Software-as-a-Service (SaaS)

Definition: What does SaaS mean?

SaaS is a way of delivering applications over the Internet as a service. This eliminates the need to install software and manage complex software and hardware, since access is via a web browser. Other terms for this type of application include web-based software, on-demand software, or hosted software.

SaaS solutions are generally run on the servers of the respective SaaS provider. The provider manages access and is therefore also responsible for security, availability, and performance. SaaS is often used on a subscription basis, with the service user paying a regular usage fee. Users include IT professionals and businesses as well as businesspeople and private individuals. The products range from personal entertainment, such as Netflix, to advanced IT tools.

In short, SaaS is a software licensing and delivery model in which the software...

• is licensed on a subscription basis (usually monthly or annually),
• is hosted centrally in the cloud,
• is accessed via a web browser.

The Emergence of SaaS

In the 1990s, so-called Application Service Providers (ASP) emerged, though with these, the software still had to be installed on users’ computers. This evolved in the early 2000s into the SaaS model, in which the software is delivered via the cloud over the Internet without requiring installation.

SaaS vs. IaaS vs. PaaS

SaaS is one of the three main categories of cloud computing, alongside Infrastructure as a Service (IaaS) and Platform as a Service (PaaS). All three models involve cloud providers that deliver their own hosted data center resources to customers via the Internet. The models differ in terms of the scope of services provided.

• SaaS products are complete and fully managed applications. The customer does not need to download any software or manage existing IT infrastructure, and the provider also handles maintenance, upgrades, and support.
• With IaaS, data centers and computing resources are outsourced to cloud providers. IaaS providers host, for example, servers, storage, and network hardware, while customers manage their own data usage, applications, and operating systems.
• PaaS provides a development platform and other tools hosted in the provider’s data center. These cloud platform services offer developers a framework on which they can build and use to create customized applications.

How does the SaaS model work?

Software-as-a-Service operates as a cloud delivery model. Accordingly, a software provider hosts the application and associated data on its own servers, databases, and networks. There is also the option for an independent software provider to commission an external IT service provider to host the application in the provider’s data center. Typically, SaaS applications are accessed via a browser, making them available on any device with an internet connection. To do so, users log in to their individual accounts using their credentials. The associated costs are billed monthly or annually, depending on the pricing model. The provider is responsible for maintaining and updating the software.

Examples of SaaS Applications

SaaS is now available in many different fields and has become a common method for delivering numerous business applications. Some examples of how the software is used include:

• Project management
• Content management system
• Financial Accounting
• Business operations
• Human resources planning
• Office and Communication
• Enterprise Resource Planning

Benefits of a SaaS Solution

Businesses in particular often benefit from SaaS applications. The model offers many advantages over on-premises software, and more and more companies are switching to cloud computing to take advantage of these benefits.

Benefits at a Glance

• Low Costs: Compared to hardware and software licenses, costs are lower because there is no need for installation, complex implementation, or large upfront investments. Maintenance costs are also lower, as the SaaS provider owns and manages the software.
• Quick setup: After logging in via a browser, you can start working with the program immediately, since the software is already installed and configured. Problems that can arise with a traditional software installation simply don’t occur.
• Little to no IT effort: Hosting is handled by the service provider, meaning the company’s IT department does not have to worry about installation, licenses, or updates.
• Ease of use and availability: Because it is web-based, the software is not tied to a specific workstation but can be used across multiple locations.
• High security: Thanks to centralized storage on cloud servers, no data is lost. Furthermore, the security of the application is a top priority for the providers as well.
• Scalability and integration: Cloud environments are scalable; there is no need to purchase additional servers or software programs. SaaS usage can be flexibly scaled up or down at any time.
• New versions and upgrades: The solution is updated and made available by the provider. The costs for this are lower than with traditional models, which often require the purchase of upgrade packages or corresponding IT services.

Disadvantages of a SaaS Solution

In addition to its numerous advantages, SaaS also has some disadvantages, as well as potential risks and challenges. Companies must rely on the external provider and, in some cases, relinquish control.

Disadvantages at a Glance

• Limited control: Problems can arise, for example, if the provider experiences service interruptions or security breaches. Control lies with a third party, and the company has little influence.
• Security Concerns: By transferring data to the provider, companies assume a certain level of risk. Hacker attacks or data breaches can occur at any time.
• Stable Internet and Connectivity: As a cloud solution, companies rely on fast and stable Internet to work successfully and consistently with SaaS. If the provider experiences downtime, the software cannot be used for a certain period of time.
• Compatibility: The performance of web tools depends in part on the browsers and operating systems used.