What is SaaS? What You Need to Know for Future Success

We live in a world of software. 

The cloud has overtaken the world of IT, e-commerce, marketing, and retail - pretty much every aspect of business where people use software solutions. Today, cloud technology is used everywhere and permeates an organization's infrastructure to provide myriad services. It has gained a rapid pace in the past few years, and now it’s hard to find an industry without it.

Cloud technology is changing the way companies around the world do business. 

For a long time, businesses didn’t have access to the IT infrastructure they needed to scale. They had to go through massive changes just to accommodate more customers. Businesses bought or created software applications to support their operations and these applications required a high upfront cost before you could use them.

Additionally, they forced businesses to buy or build in-house infrastructure (servers and storage) to run and maintain the application. This traditional IT deployment model was a huge barrier to progress, and this is where cloud technology came to the rescue.

Cloud computing has remodeled the delivery of computing services. However, there’s one aspect of cloud computing that many businesses overlook: scalability. Cloud services provide a stable, reliable, and uninterrupted infrastructure that’s always online and accessible, paving the way for many innovations, including software-as-a-service.

Software as a service (SaaS) is one of the most popular forms of cloud computing. It's a viable alternative to traditional software deployment and a perfect way to leverage the cloud service model for your business. It has enabled people to work from anywhere in the world, but more importantly, it has allowed them to do so much more productively and effectively.

SaaS is becoming increasingly popular among enterprise software vendors who want to keep their software offerings free (or, at the very least, inexpensive) for their customers.

Using SaaS is like renting a car. Instead of paying for the car directly, you pay per mile driven or per day. On top of this, you don’t need to worry about the costs associated with selling the car (marketing, advertising) and maintaining it (insurance, repairs). The cloud-based model eliminates the need for an onsite maintenance team or upkeep.

SaaS applications can be accessed anywhere using a web browser without installing or maintaining any client software.

Once considered somewhat of a luxurious solution for small businesses and startups, SaaS is now being adopted across all industries. Companies of all sizes are using SaaS. With the advent of web 2.0, more and more software companies now provide their best services as SaaS solutions. The ease of using SaaS solutions makes businesses consider moving from traditional on-premise software to the SaaS model.

SaaS allows enterprise IT to deliver remote business applications to end-users via the internet with software, data, and other centralized resources. SaaS reduces the upfront cost of procuring new software licenses and eliminates licensing fees and installation processes for end-users.

SaaS allows customers to pay for their software usage on a per-user basis. Along with infrastructure as a service (IaaS) and platform as a service (PaaS), SaaS forms the base for cloud computing.

The most common form of SaaS products is web-based software such as Google Docs, Microsoft 365, and Dropbox, which are available for unlimited use on multiple devices. Users can access the services from any device with an internet connection.

How does SaaS work?

From business planning to project management, users utilize SaaS applications in many industries worldwide. SaaS provides businesses with tools for enterprise resourcing planning (ERP), content management, identity and access management (IAM), customer relationship management (CRM), security, etc.

SaaS applications work through the cloud delivery model. A software vendor may host the applications and related information using its resources or contract a cloud provider to host the application and associated data in the provider's data center. Web browsers are commonly used to access SaaS applications. This alleviates the cost of purchasing, provisioning, maintaining hardware and software licensing, installation, and support.

Businesses that use SaaS apps are not responsible for the application's installation and maintenance. They pay a subscription fee to the SaaS provider to gain access to all the software features. Using application programming interfaces (APIs), users can integrate SaaS applications with other software for an efficient workflow.

SaaS vs. on-premise software

Whether you’re a startup or an established company, choosing the right software for a task can be challenging. For many businesses, one of the toughest decisions to make is trying to decide whether to go with SaaS or on-premise software. 

On-premise software resides and runs on your servers (or the servers of your data center or cloud hosting company), while SaaS is a software solution hosted by the vendor and can be accessed online via a web browser.

Today, most enterprise organizations run their on-premise software in-house because it allows them to achieve higher security levels and control the level of customization required. But with the advent of cloud computing, SMEs and small companies can also take advantage of SaaS-based options at no additional cost.

The choice may seem simple when you look at things, but there are many questions to answer before making the big decision.

Cost

SaaS has lower startup costs. However, the cost of SaaS services increases year after year, and businesses tend to spend more in the long term. SaaS pricing structures are adaptable, and upgrading fees are minimal. Because the service providers are responsible for most infrastructure, SaaS reduces the expenses associated with internal resources and IT support.

On-premise systems have a high operating cost but minimal maintenance expenses. Businesses require their own IT infrastructure and teams to set up a new environment, making it more expensive to upgrade and maintain.

Scalability

Organizations can quickly scale up SaaS services to meet growing corporate demands and scale down to avoid wasting resources. On the other hand, on-premise solutions need long-term planning for scalability. They’re sometimes not the ideal choice for expanding organizations since IT teams are wholly involved in keeping up with upgrades.

Security and compliance

Top SaaS providers provide best-in-class security and server and network monitoring. The vendors also perform baseline validation for user review, and enforcing regulatory standards is simple.

For on-premise solutions, the in-house IT team is in charge of validating and enforcing regulatory standards. Implementing regulatory standards is comparably easy for them because they have total control over the environment, but it requires more time and resources.

SaaS vs. PaaS vs. IaaS

Cloud computing has changed the way we use software. It’s no longer a battle between large enterprise-ready solutions or bespoke development with IT support and maintenance. Today, savvy businesses choose from three broad options: software as a service (SaaS), infrastructure as a service (IaaS), and platform as a service (PaaS).

SaaS

SaaS is the most popular cloud computing service used by organizations. Third-party providers manage the software application and deploy them over the Internet. Businesses do not need to download anything to run the app straight through the browser.

SaaS is straightforward to use and maintain, and it's also entirely scalable. You may use it on many devices without installing it. Instead, you can quickly distribute it to your team. For example, Google workspace and Dropbox are SaaS apps widely used by businesses and individuals alike.

PaaS

While SaaS provides businesses with a complete software solution, PaaS provides you with the tools to build your required service. In short, PaaS is a software development platform.

PaaS provides a platform for developers to build and deploy applications without having to deal with time-consuming regular or specialized activities such as server and storage configuration, security, or load balancing. Because they take on cloud qualities, these applications are scalable and highly available. For example, Heroku and Google App Engine are popular PaaS apps.

IaaS

IaaS offers users the cloud computing infrastructure they require to do generic or specialized functions. The actual infrastructure, such as servers and storage, is generally managed by an IaaS provider. The customer is in charge of everything else, such as operating systems and virtual machines.

Buying an IaaS solution entails renting IT equipment that functions similarly to traditional computer hardware but in a virtual setting. Rather than purchasing the actual equipment, businesses rent infrastructure as a virtual service from an IaaS provider. For example, DigitalOcean and Microsoft Azure are commonly used IaaS apps.

Characteristics of SaaS

Perpetual licenses for legacy software that required complicated on-premises infrastructure, intensive user training, and continued maintenance and support, are a thing of the past. SaaS has always been a popular choice for organizations of varying sizes. This can be attributed to the fact that it’s an easy and cost-effective way of acquiring enterprise software.

Although most SaaS products differ in many ways, they share several essential characteristics.

Multi-tenant architecture

Multi-tenancy SaaS architecture deploys a single instance of the software application to multiple clients. Here each client is referred to as a tenant. SaaS vendors provide tenants the power to customize some aspects of the software based on their needs. 

Separate consumers access the same hardware and data storage in a multi-tenant system, generating a distinct instance for each customer. This means that the cloud service provider can handle maintenance, upgrades, and bug fixes more quickly, efficiently, and effectively.

Software engineers can make essential changes for all clients by maintaining a single, shared instance rather than implementing changes in different instances. The back-end customer data is segregated and inaccessible to other tenants, although they share the same server.

Flexible pricing model

Adopting a SaaS product for enterprise software is less expensive than purchasing a standard software license because no setup or installation on hardware is required. SaaS offers businesses access to all their information and data so they can make smarter decisions quickly.

Customization of services

SaaS apps support customizing and configuring applications. This allows users to adjust parameters that affect the overall appearance and feel of the system. Users can optimize and customize apps based on established parameters using their parameter values for an efficient workflow.

High availability

Multiple tenants share SaaS apps, and their availability is expected to be extremely high throughout. As a result, SaaS vendors provide their customers with a high level of service level agreements (SLAs).

An SLA outlines the degree of service you anticipate from a provider, setting out the metrics to evaluate the service. It also includes remedies or penalties applicable to the vendor if agreed-upon service standards are not achieved.

Applications are available around the world 24 hours a day, seven days a week. In addition, SaaS applications provide management and monitoring APIs for users to continuously check the health or availability factor in real-time.

Automated provisioning

Businesses generally utilize SaaS apps. Because of this requirement, SaaS apps create tenants with the help of web services and access credentials. The de-provisioning functionality, which removes access from users or organizations when the client decides not to utilize the application, is another essential feature commonly seen in SaaS apps. 

For example, Salesforce is a SaaS app used by teams to handle sales-related processes. Using the Salesforce APIs, the application can create a tenant for an organization with a unique ID. Another set of APIs can create users within the tenancy, and the user's access credentials are shared. When an organization decides to stop using the application, the application makes use of the delete API.

Challenges of SaaS

SaaS has become one of the most dominant business models in today's technology-focused world over the past decade. Many companies offer online services that make running a business much more manageable.

Some of these services include public cloud computing like Microsoft Azure, business communication platforms like Slack, human resource (HR) software like Greenhouse.

All of these services are ideal solutions for businesses looking to save time and money. But, for all of the benefits SaaS offers, it also comes with some challenges.

Reduced control over software assets

Organizations heavily depend on third-party providers to supply services and maintain a secure environment. If a company fails to evaluate the quality of services and the reputation of the SaaS vendor, it may face service interruptions or security breaches.

As a result, you must understand the SLA to guarantee that it’s implemented. A supplier may upgrade to a new version of an app in certain situations, while companies may be unprepared or unwilling to spend the expenditures associated with updating and training. Migrating big files from a new provider might also be a problem for specific organizations, but it’s manageable.

Unprepared service disruption and security

While most SaaS service providers do their best to keep everything running, there are situations where services might become unavailable. The SLA guarantee for uptime differs amongst providers, with some offering more regular security patches, new features, and other upgrades.

This means that enterprises are not entirely in control and have to rely on suppliers for constant uptime. Data breaches in the cloud might jeopardize the safety and integrity of enterprise data, leading to significant financial losses.

Performance and latency issues

It's conceivable that SaaS consumers are located distant from data centers, resulting in latency and performance problems. Enterprises that don't have a comprehensive cloud strategy and purchase SaaS software without adequate consulting risk squandering money and mismanaging data, resulting in more labor and IT hours.

SaaS apps, on average, operate somewhat slower than on-premise software. Although their speed is still relatively decent, businesses should prepare themselves for a less-than-instant computing environment.

Benefits of SaaS

There are many benefits to using SaaS, leading to a massive increase in its popularity over the last few years. The cloud makes SaaS possible and offers some significant advantages over traditional software. Here are some of the key reasons businesses worldwide are beginning to adopt SaaS.

High scalability

Rather than investing in software licenses and server capacity internally, SaaS software lets businesses scale up access based on organizational needs. The flexible pricing approach allows enterprises to shift expenditures to an ongoing operational expense, making budgeting easier.

Easy data storage and recovery

With legacy software systems, companies had to employ data backups weekly unless they invested in an expensive automated solution. SaaS solutions eliminate this time-intensive by automating backups without human involvement, assuring the data integrity.

Businesses also use SaaS backup software to back up data generated within multiple SaaS solutions to preserve business continuity in the cloud.

Lower costs

Since SaaS solutions use a multi-tenant environment, hardware and software license costs are lower when compared to on-premise software solutions. Additionally, businesses can quickly grow their client base since SaaS enables small companies to utilize products they never otherwise use due to hefty licensing costs.

Because the SaaS provider owns the environment and divides it among all clients that use the solution, maintenance expenses are also lower.

Easy accessibility

Because SaaS solutions are web-based, users can access them from anywhere in the globe. With SaaS, businesses can access their data and operate efficiently from anywhere, making life much simpler for home workers and individuals who work at remote locations.

SaaS is the future of business

SaaS has changed the software industry for good. There’s just no question. Today's SaaS applications are genuinely equal to some of the best software we can get our hands-on, in terms of features or power and certainly in terms of usability and accessibility.

Businesses have all the power of cloud computing without the hassle of managing or maintaining servers.

Unable to manage your SaaS solutions? Gain more granular visibility over your software usage and manage your SaaS portfolios with SaaS operations management software.