April 18, 2024

Software as a service (SaaS) is a cloud computing model in which service or software providers make applications available over the internet. With SaaS, software is accessible on a subscription basis without the need to install, maintain, or host the software locally.  

SaaS applications are hosted on remote servers managed by the service providers, which handle all aspects of the software’s infrastructure, including security, performance, and maintenance; customers automatically have access to new features, enhancements, and security updates.

The SaaS model enables customers to access the software from anywhere using a web browser or mobile app, offering a high degree of convenience and flexibility. SaaS is widely used for business applications such as email, customer relationship management (CRM), collaboration tools, and office productivity suites.  

A brief history of SaaS

1960s The concept underlying SaaS can be traced back to the 1960s with time-sharing systems, where multiple users accessed a central computer through terminals, sharing computing power and applications.   
Early 1990s    The direct predecessors to SaaS, application service providers (ASPs), emerged. They hosted and managed third-party applications, making them available to customers over the internet. ASPs often faced challenges such as limited customizability and high costs.   
Late 1990s    The term software as a service first appeared. Salesforce, founded in 1999, is considered the first major SaaS solution, offering its customer relationship management (CRM) software entirely over the internet.   
2000s    The widespread adoption of broadband and the evolution of web technologies that came with Web 2.0 facilitated the growth of SaaS. These developments allowed for richer, more interactive web applications and improved user experiences.   
2010s   Rapid expansion of cloud computing occurred, with cloud service solutions, such as Amazon Web Services (AWS), Google Cloud Platform (GCP), and Microsoft Azure, providing the infrastructure for SaaS applications to scale globally.     
2020s    SaaS continues to evolve, driven by innovations in artificial intelligence, machine learning, and advanced analytics. The SaaS model is expanding to encompass everything from niche applications to platforms that enable users to build custom applications.     

SaaS characteristics

The SaaS cloud computing model has a distinct set of characteristics that differentiates it from traditional software delivery models. The key characteristics of SaaS include the following. 

Accessibility and mobility

SaaS is available on-demand, allowing customers to access the software anytime, anywhere, as long as there is internet connectivity. This makes SaaS an ideal solution for organizations with remote and mobile users and distributed work environments.   

Centralized hosting

With SaaS, the provider hosts the software and related data on centralized servers. This ensures that all users access the same version with the latest updates and patches. 

Cloud-based delivery

Delivered over the internet, SaaS eliminates the need for users or IT teams to install or maintain software locally. This significantly reduces the effort and cost associated with software deployment and management, as well as enhances security by ensuring that software updates and patches are applied to all users’ software. 

High availability

SaaS solutions are designed to be highly available, with built-in redundancy and failover capabilities to ensure continuous operation. 

High compatibility

Since users access SaaS applications through a web browser, these solutions ensure compatibility across devices and operating systems. This eliminates issues related to software updates and version discrepancies. 

Subscription model

SaaS operates on a subscription basis, unlike traditional software delivery models, in which customers pay upfront to purchase software licenses. This model offers flexibility and scalability, allowing users to adjust their subscription level up or down based on usage and needs. 

SaaS features

Collaboration and sharing

SaaS solutions are designed for easy collaboration and sharing with the objective of helping teams to work together more effectively, regardless of their physical location.

Customization and integration

SaaS applications offer customization capabilities to meet the specific needs of different organizations. Additionally, they often provide application programming interfaces (APIs) and integrations with other services and platforms, enabling a seamless workflow across tools. 

Data security

Advanced security features, including encryption, secure data transmission, and identity management, are used by SaaS solutions to protect sensitive information against unauthorized access and threats. 


A single instance of SaaS software serves multiple customers or tenants. This optimizes resource sharing and reduces costs while keeping each tenant’s data separate and secure, even though they are using the same infrastructure and software and the codebase is shared. This architecture enables efficient resource utilization and easy scalability.

Performance monitoring

SaaS solutions include continuous monitoring to ensure optimal performance and service availability. SaaS providers are responsible for troubleshooting and maintaining the infrastructure to meet performance requirements. 

Regulatory compliance

SaaS providers maintain compliance with regulations and standards, relieving customers of some of the complexities associated with the many different data privacy laws and industry-specific regulations. 


SaaS offers the flexibility to scale usage up or down based on current business needs without the need for additional hardware or significant changes to the service. Access to software can be scaled according to demand, and subscriptions can be easily adjusted to accommodate business growth or seasonal fluctuations.  

SaaS solutions can scale resources to accommodate the growing needs of users, from adding more storage or processing power to expanding the range of services.

Web-based access

SaaS applications are accessible over the Internet, requiring only a web browser to use, eliminating the need for complex installations or downloads. 

SaaS vs on-premises software

The decision between software as a service (SaaS) and on-premises software depends on various factors, including cost, control, customization, and security. Each model offers distinct advantages and challenges. 

SaaS On-premises software 
SaaS benefits include: 
-Accessibility—accessed from anywhere, promoting remote work and flexibility 
-Automatic updates—provider manages updates and upgrades, ensuring seamless user access to the latest features without additional effort or cost 
-Cost-effective—lower upfront costs because it operates on a subscription basis, eliminating the need for hardware investment and maintenance 
-Quick deployment—available over the internet, which allows for rapid deployment and immediate use 
-Scalability—scales with growth, allowing customers to add or remove licenses based on their needs   

SaaS limitations include: 
-Customization limits—customization may not be as extensive as what’s possible with on-premises solutions 
-Data security—data is stored off-site, which may raise concerns for regulated organizations with strict data security and privacy requirements 
-Limited control—customers have less control over the software’s functionality and the underlying infrastructure   
On-premises software benefits include: 
-Control—organizations have full control over the software and infrastructure, including updates, security, and compliance measures 
-Customization—can be extensively customized to meet specific business requirements 
-Data security—data remains within the organization’s control, addressing compliance and security concerns   

On-premises software limitations include: 
-Accessibility—access is limited to the office network unless remote access solutions are implemented 
-Higher upfront costs—requires significant initial investment in hardware, software licenses, and infrastructure 
-Maintenance—the organization is responsible for ongoing maintenance, updates, and security, requiring dedicated IT resources 
-Scalability—scaling up may require additional hardware purchases and can be more time-consuming compared to SaaS   

Advantages of SaaS

SaaS offers a range of advantages that have contributed to its widespread adoption across many industries. The following are several key advantages of SaaS. 

Cost reduction

By eliminating the upfront cost of purchasing and installing applications, as well as ongoing costs like maintenance and upgrades, SaaS solutions significantly reduce the total cost of software ownership. 

Ease of use and deployment

SaaS applications are user-friendly, with more straightforward setup and management than traditional software, enabling rapid deployment and adoption within organizations. In many cases, IT teams pre-configure applications before sharing them with users. 

Performance and reliability

SaaS providers invest in robust infrastructure to ensure the performance and reliability of their services and offer uptime guarantees through service level agreements (SLAs). 

Predictable ongoing costs

The subscription model provides predictable ongoing monthly or annual costs, turning capital expenses into operational expenses. It also facilitates budget management and financial planning. 

Reduced time-to-benefit

By significantly reducing deployment times compared to traditional software installations, SaaS solutions allow customers to benefit from the software almost immediately. 

User experience

SaaS applications focus on delivering a high-quality user experience with intuitive design and user-friendly interfaces that require minimal training and short learning curves compared to traditional software. 

SaaS vs IaaS vs PaaS vs XaaS


Customers pay a subscription to access software applications over the internet. With SaaS, customers have limited control over the infrastructure and platform. They primarily manage data and user-specific application settings. Examples of SaaS include email, CRM, productivity tools, and ERP systems. 


IaaS (infrastructure as a service) hosts infrastructure components that were traditionally located and managed in an on-premises data center. These components include servers, storage, networking hardware, and the hypervisor or virtualization layer.  

In an IaaS model, customers manage the operating system, storage, and deployed applications, while the provider manages the underlying infrastructure. Examples of IaaS include web hosting, advanced data analysis, and test environments. 


PaaS (platform as a service) provides customers with the platform infrastructure needed to develop, test, launch, run, and manage applications. PaaS offers a solution that allows customers to focus on application development without worrying about the expense and complexity of building and maintaining the platform infrastructure. Customers control the applications and data, with the provider managing the operating system, middleware, and runtime environment.   


XaaS (anything as a service) is a collective term that represents a broad array of services related to cloud computing and remote access. This model encompasses SaaS, IaaS, and PaaS, as well as other services, such as FaaS (function as a service), DaaS (desktop as a service), SECaaS (security as a service), DBaaS (database as a service), communication as a service (CaaS), and network as a service (NaaS). 


Frequently asked questions about SaaS include the following.  

What is cloud computing, and how does it relate to SaaS? 

SaaS is a subset of cloud computing. It refers explicitly to cloud-based software applications that are hosted online by a service provider. It is delivered to customers over the internet, typically on a subscription basis.  

This model enables customers to access software applications remotely without the need for installation or maintenance. It leverages the benefits of cloud computing to deliver convenient, scalable, and accessible software solutions. 

What is meant by public, private, and hybrid cloud computing?

Public cloud computing delivers services over the internet, accessible to anyone who pays for them. With public cloud computing, resources are shared among multiple tenants. Services are offered as pay-per-use models, and the cloud provider owns and maintains the infrastructure. 

Private cloud computing refers to a cloud computing model where the infrastructure and services are maintained on a private network. These clouds are often used by single organizations that require enhanced control and security. The infrastructure can be hosted either on-site or off-site and is managed either by the organization or a third party. 

Hybrid cloud computing is a combination of public and private cloud models. It allows data and applications to be shared between them. This model provides businesses with greater flexibility by moving workloads between cloud solutions as needs and costs fluctuate, offering a balance between the scalability of public clouds and the control and security of private clouds. 

What are some use cases for SaaS?

  • Accounting and financial management—manage finances, including invoicing, expense tracking, and financial reporting. 
  • Customer relationship management (CRM)—manages customer information, interactions, and analytics. 
  • Data analytics and business intelligence (BI) —provide insights into operations through data analysis, reporting, and visualization. 
  • E-commerce—set up, manage, and scale online stores without significant upfront investment. 
  • Email and communication—facilitate collaboration and messaging within organizations. 
  • Enterprise resource planning (ERP)—integrates core processes, such as finance, HR, manufacturing, and supply chain management. 
  • Human resources management (HRM)—streamline recruitment, onboarding, payroll, and performance evaluations. 
  • Learning management systems (LMS) —support the delivery of training programs and courses. 
  • Marketing automation—automate marketing processes, campaign management, and customer data analysis. 
  • Project management and collaboration—enable team collaboration, project tracking, and resource allocation in real-time. 

Broad adoption of SaaS

The cost savings, ease of management, and flexibility provided by SaaS solutions have led to the widespread adoption of SaaS as a replacement for on-premises software. Additional factors driving this are security, scalability, and budget benefits. For organizations looking for rapid innovation and minimal IT overhead, SaaS is often the best choice. 

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