SaaS (software as a service) is sometimes called “cloud-based software.” Over the past decade or two, it’s become the default method of software provision.
Most SaaS services allow the software to be used from any device with a web browser and internet connection. Data is stored in the cloud, rather than on users’ own devices. The software is paid for on a subscription basis (normally monthly or annually) with updates automatically included.
This contrasts with the traditional licensing of software, where organizations would typically pay a one-off upfront fee for the number of licenses needed, install software on machines, and then potentially pay for ongoing support and updates.
Advantages of SaaS
Using SaaS in your business has a number of advantages, including:
Lower upfront costs for software
Instantaneous rollout/implementation — users can access the software from any device
Ability to add new users (and/or upgrade features) as needed
Unlimited customer service is typically included in the price
For the company providing the software, the SaaS model also has several key advantages:
Predictable revenue from an established customer base
Greater revenue over time per customer
Easy to tailor services to both budget and enterprise customers
Disadvantages of SaaS
SaaS does have some drawbacks. For a company using SaaS software, these include:
The need to continually pay for the software, likely for a period of years
Concerns about data security (due to data being stored in the cloud by the SaaS company)
Inability to customize the software
Normally, users must be online to use the software
Many SaaS companies offer a “freemium” version, which includes free access to basic or limited features. The freemium model provides an opportunity for the SaaS company to convert at least some of them into paying customers.