Definition

Software as a Service (SaaS)

This definition is part of our Essential Guide: How to implement a successful SaaS business model

Software as a service (SaaS) is a software distribution model in which a third-party provider hosts applications and makes them available to customers over the Internet. SaaS is one of three main categories of cloud computing, alongside infrastructure as a service (IaaS) and platform as a service (PaaS).

SaaS removes the need for organizations to install and run applications on their own computers or in their own data centers. This eliminates the expense of hardware acquisition, provisioning and maintenance, as well as software licensing, installation and support. Other benefits of the SaaS model include:

Flexible payments: Rather than purchasing software to install, or additional hardware to support it, customers subscribe to a SaaS offering. Generally, they pay for this service on a monthly basis using a pay-as-you-go model. Transitioning costs to a recurring operating expense allows many businesses to exercise better and more predictable budgeting. Users can also terminate SaaS offerings at any time to stop those recurring costs.

Scalable usage: Cloud services like SaaS offer high scalability, which gives customers the option to access more, or fewer, services or features on-demand.

Automatic updates: Rather than purchasing new software, customers can rely on a SaaS provider to automatically perform updates and patch management. This further reduces the burden on in-house IT staff.

Accessibility and persistence: Since SaaS applications are delivered over the Internet, users can access them from any Internet-enabled device and location.

But SaaS also poses some potential disadvantages. Businesses must rely on outside vendors to provide the software, keep that software up and running, track and report accurate billing and facilitate a secure environment for the business' data. Providers that experience service disruptions, impose unwanted changes to service offerings, experience a security breach or any other issue can have a profound effect on the customers' ability to use those SaaS offerings. As a result, users should understand their SaaS provider's service-level agreement, and make sure it is enforced.

SaaS is closely related to the ASP (application service provider) and on demand computing software delivery models. The hosted application management model of SaaS is similar to ASP: the provider hosts the customer’s software and delivers it to approved end users over the internet.  In the software on demand SaaS model, the provider gives customers network-based access to a single copy of an application that the provider created specifically for SaaS distribution. The application’s source code is the same for all customers and when new features are functionalities are rolled out, they are rolled out to all customers. Depending upon the service level agreement (SLA), the customer’s data for each model may be stored locally, in the cloud or both locally and in the cloud.

Organizations can integrate SaaS applications with other software using application programming interfaces (APIs). For example, a business can write its own software tools and use the SaaS provider's APIs to integrate those tools with the SaaS offering.

There are SaaS applications for fundamental business technologies, such as email, sales management, customer relationship management (CRM), financial management, human resource management, billing and collaboration. Leading SaaS providers include Salesforce, Oracle, SAP, Intuit and Microsoft.

SaaS applications are used by a range of IT professionals and business users, as well as C-level executives.

This was last updated in May 2016

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Unlike traditional software which is conventionally sold as a perpetual license with an up-front cost (and an optional ongoing support fee), SaaS providers generally price applications 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 ("seats") using the application.
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Roughly 50% of all SaaS contracts aren't on a subscriber's contract template. To put yourself in the best possible position to use your SaaS or cloud computing contract template, you have to get the contract template in front of prospective bidders as a part of a competitive bid. But that implies you have a SaaS contract template to begin with. For a comprehensive SaaS contract and to learn how to negotiate critical cloud terms and conditions, check out the Contract Negotiation Handbook: Software as a Service.
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BenefitsPark provide SaaS based EDI Tool in USA, it has provided an access to even the small organization and to effectively integrate it into their systems for better operational efficiency
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What made you choose SaaS for your enterprise?
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In order to build a Saas, I need to pay some Saas jeje :D
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We wanted to save time as we have many clients using public cloud services and optimizing costs for each of them was time consuming. So we started using several SaaS - cloud monitoring tools and now we use Unigma which helps us managing Azure, AWS and Google Cloud together providing partner billing, cost analytics, reporting, policy-based alerting, etc.
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