What is SaaS? - Software as a Service Explained


SaaS explained

Software as a Service or SaaS is a way of delivering applications over the Internet – as a service. Also known as cloud software, ASP, on-demand software or hosted software. The first applications for consumers were things like webmail, bookmarking and photo sharing. In business, things like recruitment, expenses and customer relationship management were among the early innovations. SaaS has since become a widely-used business model with more and more different kinds of applications available via the cloud.

So what's been the driver for business seek cloud solutions? One attraction was how fast they could get services up and working. Compared with complex in-house IT projects with long lead times, SaaS implementation is fast and easy. Harvard Business Review reported that the head of marketing at a major credit card company was "like a kid in a candy store when told it would take only five weeks to get a cloud application running. IT had originally quoted 18 months."

SaaS is one of several cloud computing solutions for business IT issues. Other ‘as-a-Service’ options include:

  • Infrastructure as a Service (IaaS) – the provider hosts hardware, software, storage and other infrastructure component
  • Platform as a Service (PaaS)
  • Everything as a service (XaaS) – which is essentially all the "aaS" tools neatly packaged together.

The payment model for these kinds of services is typically a per-seat, per-month charge based on usage – so a business only has to pay for what they need, reducing upfront costs.

Salesforce revolutionised CRM with our SaaS based product. Learn More:

SaaS and the cloud

Cloud computing allows companies to consume computing resources as a utility – in the same way they do electricity or water. Recent developments have helped make this a better option for many businesses than setting up and running their computing infrastructure in-house.

The growth of SaaS has been fuelled by:

  1. The growing use of mobile devices
  2. Where people want to be able to connect from anywhere, not just the office. Web-based solutions work well to meet this need.

  3. Increasing broadband access

    This made standard internet connectivity speeds adequate for using SaaS applications. More widespread broadband connectivity also made it easier for users to log on to services in different locations.

  4. The standardisation of digital technologies
  5. Common protocols make it easier to share, integrate and scale cloud-based programs and services – as well as providing better user experiences in a multi-device environment.

  6. Growing popularity and usage of web-like interfaces
  7. More and more users are happy to work in this way thanks to the familiarity, usability and simplicity of web-like environments.

What does SaaS look like?

The major benefit of SaaS is that you have no hardware or software to buy, install, maintain or update – so as a customer there’s little to see until you actually start using the software. Here are some common features of SaaS services.

  • Multi-tenancy cloud architecture
  • All users and applications share a common infrastructure that is centrally maintained. In terms of security, for example, this means that every user gets the highest level of security specified in your package.

  • Simple access
  • Via any networked device, making it easier to manage to access data and information and keep data in sync.

  • Familiar web-based interfaces
  • Building on the consumer web that users already know. This can help you boost adoption and take-up rates.

  • Accelerated feature delivery
  • With updates often rolled out weekly or monthly and no need to maintain or support legacy versions of the software.

  • Open integration protocols and APIs
  • Enabling the development of ‘mash-ups’ which combine data, presentation and functionality from multiple services.

  • Collaborative and social functions
  • Which allow people in different teams and or locations work co-operatively with one another.

SaaS v packaged software

In the past, businesses bought and relied on packaged software – from multi-application systems covering spreadsheets, databases and email to specialist packages for particular tasks like project management or business intelligence.

Packaged software – the drawbacks

To use sales and marketing as an example, a business may have used on-premises software for CRM.

  • This software needed to be evaluated, bought, installed, kept secure, maintained and regularly upgraded on in-house systems by the internal IT department.
  • Using packaged software placed a burden on the IT team which could turn into a bottleneck for projects.
  • A business could end up needing to support a wide variety of systems side by side, but find it tricky to integrate them as they were coded and built differently.
  • This approach also presented upfront costs for software and licences and potentially servers for the software to sit on.
  • The costs of the CRM software and hardware might mean it is not affordable for small businesses. It could also be difficult to scale up quickly in response to growth or change.

Learn more about Sales Cloud and the benefits of cloud-based CRM:

With Software as a Service however…

  • You are tapping into a system that is ready to use, as it is installed, maintained, upgraded and kept secure by the vendor.
  • All your business needs to do is to adapt to using a cloud-based service. For example, instead of spending time pulling together various reports you may be able to set up a system in the cloud that automatically generates them for you.
  • If you need to add additional users as your business grows you should be able to do this simply and quickly.
  • Because you only pay for what you need it can be a very cost effective solution for all sizes of business.
  • Your IT department should be able to concentrate on tasks that help drive the business forward rather than doing lengthy roll-out programmes or spending time on maintenance.

Responsibilities of service

The diagram shows how responsibility shifts from your business to the SaaS vendor – which potentially also reduces risks for your business too.


SaaS in the enterprise sector

As computing systems increase in sophistication and power, SaaS has kept pace, moving up from simple single applications and becoming a practical approach for enterprise-scale solutions.

Enterprise-scale businesses often have different units operating across different territories, time zones and locations. To maintain a holistic, connected way of working in spite of these challenges, you need software and systems that can bridge the gaps. Cloud-based SaaS gives you the tools to do this in a cost-effective way.

For example, you can implement an enterprise CRM system across a potentially unlimited number of users anywhere in the world, using a common set of resources and metrics to collaborate on shared solutions.

Additionally, with the right setup, you can plug in legacy systems and ensure that all your services are interlinked. This helps eradicate gaps in reporting and data, forging a virtuous circle.

Cloud-based services allow data and performance to be shared and tracked easily. Dashboards provide a personalised interface for each individual, drawing on and feeding into a common pool of data. Teams can collaborate via shared social spaces that are always in sync on every user’s device. Bringing together functions in a common environment or platform helps an enterprise gain scale, cost, speed and service efficiencies.

The benefits of SaaS

Increased efficiency and cost effectiveness are the reasons many businesses give for turning to cloud-based SaaS solutions. The advantages include:

  1. Low setup and infrastructure costs
  2. You just pay for what you need with no capital expenditure that needs to be depreciated on your balance sheet over time.

  3. Accessible from anywhere
  4. Just connect to the internet and you can work from wherever you need to be via desktop, laptop, tablet or mobile or other networked device.

  5. Scalability
  6. You can adapt your requirements to the number of people who need to use the system, the volume of data and the functionality required as your business grows.

  7. Industry leading service level agreements (SLAS) for uptime and performance
  8. So you have assurances that the software will be available to use when you need it – a difficult promise for in-house teams to make.

  9. Automatic, frequent updates 
  10. Providers offer timely improvements thanks to their scale and because they receive feedback about what their customers need. This frees up your IT department for other more business-critical tasks.

  11. Security at the highest level required by any customer
  12. Because of the shared nature of the service, all users benefit from the security level that’s been set up for those with the highest need.

The future of SaaS

Cloud computing and SaaS have come a long way in a short time. Increased awareness and uptake has accelerated the growth of SaaS products and led to the rise of SaaS Integration Platforms (SIPs) such as Infrastructure as a Service (IaaS) and Platform as a Service (PaaS). Companies will continue to outsource non-core IT activities to specialist service providers who can do it better. The cloud approach can help companies develop end-to-end integrated solutions and allow them to concentrate on what they do best, leaving a wide range of hardware and software IT issues to service providers.

With companies adopting various "aaS" services, long-term relationships with service providers will grow – which in turn will lead to innovation as customers' growing needs are understood and provided for.

In the future, high-performance computing will help with a wide range of business uses, such as analysing large volumes of customer data and monitoring application logs. SaaS may be one day be able to help address critical challenges for business such as predicting which customers will churn or which cross-selling practices work best for your business.

With the need for high-volume data, software performance and backup increasingly daily, it’s easy to see why so many businesses are choosing to outsource to cloud-based providers. If you’re considering a move to a SaaS platform, find out what Salesforce has to offer for businesses of all sizes.


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