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.

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

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

For the SaaS company, the drawbacks are typically:

• Operating in a crowded marketplace
• The need to invest heavily in customer service

There are a number of very well known examples of SaaS, including:

• Google Workspace (suite of office applications — Google Docs, Google Sheets, and more)
• Dropbox (cloud storage software)
• AWeber (email marketing software)
• OptinMonster (website popup opt-in forms)

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.

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