What is SaaS (Software as a Service)?

Welcome to the world of SaaS! Software as a Service (SaaS) is a cloud-based delivery model that provides users access to applications over the internet. It is an increasingly popular way for businesses and individuals to access software without purchasing, installing and maintaining it on their company hardware.

Gartner predicts that worldwide spending on cloud services will increase by 20.7% to a total of $591.8 billion in 2023. This growth is up from $490.3 billion in 2022. This growth is significantly higher than the 18.8% growth forecast for 2022. Similar predictions by the Global Insight Partners predict the software as a service market will grow from 167.53 billion in 2022 to 462.94 billion (USD) by 2028.

With SaaS, you can use the latest technology without investing in expensive hardware or software licenses. You can also benefit from automatic updates and upgrades, which keep your applications up to date with the latest features and security patches. Additionally, you can scale your usage up or down depending on business needs, allowing you to pay only for what you use.

Whether organizations are looking for an easy way to get started with SaaS or are already familiar with it but want to learn more about developing SaaS applications, this is the right resource. Here you'll find resources that will help answer any questions about SaaS and provide guidance on how best to utilize it in your business.

The brief history of Software as a Service (SaaS) can be traced back to the early days of computing and the concept of time-sharing. However, the modern era of SaaS began in the late 1990s and has since evolved into the most pervasive and utilized technology.

In the late 1990s, there was an emergence of Application Service Providers (ASPs). The concept of Application Service Providers (ASPs) were companies that provided business applications, such as CRM (Customer Relationship Management), ERP (Enterprise Resource Planning), HCM (Human Capital Management) and SCM (Supply Chain Management over the Internet as a service rather than selling software for customers to install locally. This new delivery model marked the early beginnings of the SaaS model, where customers could access software applications remotely through the internet.

In the late 1990s and early 2000s, many companies emerged as early SaaS pioneers, offering various business applications as web-based services. An example of these pioneers is Salesforce, founded in 1999, which introduced the concept of cloud-based CRM. These companies paved the way for the SaaS model, demonstrating the benefits of remote software delivery and subscription pricing.

The mid-2000s saw significant cloud computing advancements, including internet connectivity, virtualization and data center technologies. These advancements enabled SaaS providers to offer more sophisticated and scalable solutions with improved performance, reliability and security. Cloud computing became a key enabler for the growth of SaaS.

By the late 2000s and early 2010s, the SaaS market rapidly expanded, with a growing number of solution providers offering a wide range of software applications as services. SaaS solutions were increasingly adopted by businesses of all sizes, across various industries, due to the benefits of cost-effective and accessible software delivery, scalability and flexibility.

In the mid-2010s, the SaaS market started to mature, with consolidation among providers through mergers and acquisitions. Established technology companies also entered the SaaS market through acquisitions and new product offerings. SaaS became a mainstream technology delivery model and many businesses adopted SaaS solutions as a standard practice for their software needs. Today, SaaS continues to evolve, with advancements in emerging technologies such as artificial intelligence (AI), machine learning (ML) and the Internet of Things (IoT) shaping the future of SaaS.

With the rapid expansion of the SaaS market and consolidation and maturity in the mid-2010s, SaaS has become the standard technology deployment method, providing businesses with accessible, scalable and cost-effective software solutions.

Software as a Service (SaaS) offers many advantages to businesses and individuals alike. With SaaS, users can access the latest technology without acquiring, customizing and maintaining it on their hardware. Additionally, users benefit from automatic updates and upgrades that keep applications current.

Because SaaS solutions can scale up or down depending on needs, it allows users to only pay for what they need and use. Scalability has contributed to why SaaS has become the most popular and seamless way for businesses to consume software applications.

1. Lower upfront costs: SaaS allows users to subscribe to software on a pay-as-you-go basis, which can reduce upfront costs compared to purchasing and installing software locally. With traditional software, companies must purchase upfront and maintain and upgrade software licenses regularly, often incurring extra costs. With SaaS, businesses pay only for what they use, eliminating the need for costly upfront investments or ongoing maintenance fees. This model also allows companies to scale their usage to meet changing needs and budget requirements, making COTS (custom off-the-shelf) software a more affordable option for small businesses and startups.
2. Easy scalability: With SaaS, users can quickly scale their software consumption up or down as needed. This flexibility means businesses can easily accommodate growth or changes in demand without worrying about purchasing new software or upgrading hardware.
3. Automatic updates and maintenance: SaaS providers take care of updates and maintenance, which means that users always have immediate access to the latest version of the software. The service contracts and support reduce the IT staff burden and ensure that software is always up-to-date and secure.
4. Accessibility: SaaS applications are accessed from any device with an internet connection, which makes it simpler for users to work remotely or collaborate with colleagues in different locations. Additionally, since SaaS providers maintain security and updates, businesses don't need to worry about managing or maintaining their software.
5. Customization: SaaS applications are often highly configurable, meaning that end-users can customize the products to meet their specific needs without developing their software.
6. Data security: SaaS providers typically offer robust data security measures to protect user data, which can be especially important for businesses that deal with sensitive data. SaaS providers have dedicated security teams and resources to ensure the security of Software and user data. The support teams and focus will generally result in a higher protection level than on-premises solutions that small IT teams or individual employees may manage.

Overall, SaaS offers a more affordable, scalable and accessible way for businesses to access software and manage their operations.

Related resources:

• [White Paper] Why A&E Firms Should Move to the Cloud
• [Product Info] Why Government Contracting Firms Should Switch to Costpoint Cloud ERP

On-premises, hybrid cloud and SaaS are different delivery models for Software and IT services, each with advantages and disadvantages.

A critical distinction between SaaS and on-premises solutions is that SaaS solutions are managed and hosted by a third-party provider. In contrast, on-premises solutions are hosted on-site within company servers. The most suitable software deployment option for a company depends on various factors, such as budget, objectives, security needs and company culture.

On-Premises Software

Software installed and hosted locally on a company's servers and infrastructure. This flexibility gives businesses more control over their data and software but requires more upfront investment in hardware, maintenance and IT staff. On-premises solutions are generally more suitable for larger organizations with the resources and expertise to manage their infrastructure.

Hybrid Cloud Solutions

Hybrid solutions combine on-premises infrastructure with cloud services, allowing businesses to take advantage of the somewhat infinite scalability and flexibility of cloud computing while still maintaining control over their data and infrastructure. This delivery approach can offer the best of both worlds, but it also requires careful planning and management to ensure that data is secure and applications are correctly integrated.

SaaS Software Solutions

SaaS solutions, on the other hand, are hosted and managed by a third-party provider and accessed over the internet. This model offers lower upfront costs, more effortless scalability, automatic updates and accessibility from anywhere with an internet connection. However, businesses may have less control over their data and software and may be subject to service outages or other issues outside their control.

Choosing between on-premises, hybrid cloud and SaaS depends on each business's needs and resources. Smaller companies with limited IT resources may find SaaS the most affordable and convenient option. At the same time, larger organizations with complex infrastructure needs may prefer to manage their on-premises solutions. Hybrid cloud solutions can offer both benefits but require careful planning and management to ensure data is secure and the implementation of applications is correct.

Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS) are three different models of cloud computing. Each model provides different levels of control and flexibility, each with advantages and disadvantages.

SaaS, PaaS and IaaS are different cloud computing service models, each with its own characteristics and use cases:

1. SaaS (Software as a Service)

SaaS refers to cloud-based software applications hosted and managed by a third-party provider and accessed over the internet. With SaaS, users typically access software applications through a web browser or other client applications and the provider takes care of maintenance, updates and security. Examples of SaaS include enterprise resource management (ERP) and financial software, customer relationship management (CRM) software, human capital management (HCM) software, supply chain management (SCM) software and productivity suites like Collaboration software.

2. PaaS (Platform as a Service)

PaaS provides a cloud-based platform that allows users to develop, run and manage their applications without worrying about the underlying infrastructure. PaaS typically includes tools, services, frameworks for developing and deploying applications, databases, development frameworks and other tools for building, testing and managing applications. PaaS is commonly used by developers and Software teams to build, deploy and manage custom applications, web services and APIs.

3. IaaS (Infrastructure as a Service)

IaaS refers to cloud-based infrastructure resources that provide virtualized computing resources over the internet, such as virtual machines (VMs), storage, networking and other computing resources. With IaaS, users have more control over the underlying infrastructure and can build, configure and manage their virtualized environments in the cloud. IaaS is commonly used by businesses requiring more flexibility and control over their computing resources, such as running virtual servers or storing their applications and data.

The Difference Between SaaS, PaaS and IaaS

Simply put, SaaS represents the delivery of software applications over the Internet, PaaS provides a platform for developing and deploying applications and IaaS offers virtualized computing resources in the cloud. The choice between SaaS, PaaS and IaaS depends on the specific needs and requirements of an organization and project need. Businesses often use a combination of these cloud service models to meet their IT needs.

SaaS distribution and pricing models can vary depending on the specific SaaS product, market segment and business strategy. However, some standard distribution and pricing models for SaaS include the following:

1. Direct sales: The SaaS provider sells directly to end customers in this model. This pricing model can involve a sales team contacting potential customers, providing demonstrations and negotiating contracts. Direct sales can effectively reach large enterprises or customers with complex needs, but it may require significant sales and marketing resources.
2. Online sales and self-service: Many SaaS providers offer self-service online sales, where customers can sign up and purchase the Software directly from the provider's website. This pricing method can be an efficient and scalable way to reach smaller businesses or individual users and often involves subscription pricing with tiered plans based on features, usage or the number of users.
3. Channel partners: SaaS providers may also distribute their Software through channel partners, such as resellers, value-added resellers (VARs) or system integrators. Channel partners can help with market reach, customer acquisition and customer support and may receive commissions or discounts based on sales performance.
4. Free or freemium: Some SaaS providers offer a free version or freemium model, where basic features or limited usage are provided for free. Additional features or higher usage limits are available through paid plans. This option can attract users and drive adoption, with upsell opportunities to paid plans for more advanced features or higher usage levels.
5. Custom pricing and enterprise negotiations: For larger enterprises or customers with unique requirements, SaaS providers may offer custom pricing or negotiate contracts on a case-by-case basis. These negotiations can involve tailored pricing based on the customer's needs, such as volume discounts, multi-year contracts or customer service level agreements (SLAs).
6. Usage-based pricing: Some SaaS providers may offer usage-based pricing, where customers are charged based on their actual usage of the Software, such as the number of users, data storage or API calls. This pricing type can provide flexibility for customers with variable or unpredictable usage patterns.
7. Add-ons or marketplace: Some SaaS providers offer add-ons, plugins, or integrations that can be purchased separately to extend the functionality of their Software. This option can provide additional revenue streams and application customization opportunities for customers.

It's important to note that SaaS pricing models can evolve and change over time as the market and customer needs change. SaaS providers may offer discounts, promotions, or special pricing for specific industries, geographies, or customer segments. It's crucial for businesses to carefully evaluate the pricing and distribution models of SaaS providers to ensure they align with their budget, requirements and business goals.