Nov. 8, 2022 · 8 minutes
Software-as-a-Service (SaaS) is a licensing and distribution model used to deliver software applications over the Internet i.e. as a service. Users typically access applications on a subscription basis, making SaaS ideal for business software such as email, instant messaging and customer relationship management (CRM).
The idea of centralizing the hosting of business applications has been around at least since the 1960s. In the 1990s, it evolved with the rise of the internet into Application Service Providers (ASPs), with third-party applications managed and hosted by an ASP vendor, but some software still required to be installed on users’ computers.
SaaS is an evolution of the ASP model, with vendors and suppliers managing their own software and no installation required because software is distributed instantaneously over the internet -- via the cloud. Cloud computing allows businesses to consume computing resources over the internet as a utility – in the same way they do electricity or water.
The SaaS-based cloud model now offers businesses significant efficiencies and cost savings, but a number of developments were necessary before SaaS could become a viable option:
Software-as-a-Service is now just one of several cloud computing solutions for business IT issues. Other ‘as-a-Service’ options include:
Businesses cite many reasons for turning to cloud-based SaaS solutions, including increased efficiency and cost-effectiveness, along with scalability, remote access to services, and automatic updates. Here’s a detailed look at the benefits of SaaS:
With SaaS that there is no dedicated hardware or software to buy, install, maintain or update – so as a customer there’s little to see until normal day-to-day work begins. Here are some common features of SaaS services.
Before things like SaaS, businesses relied on packaged software installed on in-house hardware – from multi-application systems covering spreadsheets, databases and email, to specialist packages for particular tasks like project management or business intelligence. Set-up and maintenance
The SaaS business model shifts responsibility for the software application from business to SaaS vendor. As more as-a-Service offerings are adopted, more core IT systems are managed by the vendor, potentially reducing the risk for the business and also freeing up resource for in-house IT to focus on innovation and new technologies.
The SaaS model lends itself to adoption by businesses of all sizes, from startups to global corporates.
Back in the days of traditional client-server software packages, technology trends favoured large enterprises. That’s because they entailed a big, expensive cash commitment upfront, backed by a staff of in-house IT professionals for implementation, maintenance, and security. Very few SMBs had resources for those kinds of purchases, and those that did often preferred to avoid such large expenditures.
SaaS is a game changer for small businesses. By making day-to-day infrastructure needs into a monthly operational expense that can be scaled up or down as an organisation’s needs evolve, many SMBs can now afford technology upgrades that were previously unavailable to them.
For example, the ability to outsource the provision and management of key functions enables a growing team to focus on its core skills. Rapid set-up, minimal up-front costs, remote working support and scalability are all obvious benefits, too.
At the other end of the scale, SaaS has also become a practical approach for enterprise-scale solutions too. Bringing together functions in a common environment or platform helps an enterprise gain scale, cost, speed and service efficiencies.
Enterprise-scale businesses often have different units operating across different territories, time zones and locations. Cloud-based SaaS can provide the tools to maintain a holistic, connected way of working in spite of these challenges, and in a cost-effective way.
With the right setup, legacy systems can also be plugged in to ensure that all an organisation’s services are interlinked. This helps eradicate gaps in reporting and data, forging a virtuous circle. In addition, teams can collaborate via shared social spaces that are always in sync on every user’s device.
The future of SaaS and cloud computing is likely to see increasing adoption of specialist services, more end-to-end integration, a growing emphasis on relationships between customers and key providers -- and ever more sophisticated, data-backed insight.
The rising tide of software as a service has created an industry of products and services that require subscription-like recurring payments. This means the mindset of customers has also shifted from one-off customers with a one-time purchase, they become present customers that adopt a recurring purchase routine. In response to this trend, Gartner predicts that by 2020 over 80% of software vendors will change their business model from traditional license and maintenance to subscription.
With the ever-increasing demand for high volumes of data, software performance and backup, businesses are more likely to outsource their IT services to specialist service providers.
Businesses that have already fully invested in SaaS are likely to adopt integrated, end-to-end solutions that allow them to focus on what they do best. As a result, long-term relationships with service providers will increase – leading to greater innovation as customers' growing needs are better understood and met.