What is SaaS?

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

For the SaaS company, the drawbacks are typically:

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

Examples of SaaS in action

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

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.