What is Software as a Service (SaaS)?

If you’ve been looking for ways to maximise productivity for your business and streamline communication, SaaS (short for software as a service) might be the solution for you. With its use skyrocketing in recent years, now is the time to look into a switch from the conventional software delivery model. In this article, we’ll explore SaaS examples, how SaaS works, and where to start.

What Software as a Service (SaaS) means

SaaS is a software distribution model that uses the public cloud and is accessed via the internet. One of the main appeals of SaaS is that it is web-based software, requiring no traditional on-premises software, simply a web browser and a login. Software as a service platforms often only require minimal fees on a subscription, pay-as-you-go, basis. They require almost no maintenance or management from the user, saving greatly on time as well as cost.

SaaS has evolved significantly in recent years, allowing a dramatic shift in software delivery away from more traditional IT and one-off software licensing. The software vendors, such as Microsoft Azure, Amazon Web Services, and Google Cloud are now responsible for storing and managing all data in the cloud, and software updates and maintenance are also provided automatically. This means the user is no longer burdened by the need for in-house servers, networks, or the storage required to use these essential tools.

Benefits of SaaS

The advantages of SaaS offers are many thanks to its generally flexible, affordable nature. Software applications, resources, and tools that small businesses previously did not have the time or resources to implement are now available in a few computer clicks, with lots of upsides:

Cost effective

Let’s start with one of the biggest advantages: the SaaS model helps keep down costs. They require no great initial investment, no on-premise software, with no hardware or installation costs. They also eliminate the need for an in-house data centre. The SaaS model often runs on a subscription-based, pay-as-you-go, basis, with most providers offering a free trial and different pricing tiers depending on your business’ needs and scale.

Accessible from anywhere

In the era of a hybrid or completely work-from-home culture, accessibility is a great power of SaaS. The cloud environment is more useful than ever as it allows employees to stay connected with their team from anywhere. All that is needed to run the software is an internet connection and a computer. Access to the software can be gained almost instantly.

Low maintenance

With SaaS, the onus falls on the provider to maintain the software. Unlike traditional IT, the SaaS cloud provider continuously updates the software automatically, meaning massive time saving for small businesses.

Worry-free security

SaaS allows businesses to outsource their security needs to the service provider. This eases the pressure on an in-house IT department to protect against malware and other security risks. Most SaaS providers invest heavily in security technology, ensuring peace of mind.


Traditional software required a licence to be purchased for each user, whereas SaaS vendors allow customizable subscription models that can be changed at any time to accommodate changing needs, allowing new employees to access software in just a few clicks. The different subscription tiers SaaS providers offer also allow you to only pay for the services and software tools you need.

Ease of Use

Most SaaS solutions are often highly refined to be intuitive to the user and require minimal training. If any problems do arise, technical support is available from the SaaS provider as part of the subscription cost.

What are the Disadvantages of SaaS?

Before you start thinking it’s too good to be true, SaaS also has its drawbacks, and it’s important to weigh these up as well. Most of these stem from the fact that using the SaaS model does, by nature, externalise all your software needs and therefore take away some control and reliability. If you prefer to be in the driver’s seat of your business’ IT, more classic software products may be for you.

Connectivity requirements

Because third-party cloud based software relies on internet access and cloud infrastructure, if there are any connectivity issues, you will be unable to access the software.

Recurring fees

As opposed to the one-off licensing cost of traditional business software, SaaS runs on a recurring fee system, meaning that while upfront costs are low, you may end up paying more over time.

Vendor lock-in

Another potential problem with a subscription system is that service providers may make it difficult for the user to cancel their subscription and switch service providers. While they do not do this explicitly, you may find yourself jumping through hoops trying to cancel your subscription or finding it unnecessarily difficult to switch your data to another provider.

Loss of control

Unlike traditional IT, you are often at the whim of the SaaS business. Updates cannot be deferred, and any changes to the tools you use are at the discretion of the provider.

Risk of provider failure

According to a study from McKinsey, an estimated 92% of SaaS companies fail in the first three years of business. One SaaS provider, Nirvanix, abruptly went bankrupt in 2019. Users were given one month to pull their data or risk it being lost. This leaves SaaS users at risk of losing valuable data if anything happens to the provider.

Examples of SaaS

Some well-known SaaS products are Dropbox, Outlook, and Slack. Even the hugely popular Netflix runs via the SaaS model. Here are some other examples of SaaS platforms that are highly useful for small businesses:

  • Square, payment processing: Square is a credit card payment platform that allows any laptop or tablet to be turned into a payment processing device by simply plugging in a handheld device. Square also offers free analytics and employee management software as an add-on.
  • Monday, customer relationship management: Monday provides an all-in-one CRM service on a subscription basis with multiple pricing options. It is easy to use and highly customizable.
  • Deputy, employee scheduling software: Deputy allows small business owners to schedule shifts while simultaneously taking into account budget and employee availability, making the often hard-to-juggle task of scheduling shift work much simpler.

SaaS vs. Traditional Software Licensing

As previously touched on, SaaS and cloud computing as a whole has some drastic differences from traditional software development. Traditional software requires installation on the user’s computer rather than simply loading a page, free trials are not available, and a new version of the software will often require a new purchase. A far cry from the flexible, automatically updated, and scalable software as a service offers. One of the benefits, however, of traditional IT and keeping software in-house offers increased customization and control.

SaaS vs. PaaS vs. IaaS

Now that you know the in and outs of SaaS and how it stacks against more run-of-the-mill IT, let’s delve quickly into the two other most popular cloud delivery models. SaaS is one of three, the other two being IaaS (infrastructure as a service), and PaaS (platform as a service). Google, Amazon, and Microsoft all provide SaaS, IaaS, and PaaS services. Which one you choose is up to your individual business needs and how hands-on you like to be with your software and hardware.

IaaS (Infrastructure as a Service):

Infrastructure as a service is a cloud-based service that offers computing, storage, and network resources. It gives users access to software services and hardware on-demand rather than having to purchase it outright.

PaaS (Platform as a Service):

Platform as a service is a complete, ready-to-go cloud-based platform that allows businesses to host and create their own applications. It provides users with a framework to build customised applications while the provider hosts the customer’s software, manages and maintains all the hardware and software included in the platform, allowing the best of both worlds.

SaaS Market and Pricing Models

Now that you’re up-to-date on what an SaaS is compared to traditional software and its many business applications, the question you probably have now is how much it actually costs to get an SaaS up and running for your business. The answer will vary greatly depending on how much you want to get from your SaaS service and what pricing model the SaaS vendor uses. The three most common SaaS pricing models are:

Usage pricing:

Some SaaS vendors price by usage such as how much data is stored on your behalf or how much time you spend actively using the service, similar to a traditional phone plan. This is beneficial to smaller businesses and ensures they don’t end up paying the same flat rate as a large enterprise for a different level of utility.


Freemium is one of the most common pricing models you’ll run into in the SaaS market, with it being adopted by giants such as Google and Dropbox. Freemium means that the SaaS vendor also offer a permanently free-to-use version of their service, albeit with limited features. Dropbox, for example, offers 2GB of storage for free to every user, banking on the fact that when users reach their limit, they’ll pick the easier method of paying for a subscription rather than transferring their data to another cloud service provider.

Tiered pricing:

Many SaaS providers use tiered pricing. This model means SaaS vendors will offer different pricing options with varying amounts of features. This enables you to pick exactly how much service you need from your SaaS application software and not pay for tools and features you won’t use.

It’s important to factor in that many companies make use of more than one SaaS, meaning costs do quickly add up. According to the career advising company Zippia, companies spend $2,623 on SaaS per employee per year on average, with the average employee making use of 8.3 different SaaS products.

The Future of SaaS and Cloud-Based Software

Today, SaaS’ already has hundreds of potential business applications and this number will only continue to grow. Another study from Zippia showed that 99% of companies in the United States use SaaS, with 38% of companies running entirely on SaaS. It’s clear to see that using SaaS applications is on the rise and quickly innovating. Here are some of the expected trends the SaaS space will be subject to in the near future:

Artificial Intelligence

Like many other industries, the SaaS software will no doubt be shaken up by the rise of artificial intelligence. Companies will be increasingly using cloud AI to do market research and even automate email marketing campaigns.

Mobile optimisation

Far from traditional software development and infrastructure, SaaS products are increasingly optimised for mobile devices, not just computers to use the software. This allows for software delivered on the go and simple-to-use systems. Now, software is located wherever you are.

Increased security

Global trends are showing an increased amount of spending on cybersecurity in 2023, with end users spending 23% more on cloud security this year. With it clearly at the front of users’ minds going forward, this is sure to accelerate SaaS development and innovation in data and cloud security.

Now that we’ve explained in depth what SaaS apps are and how it stacks up to other options, will your business be making the shift, or do you prefer more control over your IT?

  • Juliette Owen-Jones
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