What is SaaS: Software as a service?

Software as a service (SaaS) is a business model that uses cloud computing to deliver software to users via the internet. Similar to cloud as a service, infrastructure as a service, and platform as a service, SaaS is based on a subscription model. In other words, instead of purchasing and owning a piece of traditional software, you can use apps and services only as long as you’re a subscriber.

So, what is the SaaS model really? It’s virtually every tool you access via your browser — email, calendar, to-do app, Netflix, YouTube, Spotify. The list is endless. Almost everything you interact with via your browser now is probably based on SaaS, especially if it has a monthly plan.

If you’re a developer planning an app, the SaaS model is where you should start. It’s often cheaper, platform-independent (you only have to code the app once), and offers a consistent revenue stream.

Typically, in software as a service, the developer releases the app, the cloud service provider hosts the infrastructure, and the users access the app via the browser. Often, the developer is also the SaaS provider.

In SaaS, servers, storage, networking infrastructure, databases, and computing resources are all hosted by the cloud service provider. Compare it with PaaS (platform as a service), where some of the infrastructure is handled by the cloud, such as the network virtualization or hardware virtualization, but the app itself and the user’s data are in the hands of the software company.

To use the SaaS apps, users have to pay a subscription fee. Of course, many of these cloud-based apps have free tiers, but they usually have limited functionality. SaaS providers may also have a lifetime subscription, requiring only a one-time fee. But, if the company ever goes under, you would also lose access to the app. So, you never really own the software.

From the developer’s side, SaaS is beneficial because there’s only one version of the app for all platforms. In this case, updates are also centralized. The bug fixes and new features are introduced automatically, without the need to download and install the new app version to get the updates.

The software as a service model has been adopted in many industries, from e-commerce to healthcare. Some of the use cases include:

Customer relationship management (CRM)

CRM platforms have to handle everything from customer support to sales management and marketing automation. SaaS helps companies such as Salesforce to centralize customer data and integrate it with other tools.

Collaboration tools

Collaboration tools often have to connect people using different platforms and devices. So, SaaS is an ideal model for companies like Slack and Trello, allowing users to work and talk live using only their browser.

Email clients

Email clients, along with CRM platforms, were among the original SaaS adopters. Email was complex and costly in the early days — some companies had to manage their own email servers including hardware and software. SaaS has simplified email management significantly for both companies and users, eventually giving birth to today’s email giants such as Gmail.

E-commerce

SaaS has transformed shopping online, giving birth to platforms such as Shopify. Similar to email, anyone who wanted to own a shop online had to pay an arm and a leg to develop and maintain it. With SaaS, anyone can build an online store — all they need is a domain and a content management system like WordPress.

We’ve already covered some of the benefits of SaaS, of which there are many. Let’s put everything together.

SaaS benefits:

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  Cost-effectiveness. To say that everything’s cheaper with SaaS would be an understatement. The centralization of infrastructure significantly cuts developers’ costs as the company pays only for what it needs.
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  Scalability. Similar to costs, you can use as little or as much as you need. If your user base grows, you can easily get more resources or scale down if things aren’t going as well.
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  Easy user onboarding. Instead of building an app for every OS, web-based apps ensure unified flows for users regardless of their device.
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  Real-time data. Exchanging data in real time is beneficial for developers as well as users. The developers get accurate app reports, while the users get updates instantly.
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  Universal app access. One of the best SaaS advantages is the ability to access the app on virtually any device. All you need is an internet connection.
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  Automatic updates. If you want to fix a bug or introduce a new feature, you don’t need to wait until each user updates their software.
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  Expanded functionality. SaaS allows you to create APIs or use third-party APIs to increase your app’s features.
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  Backups and data synchronization. Cloud providers make regular backups to ensure you don’t lose data in case of a disaster.

SaaS has many benefits, but if you’re going to use it for your app, you should also understand its shortcomings.

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  Reliance on your cloud provider. Once you choose a cloud provider and build your workflows and infrastructure on it, it may be difficult and costly to replace it.
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  Security. Even though it’s your app and your bugs, using a cloud provider as a go-between takes a lot of control from your hands. You don’t know how the cloud provider protects itself against data breaches, whether your third-party integration is secure, and you can’t control how your data is handled.
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  Automatic updates. The fact that users always have the latest version of your app is a massive benefit. At the same time, they lose the ability to choose the version of the app, sometimes causing them to lose a beloved feature or preventing them from launching the app on their device.

Software as a service (SaaS), platform as a service (PaaS), and infrastructure as a service (IaaS) are similar, cloud-based business models. The major difference is how much control they give the cloud provider.

For example, you already know that SaaS is fully controlled in the cloud. In PaaS, the organization handles the app management and user data while the cloud provider takes care of the rest. IaaS is the least reliant on cloud services, only outsourcing their computing resources. The application, user data, and operating systems are handled within the organization.

We’ve mentioned a few SaaS providers already, but the list is virtually endless. SaaS providers include both large companies offering a full suite of services and applications designed to do one task. Some of these SaaS providers include:

• Salesforce
• Microsoft 365
• Google Workspace apps
• Zoom
• Slack
• Mailchimp
• Netflix
• YouTube
• Shopify

For a long time, SaaS was the future. You may still remember software CDs allowing you to own the software you paid for. But, steadily, they’ve been replaced with mobile apps and online subscriptions. How SaaS will change as the technology landscape shifts again is yet to be seen.

For example, will the rise of AI and no-code platforms help people launch apps and online services without much technology skills? Some experts are sure that this is what will happen. But, it’s just as likely that AI will transform how SaaS works or even help create completely new business models.

FAQ

Is SaaS suitable for all types of businesses?

No, SaaS isn’t suitable for all types of businesses. Still, this model is very versatile and can accommodate the needs and requirements of a wide variety of industries. If you’re developing web-based software or building a business online, SaaS will likely be the easiest way to reach your audience.

How does SaaS enhance data security?

In SaaS, of course, the user data is completely in the hands of the cloud provider. To ensure data security, SaaS vendors use many different methods of protecting their cloud infrastructure, such as encryption.

Can startups afford SaaS solutions?

Yes, SaaS is one of the most affordable business models for startups because the company only has to pay for what it uses. If you’re building a SaaS application with a friend and only have a handful of Beta users, it’s probably best to pick the cheapest plan your cloud provider offers and save the money. You can easily add more computing power and resources to accommodate the growing user base.