keep data in sync.
Familiar web-based interfaces, building on the consumer web that users already know. (This can help boost adoption and take-up rates.)
Collaborative and social functions, which allow people in different teams or locations to collaborate effectively.

SaaS vs on-premise packaged software

Before things like SaaS, businesses relied on packaged software installed on in-house hardware – from multi-application systems covering spreadsheets, databases and email, to specialist packages for particular tasks like project management or business intelligence.

So how do they compare?

On-premise packaged software

SaaS

Set-up and maintenance

Software needs to be evaluated, bought, installed, kept secure, maintained and regularly upgraded on in-house systems by the internal IT department.

Simply sign-up for a system that is ready to use, while the SaaS provider takes responsibility for all software, hosting, maintenance and security issues.

Cost

Upfront costs for software and licences and potentially the servers for the software to sit on too.

SaaS uses a subscription model based on users, meaning minimal upfront costs.

Role of IT department

Using packaged software can place a burden on the IT team, which could turn into a bottleneck for projects.

IT can concentrate on strategic projects that help drive the business forward rather than lengthy roll-outs or maintenance issues.

Integration of systems

A business could end up needing to support a wide variety of systems side by side, but find it tricky to integrate them as they were coded and built differently.

The as-a-service model is designed to seamlessly integrate additional services into a ‘stack’ as needs require.

Scalability and affordability

The costs of software and hardware might not be affordable, especially for small businesses. It could also be difficult to scale up quickly in response to growth or change.

Additional users and/or applications can be simply and quickly added in line with a growing business’ requirements. Payment is based on actual need/use, making it a very cost-effective solution for all sizes of business.

The SaaS business model

The SaaS business model shifts responsibility for the software application from business to SaaS vendor. As more as-a-Service offerings are adopted, more core IT systems are managed by the vendor, potentially reducing the risk for the business and also freeing up resource for in-house IT to focus on innovation and new technologies.

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SaaS for businesses of all sizes

The SaaS model lends itself to adoption by businesses of all sizes, from startups to global corporates.

SaaS for Small Businesses

Back in the days of traditional client-server software packages, technology trends favoured large enterprises. That’s because they entailed a big, expensive cash commitment upfront, backed by a staff of in-house IT professionals for implementation, maintenance, and security. Very few SMBs had resources for those kinds of purchases, and those that did often preferred to avoid such large expenditures.

SaaS is a game changer for small businesses. By making day-to-day infrastructure needs into a monthly operational expense that can be scaled up or down as an organisation’s needs evolve, many SMBs can now afford technology upgrades that were previously unavailable to them.

For example, the ability to outsource the provision and management of key functions enables a growing team to focus on its core skills. Rapid set-up, minimal up-front costs, remote working support and scalability are all obvious benefits, too.

SaaS for Enterprise

At the other end of the scale, SaaS has also become a practical approach for enterprise-scale solutions too. Bringing together functions in a common environment or platform helps an enterprise gain scale, cost, speed and service efficiencies.

Enterprise-scale businesses often have different units operating across different territories, time zones and locations. Cloud-based SaaS can provide the tools to maintain a holistic, connected way of working in spite of these challenges, and in a cost-effective way.

With the right setup, legacy systems can also be plugged in to ensure that all an organisation’s services are interlinked. This helps eradicate gaps in reporting and data, forging a virtuous circle. In addition, teams can collaborate via shared social spaces that are always in sync on every user’s device.

The future of SaaS

The future of SaaS and cloud computing is likely to see increasing adoption of specialist services, more end-to-end integration, a growing emphasis on relationships between customers and key providers -- and ever more sophisticated, data-backed insight.

The future of the SaaS Industry

The rising tide of software as a service has created an industry of products and services that require subscription-like recurring payments. This means the mindset of customers has also shifted from one-off customers with a one-time purchase, they become present customers that adopt a recurring purchase routine. In response to this trend, Gartner predicts that by 2020 over 80% of software vendors will change their business model from traditional license and maintenance to subscription.

The future of SaaS within Businesses

With the demand for high-volume data, software performance and backup increasing daily, businesses are likely to increasingly outsource IT activities to specialist service providers.

Businesses who are already fully invested in SaaS are likely to adopt integrated, end-to-end solutions that allow them to concentrate on what they do best. As a result, long-term relationships with service providers will grow – which in turn will lead to greater innovation as customers' growing needs are better understood and provided for.

That’s a lot of info!

Here’s what you should take away from this article:

What is Software-as-a-Service (SaaS)? SaaS delivers software applications over the Internet, typically on subscription. Common SaaS includes email, messaging and CRM.
How did SaaS begin? SaaS evolved from Application Service Providers and the cloud computing paradigm, of which Salesforce is a pioneer. .
What are the other ‘as-a-Service’ models? Other ‘as-a-Service’ models include infrastructure, platform, security, managed software, virtual desktops and remote databases. ‘Everything-as-aService’ (XaaS) combines all of these.
What are the business benefits of SaaS? The business benefits of SaaS include increased efficiency, cost savings, remote access to services, scalability and enhanced security.
What are the features of SaaS? Features of SaaS include multi-tenancy cloud architecture, access via any web-connected device, real-time data and collaborative functions.
How does SaaS compare with on-premise software? SaaS provides affordable, ready-to-use services which require minimal upfront costs, set-up or maintenance.
How does the SaaS business model work? The SaaS business model shifts responsibility for IT systems to vendors, allowing users to focus on their businesses.
Can SaaS benefit my business? SaaS can benefit any size business, from cost-effective outsourcing for small enterprises to holistic global communications solutions.
What’s the future for SaaS? The future for SaaS promises increased business enablement which will allow businesses to excel at what they do best.

Frequently Asked Questions

What is the SaaS model?

SaaS is a licensing and distribution model that delivers software via the Internet. Software-as-a-Service applications are typically are typically hosted and managed by a third-party provider on a subscription basis. SaaS delivers cost savings and improved efficiency as businesses can consume computing resources based on need and usage.

What are examples of SaaS?

Examples of SaaS include various types of business software, such as email, instant messaging systems and customer relationship management (CRM) platforms. Many companies are choosing SaaS solutions for these applications because they are cost-effective and provide benefits such as remote access to services and improved security.

Is SaaS the same as cloud?

SaaS is not the same as the cloud, but it does often use the cloud as an online platform to host software applications. This means that SaaS can be viewed as a subset of cloud computing. Cloud-based SaaS provides a holistic, connected way for businesses to operate across different time zones, territories and locations.