What is SaaS (Software as a Service)?

Software as a service (SaaS) is a way of delivering applications remotely over the internet instead of locally on machines (known as “on-premise” software). SaaS applications are also known as:

  • Web-based software

  • On-demand software

  • Hosted software

As the name suggests, SaaS transforms software from a product that’s purchased — a commodity that you buy once and download to your device — into a service that’s rendered: a set of capabilities that you subscribe to.

Traditionally, IT departments installed business software on employees’ computers and had to manually update and maintain it. Users had only so much storage on their hard drives, and companies had to buy individual licenses for everyone. That made it difficult to collaborate, to work from a communal database, and to update data as needed.

With SaaS, applications live on software providers’ servers. That frees users from licensing and hardware limitations, as well as maintenance responsibilities.

Cloud computing is a key enabler. In its most basic form, the cloud is “software, data storage, and processing power” that’s available via the web. Users therefore access cloud-based software as a service through websites and apps.

On this page, you’ll learn the basics of software as a service, including how SaaS can:

  • Simplify software maintenance and management

  • Reduce upfront IT costs

  • Enhance collaboration

  • Improve flexibility and scalability

Table of Contents

How does software as a service work?

With software as a service, you don’t install and maintain software. Instead, you log in using the internet. The provider manages application security, access, storage, and performance. This empowers your IT department to spend more time on strategic work instead of software and hardware management.

Can moving from on-premise to SaaS make employees more efficient?

Software as a service can be an asset to your IT department, to your broader workforce, and to your customer base.

Traditional software generally demands large, upfront investments in exchange for limited installations. Updates arrive in the form of new software versions that you must buy and install. Meanwhile, your company needs energy, servers, and storage to accommodate applications and data. If anything goes awry, you have to fix it. And if your business experiences a data breach or natural disaster, it could lose access to critical applications and information.

SaaS takes a different approach. It’s subscription-based, with pricing options that support both individual and multiple users. Software also lives on providers’ servers. That means there’s no hardware to maintain, applications and data are always backed up, and updates are automatic. Plus, many vendors offer training to help users make the most of their investment.

All this helps your employees get more mileage out of business software and, in turn, deliver more value to your customers.

What are the advantages of SaaS?

Because SaaS facilitates remote application hosting and delivery, its key advantage is easy access across locations and devices. That’s especially true in organizations that have a “work-from-anywhere” culture. Customers who use software as a service have no hardware or software to install, maintain, or upgrade. All they have to maintain is a high-speed internet connection.

But everyone having easier access to apps is just one benefit among many. Other benefits of SaaS include:

  • Widespread adoption: Thanks to the nature of cloud computing, SaaS reaches across more users and more departments. As a result, its capabilities are available to the entire organization instead of a few select users.

  • Easy onboarding: Many SaaS providers offer documentation and training that make it convenient to add new users. That translates to increased adoption of software by employees and a greater return on your investment.

  • Lower initial costs: With SaaS, you generally don’t have to pay for licenses, hardware, and infrastructure. That means there’s a low barrier to entry for companies of all sizes and growth stages.

  • Rapid deployment: SaaS typically requires practically no installation and minimal configuration. Often, applications are ready to deploy with only a few clicks of your mouse. That means you can use them sooner — and generate value from them faster.

  • Frictionless upgrades and updates: Because they can update SaaS solutions in real time via the cloud, companies can iterate software more quickly. That means customers receive new versions — with more features, fewer bugs, and enhanced security — frequently and fast.

  • Real-time data: Cloud-based applications collect and display data in real time. That gives SaaS users instant access to data updates.

  • Increased customization: Developers often design SaaS applications to be customizable. So, you can tailor them to your needs.

  • Advanced security: Most SaaS providers invest heavily in privacy and security. Baked-in features might include zero-trust architecture and data encryption.

  • Built-in redundancy: With on-premise software, applications and data live on local computers and servers. If those machines fail due to a natural disaster or a spilled cup of coffee, users may lose valuable capabilities and information. With cloud-based SaaS, backups are frequent and automatic.

  • Offline functionality: By definition, SaaS uses the internet to deliver its services. However, many solutions have an offline mode that works regardless of internet access. When connectivity returns, data automatically updates.

  • Rapid scalability: If your business is growing, it’s easy to scale SaaS solutions in response to your company’s changing needs.

  • Actionable intelligence: SaaS solutions ingest data in real time and from many sources. The result is more accurate analytics and reporting.

What are software-as-a-service examples?

Software as a service examples abound. One of the earliest came from Marc Benioff, Chair, Co-CEO, and Co-Founder of Salesforce, who started the company in 1999 with a mission to “End Software” with cloud computing. He envisioned a new kind of software: internet-based applications that users could “access” instead of “install.” Soon thereafter, SaaS revolutionized business technology and cleared the path for big data and analytics.

Today, the Salesforce customer relationship management (CRM) platform offers companies of all sizes a centralized place to store data as their business grows.

With SaaS applications that work together — like Sales Cloud, Quip, and Slack — teams can improve communication, collaboration, and workflows. Quip, for example, is a collaboration tool that allows many users to access and update documents and other files at the same time. Slack, meanwhile, is a communication and instant messaging platform. Each complements the other. To better understand how, consider this scenario.

Imagine a growing startup. To keep costs low, the business initially pays for only three users to have access to the aforementioned applications: the owner, the sales manager, and a salesperson. Six months later, the growing company adds more users and other SaaS platforms — for example, Marketing Cloud for its marketing team.

To keep overhead low, the business eventually embraces a virtual office. Whether they’re working from home, the office, or the road, employees can therefore collaborate on documents and update records so that everyone has accurate, up-to-date information at all times. That includes the owner, who during an important meeting with investors pulls out their smartphone, opens the Salesforce mobile CRM app, and accesses real-time data with which to answers investors’ questions.

By running an integrated system, the company enjoys a single customer view. From sales to marketing to customer service, everyone who uses the SaaS CRM platform can access the same information. In turn, the business can serve its customers with increased speed, accuracy, and quality.


What is the future of SaaS?

SaaS has become the dominant software model in the 21st century because it helps companies operate with increased ease, intelligence, and quality. The next generation of SaaS will continue to help your business stay ahead of the competition by delivering more capabilities to employees and customers — efficiently and cost-effectively.

It’s not only about being fast. It’s about being smart too. The world is becoming more complex every day and companies need straightforward solutions to help them cut through clutter to deliver real value. The next iteration of cloud computing and SaaS will help them meet the moment.


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