What is SaaS Application

By: Julia Nasy
4 Oct. 2023
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Businesses are constantly looking for the latest solutions that are better, easier, and cheaper than previous ones. And Software as a Service (SaaS) fits perfectly into this concept. This flexible delivery model compensates for the shortcomings of on-premise systems and traditional software, enabling scalability, cost-effectiveness, rapid updates, improved accessibility, and enhanced collaboration among users across different locations and devices.

Over 80% of companies use at least one SaaS solution today. This number is constantly growing, thus driving rapid expansion in the SaaS market. A wide range of service providers, the latest technologies, continuous improvement, and lower costs leave no doubt that now is the time to switch from your on-premise software to the cloud.

What is SaaS?

Software as a Service (also known as web-based, hosted or on-demand software) is a cloud computing model that delivers applications over the internet on a subscription basis. With SaaS, users can access and use software products and services through a web browser. SaaS apps run on vendor’s servers, which manage access to the application as well as handle security, availability, and performance. This approach offers flexibility, accessibility, and reduced maintenance burdens for organizations.

SaaS is one of the three primary cloud service models, alongside Infrastructure as a Service (IaaS) and Platform as a Service (PaaS). But unlike them, SaaS applications are frequently marketed to both B2B and B2C clients: IT professionals, business users and individual consumers.

The Evolution of SaaS

Early SaaS applications were basic web tools such as email, customer relationship management (CRM), and project management software. Salesforce became one of the first examples of hosted software. It provided a web-based CRM solution that assisted businesses in more efficiently managing their customer relationships and achieving greater scalability. NetSuite, an accounting and ERP software, and WebEx, an early web conferencing software, were also among the pioneering SaaS applications.

Although these apps faced several challenges, such as slow internet speeds and limited bandwidth, all issues were overcome as soon as internet infrastructure was improved and more companies shifted to cloud-based models. With the rise of cloud computing services in the 2000s, more new software vendors began appearing on the market. They started to deliver business applications over the internet with remote servers, significantly reducing the costs and SaaS deployment complexity.

In recent years, cloud-based software has been rapidly developing. The following factors drove its evolution.

Cloud infrastructure. Improvements in internet speed, reliability, and accessibility have enabled the delivery of increasingly complex SaaS applications over the web. Also, major cloud providers such as AWS, Microsoft Azure, and Google Cloud have heavily invested in expanding their cloud services, resulting in the development of a more robust cloud infrastructure.

Platformisation. Software providers have moved from standalone applications to platforms with time. This enabled third-party developers to build and deploy their own apps on the basis of the SaaS infrastructure, stimulating innovation, customization and cross-platform integration.

Artificial Intelligence (AI). Integration of AI has empowered SaaS applications to provide valuable insights, automate various tasks, enhance user experience, and offer advanced functionality such as predictive analytics, natural language processing, and machine learning (ML).

Data Security. Enhancements in security practices and technologies have been essential to build trust among users and protect sensitive data in applications. Today, SaaS providers prioritize the implementation of cutting-edge security features, including encryption, authentication protocols, and robust access controls.

Integration. SaaS users became available to integrations with other applications and services. Today, businesses can share data across various platforms and systems.

Mobile-first approach. The development of mobile technology has driven the need for SaaS applications optimized for smartphones and tablets and accessible on various screen sizes.

Related reading: Cloud Computing in Banking

How Does Software as a Service Work?

SaaS works by delivering applications over the internet from remote servers with access via a web browser on a computer or mobile device. Many SaaS apps offer analytics and reporting features, allowing customers to track their usage and gain insights into how the software is being used. Clients subscribe to software services, usually on a monthly or annual basis. Subscription-based pricing models provide a flexible payment arrangement, allowing businesses and individuals to scale their usage according to their needs.

SaaS vendors are responsible for managing the cloud environment, including hosting the software and handling bug fixes, updates, and other general tasks. Due to the flexibility of systems, they can easily implement new tools and features for customers. SaaS providers also manage all hardware components, including storage, network servers and data centers. They oversee software requirements, control operating systems, virtualization and middleware.

SaaS Model VS On-Premises Software

  • Hosting and accessibility. Instead of purchasing, installing, and maintaining in-house software, SaaS users don’t need extensive hardware for deployment.
  • Updates and maintenance. In SaaS, the service provider takes on the responsibility for updates, maintenance, and security, while in on-premise software, these tasks fall on the in-house team’s shoulders and can be resource-intensive
  • Payment model. The SaaS model is paid for on a subscription basis, while on-premise software typically involves an upfront purchase of a perpetual license, with optional maintenance and support fees.
  • Deployment time. SaaS platform offers quick deployment without the need for on-site installations, whereas on-premise solutions typically involve longer deployment times due to installation and configuration requirements.

SaaS Benefits

SaaS has long become a default software delivery method across various industries. Unlike traditional software, cloud-based platforms allow businesses to compete in a highly digitalized market. In other words, if you want your company to lead the sector, you need flexible and scalable cloud solutions which help your business quickly respond to the ever-changing IT environment.

Below are some of the most important benefits and characteristics of SaaS, that make it crucial for organizations today.

Accessibility from Anywhere

Since software vendors deliver apps over the internet, users can log into SaaS platforms and work from any internet-enabled device and location. Such mobility and flexibility enable users to operate remotely and access their files no matter where they are. It also enables easy access on different devices, eliminating the need for users to reinstall applications or buy new licenses when they switch to a new device.

On-Demand Scalability

SaaS enables businesses to scale the infrastructure up and down, depending on their needs, without additional hardware. Companies can quickly adjust their subscription to accommodate growth or downsizing. At the same time, the cloud provider handles the process, including adding more database space or computing resources.


With SaaS offerings, organizations can adapt their applications to match their specific needs and fit business processes. For example, users can change certain parameters within a settings panel, ensuring the software seamlessly fits into their unique workflow. As a result, customized applications enhance efficiency, boost user satisfaction, and provide a competitive edge.

Automatic Updates

Users can rely on a software vendor to automatically perform updates and patch management. This provides access to the latest features without manual installations and reduces the workload of in-house staff, freeing them up for other business tasks. Constantly updated software minimizes vulnerability to security risks and ensures optimal performance.


Cloud migration eliminates the need for upfront investments in hardware and software, reducing initial expenses. And since the SaaS provider maintains the servers and infrastructure, clients have the only expense item – a subscription fee. Due to a subscription-based model, businesses can budget effectively with predictable monthly or annual costs.

Related reading: Benefits of DevOps for Cloud Transformation and Innovation

Downsides of SaaS

Software as a Service doesn’t come without risks and disadvantages around cloud security and speed of delivery. Although the pros of SaaS outweigh the cons, businesses need to be aware of the main concerns to mitigate or avoid them from the start.

SaaS Security

SaaS providers store vast amounts of data in the cloud, which makes it an attractive target for hackers. Cyberattacks can lead to unauthorized access by unauthorized parties and breaches of such sensitive information as customer records, financial data, and intellectual property. To mitigate data security concerns, organizations have to ensure that the cloud provider employs all necessary security controls.

Vendor Lock-In

Switching vendors or migrating to on-premises software can be challenging for your company. This process requiring the entire database transfer to a new application can be time-consuming and costly. The transition becomes more challenging when your former provider relies on proprietary technologies and data types. Often, businesses become reliant on their service provider, resulting in vendor lock-in.


Meeting industry-specific compliance requirements can be complex with SaaS. Many businesses face compliance challenges in ensuring that their SaaS usage aligns with industry-specific, regional, or organizational regulations and standards. To address these challenges, organizations should select SaaS providers with strong compliance capabilities and establish clear policies and procedures for data management.

Loss of Control

In contrast to in-house software applications, SaaS users depend on third-party vendors who manage everything. Clients have less control over the infrastructure, updates, and security. Although automatic updates bring convenience, unexpected alterations to features, user interface, or integration with other systems may disrupt your established workflows.

Examples of SaaS

The first simple apps delivered via the SaaS model were focused on sales force automation, customer relationship management, and web content management. Alongside a growing market of cloud providers, which now includes small vendors with single offerings and cloud giants such as AWS and Google, a variety of SaaS products is also increasing. There are popular video streaming services, business applications like sales management or financial management, and vertical SaaS apps tailored to meet the specialized needs of specific industries.

Other examples of popular SaaS products and cloud services include:

  • WordPress. A content management system (CMS) for creating websites and blogs.
  • Salesforce. A leading CRM platform that helps businesses in sales, customer service, and marketing.
  • Microsoft 365.  SaaS product that offers a comprehensive suite of cloud-based versions of Microsoft Office applications and collaboration tools.
  • Slack. A cloud-powered platform for team communication and collaboration.
  • Dropbox. A cloud storage service that lets users store, share, and collaborate on files and data.
  • Google Workspace. Developed by Google, a suite of cloud-based productivity and collaboration tools for organizations to communicate, collaborate, and manage their work more effectively.
  • Trello. The project management tool with a visual and intuitive approach to help users organize tasks and projects.
  • Spotify. A popular music streaming service that offers users access to a vast library of music and podcasts.

The Future of SaaS

Today, Software as a Service dominates the cloud computing market, and there is no doubt that the SaaS model has a strong future, driven by innovations and cutting-edge technologies. The introduction of AI is already preparing SaaS for another round of unprecedented growth. AI-enhanced software tools will become integral to all cloud applications, enabling personalized offerings, improved customer engagement, chatbots, and data-driven decisions.

At the same time, ML will empower businesses to automate significant parts of cloud operations, improve internal collaboration, and enhance consumer communications. SaaS offerings will become self-improving with a high level of intelligence and operational efficiency. Among other SaaS trends are vertical SaaS, Data as a Service, low-code capabilities, and centralized analytics. SaaS security, alongside with customer retention, is also expected to become a priority for vendors.

The rapid growth of cloud computing technology leaves no choice. In just a few years, Software as a Service will become an indispensable component of successful competition in the market across various industries. So you need to start migration from traditional software to public or private cloud right now.

By: Julia Nasy
4 Oct. 2023
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