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What is SaaS? Our Complete Guide to Software as a Service

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Last editedAug 20222 min read

Gartner has forecasted that end-user spending on public cloud services will grow 20.5% in 2022, to reach a total of US$494.7 billion.

Put simply, SaaS software is a big deal. It’s changed the way people listen to music, the way people communicate, and the way business is done. But what is it, exactly?

Find out everything you need to know about the SaaS model of business with our comprehensive guide.

What is SaaS?

SaaS – which stands for software-as-a-service – is a cloud-based software distribution model allowing service providers to deliver applications over the internet. Customers can access the application via their web browser, rather than having to buy, install, and update the software themselves. The provider manages the hardware, middleware, security, and application software, so businesses only need to pay for what they need, reducing their upfront costs.

SaaS businesses use a few different pricing models, including per-user pricing, proration, tiered pricing, and the freemium model.

Read our guide to SaaS pricing models and strategies

So, what does software-as-a-service look like?

Well, there are several common features associated with SaaS applications. First off, SaaS makes use of familiar web-based interfaces that can help to boost adoption.

It’s also important to note that the SaaS model offers simple access from any networked device, making it easier to manage data and information on the go.

There’s also open integration protocols and APIs, allowing your developers to create custom applications.

Finally, SaaS is hosted on multi-tenancy cloud architecture that’s centrally maintained, providing high levels of data security.

SaaS software versus on-premise software

The traditional approach to large enterprise vendor software is known as ‘on-premise’, which refers to customers using in-house servers and infrastructure to install and manage software packages that they have purchased.

SaaS has several key advantages over on-premise software. For a start, it’s easier to get started with SaaS applications than it is with on-premise software packages, which typically require a much longer implementation process.

In addition, SaaS software is usually accessed via an ongoing subscription fee, whereas on-premise requires a one-time perpetual license fee, plus the costs associated with ongoing support and maintenance.

Generally, SaaS works out to be less expensive, which can be the deciding factor for many businesses. It’s also worth remembering that with on-premise software, you’ll need to handle upgrades, user management, and general maintenance yourself, whereas that’s covered by the provider in the SaaS model.

What are the benefits of the SaaS model?

Software-as-a-service offers several key advantages for businesses. Number one, it’s ready-to-go and easy to implement. All you need to do is sign up and you can get started immediately. Due to its subscription-based pricing model, SaaS applications are generally more affordable than the alternatives, and because it’s easy to scale, SaaS software can help your company meet fast-changing business requirements by boosting or reducing your capacity when needed.

Read our full guide to the pros and cons of SaaS

What are the cons of SaaS applications?

There are a couple of notable drawbacks associated with software-as-a-service that you should pay attention to. Most importantly, it hands over control of important business functions to a third-party.

This means that – in comparison to packaged software or on-premise software – you’ll have limited control over features and may not be able to opt out of software updates. You should also remember that the SaaS model requires you to share your data with the provider. In Australia, a new cybercrime is reported every 10 minutes, so it’s easy to see why some companies might be wary of giving up sole control of their data.

What is the future of software-as-a-service?

SaaS has come an extremely long way in a relatively short amount of time. It’s easy to forget that SaaS software didn’t emerge until the late 1990s, and even then, these early SaaS applications had severe limitations.

In the future, there are a broad range of potential innovations to SaaS solutions that may help to drive growth, including AI, the Internet of Things (IoT), blockchain, and autonomous IT management.

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