What is SaaS? Everything You Need To Know

By: Leaman Crews - Guest Contributor on November 7, 2023
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Today’s businesses revolve around business software. However, that same software requires hardware, infrastructure, and skilled personnel to keep it running, and IT departments are stretched thin on the vital resources of people and money. Thankfully, Software-as-a-Service (SaaS) solves many of these problems.

Nearly half of respondents (48%) to a Gartner survey say that SaaS applications are among their top three emerging technology investments, which is unsurprising when you think about the benefits. [1] These applications can save your business money by eliminating the need for on-premise infrastructure or maintenance, and allow you to focus your time and budget on running other parts of your business.

What is SaaS?

Software-as-a-Service (SaaS) refers to cloud-based applications purchased on a subscription basis from cloud service providers. In contrast to traditional software, which is installed on and run from a local computer or server, SaaS apps live in the cloud. Users access the app over the internet, typically with a web browser.

When you subscribe to a SaaS app, the work of developing and hosting the app is already done for you. All the hardware, software dependencies, middleware, and app data that are required to make an application live in the cloud provider’s network.

With traditional software, companies may have to make substantial investments in server hardware and system administrators to keep an app up and running. SaaS apps offer flexible payment options, and you can get started using them right away. For many IT departments, SaaS represents a significant cost savings and requires less personnel to maintain.

What are the benefits of using SaaS?

SaaS software has a number of benefits over traditional applications, including:

  • Cost effective: With SaaS, you only pay for the right to use an app, instead of spending money on infrastructure and personnel to develop and host an app.

  • Flexibility and scalability: The pricing for most SaaS apps is per user, and it’s easy to add more users as needed. This model is much more flexible and scalable than what can be achieved with traditional software.

  • Access from anywhere: Instead of installing an app on multiple PCs and laptops, a company’s users can access a SaaS app from anywhere they have an internet connection. This makes international offices and remote work much more manageable.

  • No maintenance: Whereas self-hosted software requires system administrators to troubleshoot software and apply updates, the cloud provider handles all maintenance on a SaaS app. Updates are applied automatically and typically at a more frequent pace.

What are the challenges of using SaaS?

While SaaS apps have many benefits, they can also present some challenges. The most common challenge is integrating data across multiple cloud applications, especially apps that come from different providers. Sharing data across SaaS apps typically requires custom solutions that use the apps' APIs (application programming interfaces). Organizations without developers who can create custom workflows from the APIs are likely to face integration challenges.

Maintaining a hybrid infrastructure—with some apps in the cloud and some on-premise—can sometimes be costly to maintain. At the same time, converting to an all-SaaS environment typically takes time, meaning organizations will need to manage a hybrid environment for some time.

What are the different types of SaaS?

SaaS solutions are available for nearly every type of app you can think of. However, in the context of software, there are six common types of SaaS apps:

  • Customer relationship management (CRM): CRM apps provide a centralized location to manage customer data and track customer interactions. CRM SaaS apps provide remote and traveling salespeople with the flexibility to work from the road.

  • Enterprise resource planning (ERP): ERP software consolidates core business functions such as accounting, HR, and manufacturing so that businesses get a centralized view of their data. With built-in metrics and analytics, ERP SaaS apps allow for high-level strategic planning.

  • Accounting software: Many organizations have adopted accounting and finance SaaS apps for their flexibility and collaborative capabilities.

  • Human capital management (HCM) and human resources (HR): Human resource-focused SaaS apps include timecards, performance appraisals, and other tasks typically associated with HR departments.

  • Project management: With SaaS project management apps, teams can easily collaborate on projects, allocate resources, view project milestones, and communicate with each other.

  • Collaboration software: Email, calendars, and messaging features are now commonly hosted in SaaS apps.

Are SaaS apps secure?

Some IT leaders were wary of placing company data in the cloud in the early days of SaaS apps. Over time, cloud security has generally proven to be reliable. While security concerns exist with any type of software, user behavior is usually the cause of security lapses, ranging from careless employees to insufficient remote work security.

Software Advice research shows that through 2023, 80% of businesses regularly perform security awareness training, which helps their employees use SaaS apps safely.*

What are the future trends of SaaS?

Going forward, you can expect SaaS apps to incorporate some of the latest trends in the technology industry. For example, artificial intelligence-enhanced cloud applications will likely become the norm over the next few years. And as internet of things (IoT) devices become more prevalent on manufacturing floors and in warehouses, you can expect to see SaaS apps that integrate better with IoT.

Another trend that is taking hold within SaaS is the usage-based pricing model. Right now, per-user subscription fees are the norm in the world of SaaS, but customer demand has caused some providers to look at charging based on data storage, the number of monthly API calls, bandwidth usage, and other usage-based pricing. For IT departments that are short on staff and operating within tight budgets, SaaS is only becoming more cost-effective.

Learn more about SaaS

Now that you've learned all about how Software as a Service works and how companies use it, check out some of our other SaaS systems:

Survey methodology

*Software Advice’s 2023 Data Security Survey was conducted in August 2023 among 872 respondents to learn more about data security practices at U.S. businesses. All respondents were screened for full-time employment at U.S. businesses. 362 respondents identified as IT management professionals and 271 identified as IT security managers.