Software as a Service (SaaS) is a licensing model where access to software is provided on a subscription basis, and where the software is located on external servers rather than internal servers. Users usually get to it through a web browser and sign in with a username and password. The idea of time sharing, which was created in the late 1950s and early 1960s to make money off of processor time, is where Software as a Service (SaaS) comes from.
In a Nutshell
- Software as a Service (SaaS) is an applications licensing model that enables subscription based access to software via outside servers.
- Instead of needing to install the programs on their computers, SaaS enables each user to access the services via the Internet.
- File sharing, email, calendaring, client retention management, and human resources are just a few of the business applications available in SaaS.
- SaaS might be more affordable than buying numerous software licenses for numerous PCs because it is simple to implement, simple to upgrade, and simple to debug.
- Adoption of SaaS has drawbacks related to data security, delivery speed, and lack of control.
Understanding Software as a Service (SaaS)
The rise of Software as a Service (SaaS) coincided with the rise of cloud computing. Cloud computing is a way to get technology services through the Internet. These services usually include access to servers, networks, and data storage.
Before Software as a Service (SaaS), companies that wanted to update their computer software had to purchase compact discs with updates and download them to their systems. For large organizations, updating software was a time consuming task.
Software is like entropy. It is difficult to grasp, weighs nothing, and obeys the second law of thermodynamics; i.e. it always increases.
Norman Ralph Augustine
With Software as a Service (SaaS), users can log in via the Internet or a web browser and connect to the service provider’s network to access the particular service. Technology, financial services, entertainment, and utility companies have led the business world in adopting SaaS technology.
History and Characteristics of Software as a Service (SaaS)
The idea of time sharing, which was created in the late 1950s and early 1960s to make money off of processor time, is where SaaS comes from. As hardware and computing became cheaper, organizations moved to individual ownership of personal computers using on site software but were hampered by the ongoing maintenance of individual computer software and hardware.
In the mid 1990s, the growth of the Internet saw the dawn of the “online cloud,” which allowed organizations to access software from anywhere. In 1999, Salesforce became the forerunner of the SaaS space and both startups and industry giants, including Microsoft, Oracle and SAP, were eager to move into it.
The SaaS provider hosts the customer’s software and delivers it to authorized end users over the Internet, giving customers network based access to a single copy of an application that the provider has created specifically for SaaS distribution. When new features or updates are released, they are distributed to all customers.
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Today, Software as a Service (SaaS) is ubiquitous. With companies such as Adobe, Salesforce, Shopify and Intuit leading the way, the SaaS market is expected to reach $145 billion by 2022.
Advantages and Disadvantages of Software as a Service (SaaS)
Advantages
Software as a Service (SaaS) offers a number of advantages over traditional software licensing models. Because the software does not live on the licensing company’s servers, the company has less need to invest in new hardware. It is easy to set up, upgrade, and fix bugs in, and it can cost less than buying multiple software licenses for different computers.
SaaS has numerous applications, such as e-mail services, audit functions, product and service subscription automation, document management, and customer relationship management (CRM) systems, a database of customer and prospect information. SaaS based CRMs can be used to store company contact information, business activity, product purchase history and sales leads.
The SaaS model works well for enterprise level services, such as human resources. These types of tasks are often collaborative and require employees from multiple departments to share, edit and publish material without being in the same office.
Disadvantages
The drawbacks of Software as a Service (SaaS) adoption center on data security and speed of delivery. Companies must make sure that data stored on external servers is safe and can’t be accessed by people who shouldn’t be able to. Performance can be hurt by slow Internet connections, especially if cloud servers are accessed from far away. Internal networks are often faster than Internet connections. SaaS solutions are also hard to control and can’t be changed because they are run remotely.
Advantages and disadvantages
- Accessible from anywhere
- Cost-effective
- Easy to deploy, upgrade and debug
- Easy to scale
- Higher safety risks
- Slower speed
- Loss of control
- Lack of customization
Examples of Software as a Service (SaaS)
Google Docs
Launched in 2021, Google Docs is Google’s free online word processor where users simply sign in through a web browser to get instant access. Google Docs lets you write, edit and even collaborate with others wherever you are.
Dropbox
Founded in 2007, Dropbox is a cloud storage service that enables businesses to store, share and collaborate on files and data. For example, users can back up and sync photos, videos and other files to the cloud and access them from any device, regardless of location.
SaaS expanded and today supports home offices and daily entertainment as users connect to Netflix, Zoom, DocuSign, Adobe, Shopify and Slack.
SaaS Security
As enterprises adopt cloud based models for software products, security and privacy concerns arise. Where once management was responsible for in house software updates, enterprises must now rely on third party management of their encryption, identity and access management (IAM), data privacy, and downtime or incident response. They must also rely on an adequate level of communication with technical support.
SaaS Pricing
A Software as a Service (SaaS) product is often more cost effective for a company than a traditional software license because it requires no configuration or installation. Software as a service (SaaS) providers rely on subscription based pricing models for customers, such as tiered pricing per person or group or a flat annual fee. Users can also opt for an advertising based model, where the SaaS earns revenue through advertising within the cloud space.
SaaS vs. IaaS vs. PaaS
As a Service” products fit into one of three main categories: SaaS, IaaS, or PaaS. SaaS uses the Internet to offer subscription based software services, managed by a third party provider. Some well known examples of SaaS are Dropbox, Google Workspace, and Salesforce.
Infrastructure as a Service (IaaS) provides access to resources such as servers, storage, memory and other services. It allows organizations to purchase resources on an as needed basis. Common examples of IaaS include Amazon Web Services (AWS), Microsoft Azure and Rackspace.
Platform as a Service (PaaS) provides a software development platform over the web. Specifically, it allows developers to concentrate on creating software without worrying about storage and infrastructure.
What is SaaS Marketing?
SaaS marketing uses standard marketing practices to promote and capture leads for cloud based software applications and information services.
What is B2B SaaS?
B2B SaaS simply refers to companies that sell software services to other companies. These products help organizations streamline a wide variety of functions, such as marketing, sales and customer service.
How is the MRR of a SaaS Business Calculated?
Monthly recurring revenue (MRR) is an important metric for SaaS companies using a monthly subscription pricing model. The MRR calculation is simple: multiply the average revenue per customer by the total number of accounts for that month.
Wrap Up
Software as a Service (SaaS) is a licensing model in which access to software is provided on a subscription basis, and in which the software resides on external servers rather than internal servers. It has become ubiquitous in the enterprise world, with companies such as Adobe, Salesforce, Shopify and Intuit leading the way.
SaaS offers a number of advantages over traditional software licensing models, such as cost effectiveness, scalability, and ease of deployment. However, there are some drawbacks, such as data security and speed of delivery. SaaS marketing and B2B SaaS are two important aspects of the SaaS industry, and MRR is an important metric for SaaS companies.
FAQs
A cloud based software distribution model called Software as a Service (SaaS) allows for the central hosting and management of software and the data it is connected with. Users are no longer required to install and operate the application on their own computers because it is accessible via the Internet.
A number of benefits, including cost savings, scalability, flexibility, and ease of use, are offered by SaaS. Additionally, it relieves the strain on IT management by removing the requirement for users to install and maintain applications on their own computers.
A wide range of corporate needs, including customer relationship management (CRM), enterprise resource planning (ERP), accounting, project management, and others, are covered by SaaS software.
SaaS providers often use a range of security methods, such as encryption, authentication, and access control, to protect user data. Additionally, SaaS providers frequently need to adhere to stringent compliance standards, like those set forth by the Payment Card Industry Data Security Standard (PCI DSS).
The pricing structures for SaaS applications vary depending on the vendor. SaaS programs are typically billed on a subscription basis, with users paying a monthly or yearly charge to access the program. Pay as you go pricing is another option some companies provide, letting customers only pay for the services they really utilize.
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- Microsoft – What is SaaS?
- Gartner – Gartner Forecasts Worldwide Public Cloud End-User Spending to Grow 23% in 2021
- Tech Target – What is SaaS (software as a service)?