Definition

software as a service (SaaS)

This definition is part of our Essential Guide: Private PaaS offerings: Benefits, challenges, best practices and more

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.

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 first published in May 2016

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