What exactly is SaaS?

Sep 27, 2021
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Software as a service (SaaS) is a software licensing and delivery model in which software is licensed on a subscription basis and is hosted centrally. SaaS is also referred to as “on-demand software” and “web-based/web-hosted software.”

SaaS, 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), datacenter as a service (DCaaS), and information technology management as a service, is considered a component of cloud computing (ITMaaS).

Users generally access SaaS programs using a thin client, such as a web browser. Many corporate products, including office software, messaging software, payroll processing software, DBMS software, management software, CAD software, development software, gamification, and virtualization, are now delivered via SaaS. Accounting, collaboration, customer relationship management (CRM), management information systems (MIS), enterprise resource planning (ERP), invoicing, field service management, human resource management (HRM), talent acquisition, learning management systems, content management (CM), geographic information systems (GIS), and service desk management are all examples of business processes.

SaaS has been included into almost every enterprise software company’s strategy. According to Gartner, software as a service (SaaS) will continue to be the largest market category for public cloud services, reaching $122.6 billion in 2021.


Business application hosting has been centralized since the 1960s. Beginning in that decade, IBM and other mainframe computer suppliers began offering service bureau services, often known as time sharing or utility computing. From its global data centre, they provide computer power and database storage to banks and other major companies.

The growth of the Internet in the 1990s gave rise to a new type of centralised computing known as application service provider (ASP). ASPs offered organisations the service of hosting and maintaining specialised business applications in order to minimise costs through central administration and the provider’s expertise in a certain business application. USI, based in the Washington, DC region, and Futurelink Corporation, based in California, were two of the major ASPs.

Software as a service is simply an extension of the ASP paradigm. However, the phrase software as a service (SaaS) is more often used in more particular contexts.

• Unlike most early ASPs, which concentrated on maintaining and hosting the software of third-party independent software providers, SaaS companies usually build and manage their own software as of 2012.

• Whereas many early ASPs offered more typical client-server applications that required software installation on users’ PCs, newer implementations might be web apps that just require a web browser to utilise.

• Whereas most early ASPs required a distinct instance of the programme for each business, as of 2012 SaaS services may adopt a multi tenant architecture, in which the application serves numerous businesses and users and divides its data accordingly.

On September 23, 1985, the acronym first appeared in the products and services description of a USPTO trademark application.

DbaaS, or database as a service, has evolved as a sub-category of SaaS and is a form of cloud database.

For a few years, Microsoft referred it SaaS as “software plus services.”

Characteristics of SaaS

Consider a bank that respects each customer’s privacy while offering dependable and secure services on a large scale. Customers of a bank utilise the same financial systems and technology, so they don’t have to worry about anybody accessing their personal information without their permission.

A “bank” satisfies the following important criteria of the SaaS model:

Architecture for Multiple Tenants

A multitenant architecture in which all users and apps share a single, centrally managed infrastructure and code base. Because SaaS vendor clients share the same infrastructure and code base, vendors may innovate more quickly and save significant development time that was previously spent on supporting several versions of obsolete code.

Simple Customization

The ability for each user to quickly customise apps to match their business processes while without interfering with the shared infrastructure. Because of the way SaaS is designed, each company’s or user’s customizations are unique and are always kept across updates.

As a result, SaaS providers may make updates more often, with less customer risk and a significantly lower adoption cost.

Improved Access

Improved data access from any networked device, while also making it easy to control rights, monitor data use, and guarantee everyone gets the same information at the same time.

SaaS Leverages the Consumer Web

The Web interface of most SaaS programmes will be recognisable to anybody who has used Amazon.com or My Yahoo! The SaaS approach allows you to customise using a point-and-click interface, making the weeks or months it takes to upgrade traditional company software look hopelessly antiquated.

Trends in SaaS

Organizations are now establishing SaaS integration platforms (or SIPs) to enable the development of new SaaS applications. The consulting company Saugatuck Technology refers to this as the “third wave” of software adoption, in which SaaS expands beyond independent software capabilities to become a platform for mission-critical applications.

Distribution and pricing

The cloud (or SaaS) model has no physical requirement for indirect distribution because it is not dispersed physically and is delivered virtually instantly, eliminating the need for conventional partners and intermediaries. Unlike traditional software, which is often offered as a perpetual licence with an upfront cost (and an optional ongoing maintenance fee), SaaS providers typically charge a subscription fee, most commonly a monthly or yearly fee. As a result, the initial setup cost for SaaS is generally cheaper than the same corporate software. However, because customers’ data stay with the SaaS provider in a SaaS environment, there are chances to charge per transaction, event, or other units of value, such as the number of processors necessary.

Because of the cheap cost of user provisioning (creating a new client) in a multi-tenant system, certain SaaS suppliers may offer freemium apps. In this approach, a free service with limited capability or scope is made available, while fees are paid for increased functionality or a wider scope.

The ability of SaaS suppliers to provide comparable pricing with on-premises software is a significant driver of SaaS growth. This is consistent with the conventional justification for outsourcing IT systems, which is to apply economies of scale to application operation, i.e., an outside service provider may be able to deliver better, cheaper, more dependable applications.


The majority of SaaS companies support a multi-tenant architecture. This model employs a single version of the programme with a single configuration for all clients (“tenants”). The programme may be deployed on several computers to provide scalability. In certain situations, a second version of the application is created to provide a small group of clients with access to pre-release versions of the apps for testing purposes. In contrast, traditional software has numerous physical copies of the software deployed across various client sites, each possibly of a different version, with a potentially different configuration, and often modified.

Although it is the exception rather than the rule, some SaaS providers do not employ multitenancy or use alternative techniques, such as virtualization, to handle a large number of clients cost-effectively. It is disputed if multitenancy is a required component of software as a service.

SaaS vertical vs. horizontal

Horizontal SaaS and vertical SaaS are two types of cloud computing service paradigms.

[24] Horizontal SaaS caters to a wide range of clients, regardless of their sector. Salesforce and Hubspot are two well-known instances of horizontal SaaS companies. Vertical SaaS, on the other hand, refers to a specialised market that caters to a tighter range of consumers in order to fulfil their unique needs.


Although not all software-as-a-service applications share all of the following qualities, the ones listed below are shared by many of them:

Configuration and personalization

Similarly, SaaS apps enable what is known as application configuration. In other words, just like traditional business software, a single customer may change the set of configuration options that influence the operation and look and feel of the product. Each customer may have their own configuration choices settings (or parameter values). Based on a set of predefined configuration choices, the programme can be modified to the extent for which it was built.

Many SaaS services, for example, enable clients submit a custom logo and, in some cases, a set of unique colours to accommodate customers’ typical desire to modify an application’s look-and-feel so that the application seems to have the customer’s brand. The client, on the other hand, cannot modify the website layout unless such an option was planned for.

Enhanced feature delivery

SaaS applications more often updated than traditional software, generally on a weekly or monthly basis. This is made possible by a number of variables, including:

• Because the application is hosted centrally, all updates are chosen and implemented by the provider rather than the consumers.

• Because there is only one version of the programme, development testing is faster; and the application vendor does not have to invest resources updating and maintaining backdated versions of the software because there is only one version.

• The application vendor has complete access to all client data, which speeds up design and regression testing.

Because the service provider has access to user behaviour within the programme, it is easier to discover areas that need to be improved.

Agile software development techniques facilitate even faster feature delivery.

These techniques, which emerged in the mid-1990s, provide a set of software development tools and processes to enable frequent product releases.

• The pervasiveness of SaaS applications and other Internet services, as well as the standardisation of their API technology, has spawned the development of mashups, which are lightweight applications that combine data, presentation, and functionality from multiple services to form a compound service. Mashups distinguish SaaS apps from on-premises software, which cannot be readily integrated outside of a company’s firewall.

Protocols for open integration

Because SaaS apps cannot access an organization’s internal systems (databases or internal services), they primarily provide integration protocols and application programming interfaces (APIs) that function via a wide area network.

Collaboration (as well as “social”) functionality

Many SaaS apps, inspired by the evolution of various internet networking services and so-called web 2.0 capabilities, provide features that allow its users to interact and exchange information.

Many SaaS-based project management tools, for example, provide collaboration capabilities that allow users to comment on tasks and plans and exchange documents within and outside of an organisation, in addition to typical project planning functions. Several additional SaaS apps allow users to vote on and contribute new feature suggestions.

Although certain collaboration-related functionality is built into on-premises software, collaboration between users or various customers is only feasible with centrally hosted software (implicit or explicit).


Open SaaS is a type of software as a service (SaaS) that is built with open-source code. Open SaaS, like SaaS apps, is a web-based application hosted, supported, and maintained by a service provider. While the roadmap for Open SaaS apps is set by its user community, updates and product additions are handled by a single supplier. Dries Burtaet, the inventor of the Drupal content management platform, invented the phrase in 2011.

Former Chief Information Officer for the New York State Senate, Andrew Hoppin, has been a prominent supporter of Open SaaS for government, calling it “the future of government innovation.” He cites WordPress and Why Unified as examples of effective Open SaaS software delivery models that provide users with “the best of both worlds, plus more alternatives.” Because it is open source, people may begin constructing their websites by self-hosting WordPress and personalizing them to their hearts’ delight. Moreover, because WordPress is SaaS, they don’t have to manage the website at all; they can simply pay WordPress.com to host it.

Drivers of adoption

Several significant developments in the software market and technological landscape have aided SaaS acceptance and growth:

• The increasing usage of web-based user interfaces by programs, as well as the proliferation of related techniques, has reduced the necessity for conventional client-server applications. As a result, incumbent software companies’ investment in software based on fat clients has become a disadvantage (requiring continuous care), opening the door for new software vendors delivering a more “modern” user experience.

The standardization of web page technologies, the growing popularity of web development as a practice, and the introduction and widespread use of web application frameworks such as ruby on rails or Laravel gradually reduced the cost of developing new software services, allowing new providers to compete with traditional vendors.

• The increasing penetration of broad internet access enabled remote centrally hosted applications to offer performance comparable to on-premises software. • The standardization of the HTTPS protocol as part of the web stack provided universally available lightweight security that is adequate for most everyday applications.

• The advent and widespread acceptance of lightweight integration protocols such as REST and SOAP enabled cost-effective integration of SaaS applications (located in the cloud) with internal applications through wide area networks and with other SaaS apps.

Adoption difficulties

Some restrictions impede SaaS adoption and, in some circumstances, prevent it from being used:

• Data security becomes a concern since data is kept on the vendor’s servers.

• SaaS apps are hosted on the cloud, which is remote from the application’s users. This brings delay into the system; for example, the SaaS model is not suited for applications that require millisecond reaction times.

• Multi-tenant architectures, which promote cost effectiveness for service providers, limit application customization for big customers, preventing such applications from being deployed in circumstances (primarily applicable to large companies) where such customisation is required.

• Certain business applications need access to or integration with the customer’s existing data. When such data is vast in volume or sensitive (e.g., end-user personal information), integrating it with remotely hosted software might be costly or dangerous, or it may violate data governance rules.

• Constitutional search and seizure warrant rules do not cover all types of dynamically stored SaaS data. As a consequence, a link is added to the security chain where access to the data, and therefore abuse of these data, is restricted only by the presumed honesty of third parties or government agencies allowed to access the data on their own recognizance.

• Switching SaaS vendors may entail the slow and difficult task of transferring very large data files over the Internet.

 • Organizations that use SaaS may find themselves forced to adopt new versions, which may result in unforeseen training costs, an increase in the likelihood that a user will make an error, or instability due to bugs in the newer software.

• Using an Internet connection implies that data is transmitted to and from a SaaS business at Internet speeds rather than the possibly faster rates of a firm’s internal network. Can the SaaS hosting firm guarantee the SLA (service level agreement) uptime level?

• Not available to consumers, techies, and power users for whatever reason (at least according to Microsoft)?

The standard model is also limited in the following ways: • Compatibility with hardware, other applications, and operating systems

• Issues with licencing and compliance (unauthorized copies of the software programme putting the organisation at risk of fines or litigation).

• Processes for maintenance, support, and patch revision.

The following are five of the most significant benefits of adopting SaaS:

1. Shorter time to benefit

SaaS varies from the conventional approach in that the software (application) is already installed and configured. You may simply setup the server for a cloud instance, and the application will be ready to use in a matter of hours. This lowers the time required on installation and configuration, as well as the difficulties that may arise during software distribution.

2. Reduced expenses

SaaS may give significant cost savings since it often lives in a shared or multi-tenant environment with lower hardware and software licence costs than the traditional approach.

Another benefit is that you can rapidly grow your client base since SaaS allows small and medium-sized enterprises to utilise software that they would not use otherwise owing to the high cost of licence.

Maintenance expenses are also lowered because the SaaS provider controls the environment, which is shared by all clients that utilise that product.

3. Integration and scalability

SaaS solutions are typically housed in cloud settings that are scalable and have connections with other SaaS services. In comparison to the old paradigm, you do not need to purchase a new server or software. You simply need to activate a new SaaS service, and the SaaS provider will handle server capacity planning. Furthermore, you will have the ability to scale your SaaS consumption up and down based on your unique needs.

4. New releases (upgrades)

When using SaaS, the supplier improves the system and makes it available to its clients. The costs and effort involved with upgrades and new releases are cheaper than the old paradigm, which often requires you to purchase and install an update package (or pay for specialised services to get the environment upgraded).

5. Simple to use and carry out proof-of-concept tests SaaS products are simple to use since they already include best practises and samples. Users can perform proof-of-concepts and test software functionality or a new release feature ahead of time. You may even have many instances with various versions and do a seamless transfer. Even in big organisations, SaaS services may be used to evaluate software before purchasing it.

Author: Akshat Singh SherjiTechnologies


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