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    Software as a Service 101

    Software as a Service 101

    Il'ya Dudkin


    9 min read

    Software as a Service

    If you are new to the concept of Software as a Service (SaaS), considering SaaS for your business or just heard about it and would like to simply get more information, in this article we will try to provide you with a rudimentary understanding of SaaS, as well as it’s pros and cons so that you can make an informed decision about whether or not such a distribution model fits your business.


    Software as a service is a distribution model where a third party provider will host applications and make them available to customers via the internet. It is one of the three main categories of cloud computing alongside Infrastructure as a Service (IaaS) and Platform as a Service (PaaS). Thanks to SaaS, companies no longer need to install and run applications in their own computers or data centers thus also eliminating the need to acquire hardware, expense related to provisioning and maintenance as well as software installation, support and licensing. SaaS applications can also be referred to as web-based software, on-demand software or hosted software. Regardless of the term you hear, SaaS apps will always run on the provider’s servers.

    Characteristics of SaaS

    Think of software as a service as a bank. One of the responsibilities of the bank is to ensure the privacy of each customer while providing a service that’s secure and reliable on a massive scale. All of the bank’s clients use the same financial systems and technology without worrying that someone might access their personal data without permission. A bank meets the criteria of a Saas model since it has:

    Multitenant architecture – all user and applications share one common infrastructure and code base that is maintained centrally. Since SaaS vendor clients are all on the same code base and infrastructure, vendors can innovate quicker and save valuable software development time that would be previously spent on maintaining various versions of outdated code.

    Easy customization – each user has the ability to customize applications to fit their business processes, without affecting the common infrastructure. SaaS is constructed in such a way that these customizations are unique to each user or company and they are always preserved through upgrades. This means that SaaS providers can make upgrades more frequently with less risk to the customer at a much lower adoption cost.

    The Benefits of Software as a Service

    One of the biggest benefits of SaaS is the flexibility. Instead of buying software to install and extra hardware to support it you subscribe to a service offering and pay for this service on a monthly, pay-as-you-go basis. You also have the option of terminating SaaS offerings at any times to stop recurring costs. This also gives SaaS flexibility in terms of scalability since customers can add or remove features and services on-demand. Also, instead of purchasing new software you can trust your SaaS provider to automatically perform updates and patch management, thus further reducing the burden on your in-house IT staff.

    Software as a Service

    Disadvantages of SaaS

    Perhaps the biggest advantages that were mentioned above could also serve as potential disadvantages. For example, even though it is the responsibility of the vendor to provide and regularly update the software, you still need to trust and rely on your vendor that they will keep providing you with the software continuously and without any disruptions. You also need to trust them with accurate billing and providing a secure environment for the business data. Providers who experience security breaches service disruptions or impose unwanted changes to the service agreement can have a huge effect on the customer’s ability to use the service offering. This is why you should completely understand the provider’s user agreement and make sure to enforce it.

    Practical Applications

    If you have ever used a web-based e-mail service such as Outlook, Yahoo or Hotmail then you have used a SaaS service in some form. With these services, you log into your account from a web browser or app, but the e-mail software itself is located on the service provider’s network and your messages are stored there as well. You can access your e-mail and messages from any device at any time.

    The example above is a free service for personal use. For businesses or organizational use, you can access productivity apps such as collaboration, e-mail, calendar and more advanced solutions such as CRMs, enterprise resource planning (ESP) and document management. You would pay for these services via subscription and according to the level of use.

    Software as a Service

    Choosing Between SaaS and In-house

    When faced with a decision between SaaS and in-house, you must first consider the complexity of your business. SaaS solutions typical suit small and medium-sized businesses with straightforward business processes and looking to reduce upfront costs. Even though SaaS solutions are cost-efficient, they still have a way to go in terms of handling complex requirements of large enterprises. There also remains a sizeable functionality gap between the two. For example, if a medium-sized manufacturer is producing highly specialized space shuttle parts, an on-premise system would suit them best. However, if a manufacturer is producing nuts and bolts, they can find all of the functionality they need in software such as NetSuite. Everything boils down to your organization’s needs and what solution can help you address them in the near future.

    A Key Trend

    Since so many SaaS providers offer a wide variety of service offerings, a key trend is a rise in integration among vendor offerings. There are services that are meant for integrating multiple SaaS applications, such as providing a single sign-on and access management across all platforms, as well as efforts within the SaaS community itself to create integrations across multiple providers’ software, thus allowing business processes to flow easily across applications sourced from multiple providers.

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