What is SaaS?

SaaS stands for ‘Software as a Service’, part of what many people would describe as cloud computing.

How does SaaS work?

Traditionally most software was (and often still is) provided in the form of installation files, and a user or administrator would load it onto their hardware. More recently organizations have moved from owning hardware to utilizing virtual machines in a data center somewhere – this relieves them from some responsibilities, but they still take responsibility for the machine, and they are still responsible for installing and maintaining the software.

Software as a Service is provided on a hosted platform – the administrator now has no connection whatever to the hardware, and usually doesn’t even have to worry about software updates. It is the provider, rather than the organization using the software, that takes care of such things.

SaaS aims to reduce the cost and time for deployment (you don’t have to install the software on each machine on which it is used), reduce the costs of operation (through economies of scale), remove some of the risks of operation (someone else is keeping it secure and making sure it is kept up to date), and provide known costs for the period of a contract (you won’t have to maintain or replace equipment that goes wrong).

In addition, as the customer grows the infrastructure can scale effortlessly in parallel – a bit like a utility: you use and buy as much electricity as you need (for example), but you don’t have to maintain the power station or the means of delivery.

SaaS providers typically offer a very high percentage of ‘up’ time. The organization using such reliable software can focus on their business, and be more productive.

Customers usually access software based on a licensing model (though perpetual licenses are possible too). As the demand grows, further users, customers, and capabilities can be bought according to the specific needs of the customer within different licensing models.

Reviewed January 2024