What does Software as a Service (SaaS) Mean?

If you haven’t heard of SaaS before, don’t be alarmed. What it means is ‘Software As A Service’ which is a common delivery method for software now. Let’s explain a little more.

If you have used free email provider, like Yahoo! Mail, or Gmail, you have used a SaaS product. SaaS is often referred to as ‘cloud software’ or ‘web based software’ as well.

Just about every large leading software company now delivers their product this way. Instead of getting a CD or DVD in the mail, or at a store, you get updates through the Internet, and typically pay a subscription to use the software, instead of a lump sum.

This delivery model is typically licensed on a subscription basis and is centrally hosted. Sometimes, SaaS can be referred to as “on-demand software”.

Many business applications use the SaaS model now; office and messaging software, payroll and financial software, business management, accounting, collaboration, customer relationship management (CRM), resource planning and more.

SaaS companies generally charge using a subscription fee, most commonly a monthly fee or an annual fee. Consequently, the initial setup cost for SaaS is typically lower than the equivalent enterprise software.

SaaS vendors typically price their applications based on some usage parameters, such as the number of users or amount of data being hosted, using the application.

However, because in a SaaS environment customers’ data reside with the SaaS vendor, opportunities also exist to charge per transaction, event, or other unit of value, such as the number of processors required.

Benefits of SaaS Software

There are a number of benefits of using SaaS software, such as;

Lower setup costs

Because you typically pay per month, the set up costs are dramatically reduced.

Access software anywhere

No need to have a specific device to use the software – SaaS software can be used by any internet connected device.

Constantly improving

Most SaaS vendors are constantly improving their products, and deploying these improvements without any effort on your behalf.

Downsides of SaaS Software

SaaS software is mostly positive, however some people have reported a few downsides, such as

Never actually owned

You lease the software and never actually own a physical copy of it, such as a box with a DVD inside. Most people actually don’t value this as any more important than cloud software nowadays.

May cost more longer term

Because you effectively lease it per month or year, over time it may end up costing more.

May change without notice

This can be problematic, if you have a large number of employees using the software. A sudden change costs time and money in retraining.

Possible security issues

There can be a number of security issues that whilst rare, can be dangerous. Our article on cybersecurity with B2B SaaS may help.

SaaS is only one type of cloud delivery. The three other main ones, are;

  • IaaS, which is Infrastructure as a Service;
  • PaaS, which means Platform as a Service, and;
  • DaaS, which is Desktop as a Service.

SaaS software is certainly the future of delivery for software products.

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