Software as a Service (SaaS)

Discover the world of Software as a Service (SaaS) and unlock the potential of cloud-based applications.

Illustration of a computer cloud

Software as a Service, often abbreviated as SaaS, is a software licensing and delivery model in which software is provided on a subscription basis and is centrally hosted. It is sometimes referred to as "on-demand software". SaaS is typically accessed by users using a thin client via a web browser. This model has become a common delivery method for many business applications, including office and messaging software, payroll processing software, DBMS software, management software, CAD software, development software, gamification, virtualization, accounting, collaboration, customer relationship management (CRM), management information systems (MIS), enterprise resource planning (ERP), invoicing, human resource management (HRM), talent acquisition, learning management systems, content management (CM), and service desk management.

SaaS has been incorporated into the strategy of nearly all leading enterprise software companies. One of the biggest selling points for these companies is the potential to reduce IT support costs by outsourcing hardware and software maintenance and support to the SaaS provider.

Origins of SaaS

The term "Software as a Service" (SaaS) is considered to be part of the nomenclature of cloud computing, along with Infrastructure as a Service (IaaS), Platform as a Service (PaaS), Desktop as a Service (DaaS), managed software as a service (MSaaS), mobile backend as a service (MBaaS), and information technology management as a service (ITMaaS).

The concept of SaaS began to circulate around the late 1990s and it has since then become an accepted part of the IT landscape. The underlying concept dates back to the early days of computing, even before computers as we know them today existed. The idea of renting access to computing power has been around for decades, but it is only recently that it has become viable on a large scale.

Centralized Hosting

Centralized hosting of business applications dates back to the 1960s. Starting in that decade, IBM and other mainframe providers conducted a service bureau business, often referred to as time-sharing or utility computing. Such services included offering computing power and database storage to banks and other large organizations from their worldwide data centers.

The expansion of the Internet during the 1990s brought about a new class of centralized computing, called Application Service Providers (ASP). ASPs provided businesses with the service of hosting and managing specialized business applications, with the goal of reducing costs through central administration and through the solution provider's specialization in a particular business application. Two of the world's pioneers and largest ASPs were USI, which was headquartered in the Washington, DC area, and Futurelink Corporation, headquartered in Irvine, California.

Development of SaaS

The software as a service (SaaS) model is a departure from the on-premises software delivery model. First, the software is hosted centrally, so an end user's machine need not be of a higher-end type. Second, unlike traditional software which is conventionally sold as a perpetual license with an up-front cost (and an optional ongoing support fee), SaaS providers generally price applications using a subscription fee, most commonly a monthly fee or an annual fee. Consequently, the initial setup cost for SaaS is typically lower than the equivalent enterprise software. SaaS vendors typically price their applications based on some usage parameters, such as the number of users using the application.

However, because the software does not live on the licensing company's servers, there is less control over the data and more room for exposure. On the other hand, companies can control the types of data held in the SaaS applications, reducing the exposure to data breaches. They can also use a mix of security solutions to encrypt sensitive data, and set up firewalls around the servers where data is stored.

Characteristics of SaaS

Although not all software-as-a-service applications share all traits, the characteristics below are common among many SaaS applications:

  • Configuration and customization: SaaS applications similarly support what is traditionally known as application configuration. In other words, like traditional enterprise software, a single customer can alter the set of configuration options (a.k.a. parameters) that affect its functionality and look-and-feel. Each customer may have its own settings (or: parameter values) for the configuration options. The application can be customized to the degree it was designed for based on a set of predefined configuration options.
  • Accelerated feature delivery: SaaS applications are often updated more frequently than traditional software, in many cases on a weekly or monthly basis. This is enabled by several factors:
    • The software is hosted centrally, so an update is decided and executed by the provider, not by customers.
    • The application only has a single configuration, making development testing faster.
    • The application vendor does not have to expend resources on maintaining and updating backdated versions of the software, because there is only a single version.
  • Open integration protocols: Because SaaS applications cannot access a company's internal systems (databases or internal services), they predominantly offer integration protocols and application programming interfaces (APIs) that operate over a wide area network. The ubiquity of SaaS applications and other Internet services and the standardization of their API technology has spawned development of mashups, which are lightweight applications that combine data, presentation and functionality from multiple services, creating a compound service.

Other characteristics that are unique to SaaS are that the software and data are hosted in the cloud and the service is sold on a subscription basis. This means that users do not have to worry about hardware compatibility, software updates, or data backups, as these are all handled by the SaaS provider.

Benefits of SaaS

There are several benefits to using SaaS, including accessibility, compatibility, and operational management. Additionally, SaaS models offer lower upfront costs than traditional software download and installation, making them more available to a wider range of businesses, making it easier for smaller companies to disrupt existing markets while empowering suppliers.

One of the biggest advantages of SaaS is the ability to run applications on various devices from any location. This is possible because the software is not installed on the user's device; instead, the user accesses the software and their data online. This means that the user can access their data from any device that has an internet connection, making SaaS a great option for businesses with remote employees or for individuals who travel frequently.

Scalability and Integration

SaaS offers high scalability, which makes it a good option for businesses that are expecting to grow or that have fluctuating demands. This is because the cloud resources can be scaled up or down based on demand, allowing businesses to pay only for what they use. Additionally, because the software is hosted in the cloud, businesses can access additional resources on-demand without needing to install new hardware or software.

Another benefit of SaaS is that it can easily be integrated with other SaaS offerings. Due to the cloud nature of SaaS, pulling data and features from one SaaS product to another is relatively easy, which can save businesses time and money. This is especially true if businesses are using API's that do not require extensive coding.

Automatic Updates

With SaaS, the provider takes care of automatic updates – this not only eliminates the need for the customer to install and download patches, it also means that they can benefit from new features as soon as they're available. This can be a big time saver for businesses, as they don't have to worry about maintaining the software themselves.

Automatic updates also mean that businesses can be sure they are always using the most up-to-date version of the software. This can be especially important for businesses that need to comply with regulations that require them to use the most recent versions of software.

Drawbacks of SaaS

While SaaS has many benefits, it also has some potential drawbacks. These include issues with data security, lack of control, and issues with internet connectivity. It's important for businesses to consider these potential drawbacks before deciding to use SaaS.

One of the main concerns with SaaS is data security. Because the data is stored on the provider's servers, there is a potential risk of a data breach. This is especially a concern for businesses that handle sensitive data. However, many SaaS providers take security very seriously and have robust security measures in place.

Dependency on the Vendor

Another potential drawback of SaaS is the dependency on the vendor. If the vendor goes out of business or decides to discontinue the software, businesses could be left without a crucial tool. Additionally, because the software is hosted by the vendor, businesses have less control over the software and may not be able to customize it to their specific needs.

However, most SaaS vendors offer customization options and have contingency plans in place in case they go out of business. Businesses can also mitigate this risk by choosing a reputable vendor and by having a backup plan in place.

Internet Connectivity

Finally, because SaaS relies on internet connectivity, businesses may experience issues if they have unreliable internet. If the internet goes down, businesses may not be able to access their data or use the software. However, many SaaS providers offer offline modes that allow businesses to continue working even when they're not connected to the internet.

Despite these potential drawbacks, many businesses find that the benefits of SaaS outweigh the drawbacks. By considering the potential drawbacks and taking steps to mitigate them, businesses can reap the benefits of SaaS while minimizing the risks.

Future of SaaS

The future of SaaS is likely to continue to be bright, with more businesses adopting this model for their software needs. As technology continues to advance, we can expect to see more sophisticated SaaS offerings, with improved security measures and more customization options.

One trend that is likely to continue is the move towards more mobile-friendly SaaS offerings. As more people use their smartphones and tablets for work, it's likely that we'll see more SaaS applications that are optimized for mobile devices.

Artificial Intelligence and SaaS

Another trend that is likely to impact the future of SaaS is the integration of artificial intelligence (AI) technologies. AI can help to automate tasks, provide better customer service, and offer more personalized experiences for users. Many SaaS companies are already incorporating AI into their offerings, and this trend is likely to continue.

For example, AI can be used to analyze data and provide insights that can help businesses make better decisions. It can also be used to automate tasks, freeing up time for employees to focus on more strategic tasks. Finally, AI can be used to provide personalized experiences for users, such as personalized recommendations or personalized customer service.

Increased Competition in the SaaS Market

As the SaaS market continues to grow, we can expect to see increased competition among SaaS providers. This is likely to lead to more innovative and high-quality SaaS offerings, as companies strive to differentiate themselves from their competitors.

Increased competition is also likely to lead to lower prices for SaaS offerings, making them even more accessible to businesses of all sizes. However, businesses will need to be careful to choose a SaaS provider that offers a high-quality product and good customer service, rather than simply choosing the cheapest option.