What Is Software as a Service (SaaS)?

SaaS is a licensing model in which access to software is provided on a subscription basis, where the software is located on external servers rather than on servers located in-house.

Software as a Service is commonly accessed through a web browser, with users logging into the system using a username and password. Instead of each user having to install the software on their computer, the user can access the program via the internet.

Understanding Software as a Service (SaaS)

The rise of SaaS coincided with the rise of cloud-based computing. Cloud computing offers technology services through the internet, which often includes access to data storage, networking, and servers.

Before SaaS, companies looking to update the software on their computers had to purchase compact disks containing the updates and download them onto their systems. For large organizations, updating software was a time-consuming endeavor.

With SaaS, users can log in through the internet or web browser and connect to the service provider’s network to access the particular service. Technology companies, financial services companies, entertainment, and utilities have led the business world in adopting SaaS technology.

Advantages and Disadvantages of SaaS


SaaS offers a variety of advantages over traditional software licensing models. Because the software does not live on the licensing company’s servers, there is less demand for the company to invest in new hardware. It is easy to implement, easy to update and debug, and can be less expensive than purchasing multiple software licenses for multiple computers.

SaaS has numerous applications, including email services, auditing functions, automating sign-up for products and services, managing documents, and Customer relationship management (CRM) systems, a database of client and prospect information. SaaS-based CRMs can be used to hold 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, requiring employees from various departments to share, edit, and publish material while not in the same office.


Drawbacks to the adoption of SaaS center around data security and speed of delivery. Because data is stored on external servers, companies must ensure it is safe and cannot be accessed by unauthorized parties.

Slow Internet connections can reduce performance, especially if the cloud servers are accessed from far distances. Internal networks tend to be faster than Internet connections. Due to its remote nature, SaaS solutions also suffer from a loss of control and a lack of customization.

SaaS Advantages

  • Accessible from anywhere
  • Cost effective
  • Easy to implement, update, and debug
  • Easy to scale

SaaS Disadvantages

  • Increased security risks
  • Slower speed
  • Loss of control
  • Lack of customization

Cloud vs SaaS—What’s the difference?

While cost reduction and IT efficiency drove the development of first-generation cloud apps, modern SaaS applications have become platforms for innovation to meet the competitive challenges of the digital age, such as:

  • Extending the functionality of your SaaS applications to support collaboration apps like Slack and Zoom.
  • The power of small. Cloud, mobile, and social are enabling small and startup enterprises to create innovative products and reach markets with unprecedented speed.
  • The age of consumer discontent. Armed with mobile and social, consumers have more choices and more information than ever before.

In response to these competitive challenges, a modern SaaS suite can drive innovation across the business by supporting faster innovation, providing superior customer experiences, and enabling better business decisions with built-in analytics and a holistic view of the entire business.

The future of SaaS

Market experts agree that the future of SaaS is strong. According to a 2017 Gartner report, sales of SaaS solutions will continue to grow at over 23 percent per year, from US$270billion in 2020 to over US$332 billion by 2021.

Innovation in the SaaS solutions themselves is expected to help drive that growth, including:

  • With the adoption of Artificial Intelligence (AI) solutions on the rise, it is expected to become an increasingly baked-in part of the enterprise of all cloud applications. AI will drive adaptive intelligence solutions, which allows back-office and front-office applications to learn and adapt to user data and behavior.
  • Autonomous IT management, AI, and machine learning will also play vital roles in driving more autonomous, less human-reliant management across cloud applications and cloud infrastructure.
  • Beyond AI and machine learning, there are an additional set of adaptive intelligent technologies that are driving change to all SaaS applications. These included chatbots, digital assistants IoT, blockchain, virtual reality, augmented reality. Each of these technologies is increasingly vital to digital innovation and forward-thinking providers in how they extend their SaaS offerings.
  • Industry SaaS solutions or vertical cloud applications continue to drive depth and horizontal connectedness for organizations. While SaaS began as a way to quickly provide vertical solutions to a single department, businesses increasingly need and expect cross-business visibility. As applications continue to evolve, look for more vertical depth from providers offering cross-business suites as well as more APIs and turnkey integrations for hybrid cloud solutions.

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