What is SaaS? Everything You Need to Know

Alex Shute

Alex Shute

Alex is a Co-Founder of Upward Exits. He constantly finds himself at the intersection of entrepreneurship & online business ventures. He is a family man based in Los Angeles. Avid traveler, snowboarder, and a self-proclaimed coffee connoisseur.
What is Saas?

Software-as-a-Service (SaaS) is a type of “on-demand” software that is licensed on a subscription basis. It provides an application and all its fundamental IT infrastructure and platforms to the people using it. What makes SaaS popular is the fact that businesses don’t have to bear the burden of upkeeping infrastructure, platforms, and software.

SaaS decreases customers’ upfront expenses by diminishing the need to permanently buy software or invest in on-site IT infrastructure. Business applications are delivered via a web browser, which saves them from laborious installations or strict contracts. Plus, costs can be paid for overtime rather than all at once. This typically makes the systems more flexible and economical for every budget.

Despite its popularity, many company owners still have queries about SaaS. They want to know why it can be a good option for their organization. In this article, we’ll take a look at what SaaS is and how it can help your business.

SaaS In Simple Terms

In simple terms, SaaS is a software that’s accessible via a 3rd party over the internet. This software is usually offered for a monthly subscription fee.

Usually, a cloud service provider takes care of the software. Software updates, bug fixes, and other typical app upkeep are managed by the provider. Customers communicate with the tool via a web browser or use application programming interfaces (APIs) such as REST or SOAP to interconnect the software to other applications.

Saas cloud

The majority of SaaS solutions are preconfigured plug-and-play tools where the vendor handles everything behind the platform. This includes:

  • Hardware elements, such as networking, storage, and data center servers.
  • Platforms, such as virtualization, the operating system, and middleware.
  • Software necessities, such as runtimes, information, and the application itself.

Some common examples of SaaS include BigCommerce, Google Apps, Salesforce, Dropbox, MailChimp, ZenDesk, DocuSign, Slack, and Hubspot.

Common SaaS Scenarios

SaaS is a software deployment model in which a 3rd party vendor creates applications on cloud infrastructure and makes them accessible to users over the internet. You can access the software from any platform with an internet connection and web browser instead of only on the local device on which it is installed, as with conventional software.

As described by the National Institute of Standards Technology (NIST), users can implement SaaS in one of three different models:

  • Private Cloud: Cloud software is constructed on infrastructure that is supplied for exclusive use by just one corporation having several users. The infrastructure may be possessed, handled, and run by the corporation, a 3rd party, or some combination. It may exist on- or off-site.
  • Public Cloud: Cloud software is constructed on infrastructure that is supplied for open use by the public. This infrastructure may be possessed, administered, and operated by a company, academic or governmental organization, or some combination. It exists on the location of the vendor.
  • Hybrid Cloud: Cloud software is mainly constructed on one kind of infrastructure but can switch to another whenever there’s high demand. Data and application portability is facilitated by standardized or proprietary technology.
Saas hybrid cloud

Brief History of SaaS

The preliminary SaaS solutions appeared in the late 1990s when the term SaaS was first introduced. This new model offered much greater efficiency than the application service provider (ASP) model. One instance of the application could serve several users and even customers because of its supposed multi-tenant architecture. There was no need to locally install software. Moreover, it provided a method to gather, aggregate, and centralize important application data.

Since the early 2000s, the delivery model has remained constant. However, SaaS has evolved considerably from 1st generation siloed solutions to contemporary SaaS suites that provide high visibility across the organization and can increase the power of SaaS via developing technologies like Internet of Things (IoT), Artificial Intelligence (AI), chatbots, digital assistants, and blockchain.

Saas brief history

Advantages of SaaS

SaaS is the holy grail of a continuous profit model and offers faster deployment time than on-site software. While matching pace with other cloud services, SaaS allows small companies to disrupt present marketplaces while leveraging fair SaaS pricing models.

Some other benefits of SaaS are:

  • Accessibility: You can run the software via an internet browser at any time and from anywhere, using any device.
  • Operational Administration: You don’t need any installation, equipment updates, or conventional licensing administration.
  • Cost-Efficient: There are no upfront hardware expenses. It has flexible payment procedures like pay-as-you-go models.
  • Scalability: You can easily scale a solution to cater fluctuating requirements.
  • Data Storage: Data is regularly preserved in the cloud.
  • Analytics: You have real-time access to data reporting and business intelligence solutions.
  • Increased Security: SaaS providers focus substantially on security tech and tools.

SaaS solutions are advantageous in a number of business use-cases. For example, SaaS comes handy for startups and small businesses when they’re short on time, funds, or skills to develop their own platforms or deploy platforms on-site. Likewise, bigger organizations may utilize SaaS technology for temporary projects or applications that aren’t required in the long run.

Overall, any business can benefit from SaaS technology when handling applications that need both web and mobile access. SaaS products can be implemented quite quickly and are self-provisioned for straightforward applications available through public clouds. But, SaaS solutions developed for private clouds need practical configuration and instructions by the provider.

Disadvantages/Challenges of SaaS

Unsurprisingly, the biggest advantage of using SaaS is also the biggest challenge: requiring an internet connection. If you have a strong, consistent connection, then it’s an advantage. If you lack a reliable connection, it’s a drawback.

With the increasing accessibility of broadband and high-speed networks such as 5G, this has become less of an issue today. However, there are a few other situations to take into account before opting for a SaaS tool.

A few other challenges of SaaS are:

  • Loss of Control: The vendor handles everything, which makes you dependent on the vendor’s capabilities.
  • Limited Customization: Many SaaS products offer fewer customization opportunities from the vendor.
  • Slower Speed: SaaS applications can have more latency as compared to client/server applications.
  • Security Risks: Although the SaaS provider secures the platform itself, strict measures have to be taken with critical information.

Common FAQs about SaaS

Some commonly asked questions about SaaS include:

What is the difference between PaaS, IaaS, and SaaS?

The terminology as-a-Service typically refers to a platform that is administered by somebody else so you can concentrate on what’s significant, such as iterative enhancements of custom applications. Besides SaaS, other main as-a-Service options are Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS).

Saas chart difference
  • IaaS 

IaaS means a vendor administers the infrastructure on your behalf via a cloud, which includes the actual servers, network, virtualization, and storage. The user can access the infrastructure via an API or dashboard, and the infrastructure is on rental. 

Operators handle things such as the operating system, applications, and middleware. On the other hand, the vendor provides the hardware, networking, hard drives, storage, and servers. Moreover, the vendor manages the outages, repairs, and hardware problems.

  • PaaS 

PaaS offers hardware and an application software platform to operators from an external service provider. As operators administer the actual apps and data themselves, PaaS works best for developers and programmers. 

PaaS equips operators with a platform to develop, run, and administer their own applications without having to construct and upkeep the infrastructure or environment that applications need to work.

When should you use SaaS?

SaaS platforms are suitable when you want an application to run seamlessly and consistently with least input from you. For example, consider your email server. You want to ensure that you’ll continue to send and receive emails without having to fix your email settings or worry about updates.

But what if your email server collapses because you forget to update it and you do not receive emails for days? That’s just not possible in the present-day competitive marketplace. When you use a SaaS platform to manage your email inbox, there are very less chances of something going wrong. And in case something goes wrong, the SaaS provider will have to find a solution. 

The bottom line is: you’re not only paying for the SaaS application, but you’re also paying for repose.

What are the common SaaS characteristics?

SaaS platforms have the following common characteristics:

  • Accessible via the internet.
  • Hosted on a remote server by a 3rd party vendor.
  • Scalable, with various tiers for small, medium, and enterprise-level companies.
  • Inclusive, providing security, compliance, and maintenance as part of the cost.
Saas characteristics

Can you customize SaaS software?

Yes, you can!

Modern web-based software is flexible enough to be tailored for specific business applications as well as individual operators. You can modify the user interface (UI) to change the look and feel of the program. Moreover, you can customize specific areas, like data fields, to change what data appears. Many business process features can also be enabled and disabled as needed. You can also personalize your workspace, like a dashboard or task list, to show only the info you want to see.

For example, you can set your preferences in Slack, a popular SaaS-based communication platform.

canva-photo-editor (20)

Who has the ownership of SaaS data?

In most of the cases, the users still own their information in a cloud application system. Many service level agreements (SLAs) validate your business’ ownership of the information stored in the provider’s servers, as well as your right to access that information.

Many SaaS contracts also have integrated and prepaid contingencies that allow you to access your data if the vendor stops functioning. This confirms that you have ownership of your data. Moreover, most SaaS providers will allow you to export your data and back it up locally whenever needed.

What is an SLA?

SLA is an acronym for service level agreement. It is an important and fairly complex document that should be evaluated with your stakeholders before deciding to buy a new software solution.

Along with the ownership of data, make sure you carefully review these aspects of an SLA:

  • Duties of the software provider for support, updates, or security.
  • Your duties as a client to inform the provider of problems promptly.
  • Assurances for service, like level of uptime and how a user can respond to inadequate service.
Saas Service Level Agreement

Is data safe in the cloud?

Software vendors realize how customers are anxious about cloud security. That’s why they work hard to validate how secure data is on their servers. Several SaaS vendors utilize extremely safe public cloud services to deploy and store their software instances and data.

For many organizations, data is in more danger when stored internally. This is because they often have less budget allocated to technical security and workers or others could unknowingly leak data or cause breaches in safety. According to Gartner, by 2022 at least 95% of cloud security disasters will be the user’s mistake.

In a nutshell, data security doesn’t depend on whether the server is in-house or located in a different place. SaaS providers can invest increasingly in security, backups, and upkeep than any small- to medium-sized business.

The Future of SaaS

Market connoisseurs agree that the future of SaaS is promising. According to a Gartner report, the SaaS cloud-based services market share is expected to touch $113.1 billion in 2021, which is almost twice the increase from the 2017 revenue of $58.8 billion. Innovation in the SaaS tools themselves is anticipated to help propel that expansion.

The Future of SaaS

Source: Gartner via ZDNet

Cloud solutions are being adopted far more quickly than other cloud technology segments, like PaaS or IaaS products as can be seen below.

Saas cloud revenue
  • AI: AI is a relatively new concept but it has become an integrated part of enterprise SaaS applications. This includes adaptive intelligence that involves learning and adapting to consumer information and behavior.
  • Autonomous IT management: AI and machine learning are also expected to play critical roles in encouraging more independent management across the IT stack, which means less human intervention.
  • Chatbots, IoT, and blockchain: All of these technologies are becoming more critical to digital innovation, and cutting-edge software vendors are already looking for ways to deliver them in their SaaS products.
  • Vertical depth and horizontal connectedness: Although SaaS was intended to swiftly offer vertical solutions to one business unit, companies progressively require and anticipate cross-business visibility. In the future, more vertical depth will be expected from vendors that deliver cross-business suites. Plus, there will be a need for more APIs and turnkey integrations for hybrid option.

Wrap Up

In a nutshell, SaaS provides a variety of advantages overall that should work in favor of both providers and users. Although some corporations might prefer to configure their own cloud management services and utilize orchestration among devices and sites to control their own information, for the majority of small companies at least SaaS offers unmatched prospects that can help them grow, improve, and deliver more value to both employees and clients.

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