1. Business Ideas
  2. Business Plans
  3. Startup Basics
  4. Startup Funding
  5. Franchising
  6. Success Stories
  7. Entrepreneurs
  1. Sales & Marketing
  2. Finances
  3. Your Team
  4. Technology
  5. Social Media
  6. Security
  1. Get the Job
  2. Get Ahead
  3. Office Life
  4. Work-Life Balance
  5. Home Office
  1. Leadership
  2. Women in Business
  3. Managing
  4. Strategy
  5. Personal Growth
  1. HR Solutions
  2. Financial Solutions
  3. Marketing Solutions
  4. Security Solutions
  5. Retail Solutions
  6. SMB Solutions
Product and service reviews are conducted independently by our editorial team, but we sometimes make money when you click on links. Learn more.
Grow Your Business Technology

What is SaaS (Software as a Service)?

What is SaaS (Software as a Service)? Cloud computing / Credit: Shutterstock: Rangizzz

SaaS, an abbreviation of software as a service, is a method of software delivery through which end users can access and use an application remotely via Internet browsers. An SaaS vendor houses and maintains the hardware that runs the application.

Software on the cloud

Software as a service is best described as a cloud-based or online software solution. Rather than selling customers a physical disc or a digital download of an application to install and run from the end user’s computer, vendors lease the application over a Web browser. Consumers can log in remotely and utilize the software’s many features over the Internet without needing to maintain hardware to house the software, download and install updates, or manage data.

The history of SaaS

Software as a service dates back to the 1960s when the first cloud computing ideas began to formulate. Through the lack of technological advances, the execution of this idea was quite limited in availability to end users. It wasn’t until the 1990s that the use of SaaS truly began to mature and adequate support measures were put into effect. Companies like Salesforce began offering their pinnacle services, a customer relationship management application, through the SaaS model.

Enterprise software businesses were nervous to purchase SaaS, due largely to data security risks and even the certainty of long-term services. With the turn of the millennium, software as a service holds significant traction in the enterprise software market. SaaS vendors prove yearly that they can grow revenue and customer base through a subscription licensing model as opposed to the more traditional single-use license.

SaaS vs. on-premise

The software as a service model offers many benefits that companies realize more and more each year. Previous to SaaS, large companies were forced to purchase and maintain hardware on-premise to support enterprise-level applications. The company had to employ IT professionals to troubleshoot issues with the software and hardware, as well as manually update the software when changes occurred to the version. It proved and continues to prove quite costly to most any company.

SaaS removes the need for on-premise hardware or software. Software-as-a-service vendors house the hardware to run the software in their own facilities. They likewise store all customer data there as well. Clients then access the software and data remotely in a cloud-like environment. Many SaaS options are available for use through an internet browser, whereas others require a simple application install on the client’s computer to access the software and receive updates.

SaaS subscriptions

The software as a service option typically adopts a subscription license. Businesses pay a monthly or yearly fee to utilize the services offered by the vendor, whether it is cloud storage, project management, or automated social media updates. The benefit of this is that businesses can stop using the software before they’ve paid as much a regular enterprise-level application would cost, plus they receive access to software updates as a regular part of the service’s monthly maintenance.

Data ownership and security

Many companies worry about jumping on the SaaS bandwagon simply because it entails storing secure and sensitive data in another company’s facilities. The question arises of whether this means the SaaS vendor then owns your data. When negotiating a service level agreement (SLA), giving the vendor ownership of all data is certainly a possibility. SLAs typically spell out the parameters for such problems, outlining data ownership, security requirements and typical maintenance schedules. In many cases, data ownership is not given to the vendor, though buyers should always check for clauses to ensure this.

Data security is also a paramount concern among companies investigating SaaS options. Because the data is stored and accessed from a remote facility, the buying company has no control over what security measures are in place. Vendors typically have many security measures in place from storage redundancies to multi-tiered firewalls to protect against hardware failure and theft of data.

SaaS companies

From video games like World of Warcraft to project management systems like AtTask to webhosting services like GoDaddy, SaaS can be found throughout the business world. Examples of SaaS applications include Google apps like Google Doc, Google Driveand Gmail. Products such as MyPC Backup, SugarSync and OpenDrive offer several online data backup services.

Software as a service fulfills a real need that many companies and individuals have sought. Moving applications to a cloud-like environment allows not only businesses, but individuals to access enterprise-level software at a more affordable monthly rate. As a model of software production and on-demand licensing, it provides many customers with benefits beyond a simple software solution, creating real long-term value and savings.

grow-your-business
See All