Saas (Software as a Service), sometimes referred to as "on-demand software", is a method of delivering and licensing. The software programme is hosted by a third-party provider and accessed by users online via a subscription. It is an alternative to buying and installing the software on individual computers. As a result, this web-based model is significantly different from the earlier on-premise software delivery model. Companies no longer need to invest in extensive hardware to host their software. Instead, the software provider hosts and maintains the servers, databases and code that make up their applications. This allows users or subscribers to outsource most of the IT responsibilities typically required to maintain the software. The SaaS provider takes care of it all.

The development of SaaS

SaaS is not new. It can be traced back to the 1960s, with IBM and other corporations using distributed software packages to connect users with mainframes which hosted applications and data. These services included offering computing power and database storage to banks and other large organizations from their worldwide data centres.

The expansion of the Internet during the 1990s brought about a new class of centralized computing, called Application Service Providers (ASP). ASPs hosted and managed specialised applications for businesses. The aim was to save costs through central administration and the provider's specialization in a particular business application.

SaaS today

As the Internet became faster and more accessible for all users, cloud computing (servers being hosted in remote locations or datacentres) took off and the software model of SaaS spread.

These days, businesses are shifting away from the installed programme model and are addressing their basic needs with SaaS. Popular examples are Microsoft’s Office 365, Google's G Suite, Adobe Creative Cloud, Salesforce, Shopify, Dropbox, Stripe, Slack, Mailchimp and Intercom. Just the tip of the iceberg!

Nearly every type of core business function is available via SaaS today, including:

  • office applications
  • messaging
  • payroll processing and invoicing
  • accounting
  • database management systems
  • management
  • collaboration
  • customer relationship management (CRM)
  • content management (CM)
  • management information systems (MIS)
  • human resource management (HRM)
  • talent acquisition
  • computer-aided design (CAD)
  • development
  • gamification
  • virtualization
  • geographic information systems (GIS)
  • enterprise resource planning (ERP)
  • learning management systems, and
  • service desk management.

SaaS and the cloud

Although SasS and the cloud are related, there is a difference between the two technologies. Essentially, the cloud refers to anything that is hosted remotely and delivered via the internet.

SaaS, however, refers specifically to business software applications that are delivered via the internet. With SaaS, the user no longer has to maintain either the physical servers or the cloud based software application. Instead, they pay a subscription to access an already developed software application.

Put simply, the cloud is a larger platform in which SaaS resides. There are other technologies that reside in the cloud alongside SaaS. These are Platform as a Service (PaaS) and Infrastructure as a Service (IaaS).

Pricing of SaaS applications

Unlike the traditional installed software which involves the purchase of a perpetual license, SaaS providers price their applications using a subscription fee. This monthly or annual payment includes the software licence, support and other fees. In the SaaS pricing model, the initial setup costs are low and a user is able to spread the costs out over time.

The costs to a SaaS provider of setting up a new customer are also low. This often means that providers can offer free applications with limited functionality or scope and only charge for enhanced applications. Other SaaS applications are completely free to users and funded through alternative sources such as advertising.

Data ownership and use

Most SaaS contracts state that the user owns their data and is able to export and back it up locally at any time. It is also common for contracts to provide that the service will help the user migrate the data, for a fee.

Most SaaS providers prepay their data centre hosting company to “keep the lights on”. This contingency payment ensures that users can access their data if something should happen to the provider.

SaaS functionality

SaaS relies on a good internet connection. Therefore, some SaaS vendors have developed “offline” functionality as a safeguard. This allows users to keep working if the internet goes down. Furthermore, all data is synced to the system once a stable connection is established again.

Most SaaS companies support multiple web browsers and operating systems.

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