Software as a Service, commonly referred to as SaaS, is an arrangement where software is licensed and provided on-demand through a pay-per-use or subscription basis. The software is hosted centrally by the provider and accessed through a customer’s web browser. Remote provision of these services is now part of cloud computing, a huge step away from the traditional office desk and into a flexible, mobile working environment

How does it work?

Businesses typically use SaaS for business apps and office software. This often includes messaging, payroll and accounts, as well as software that manages databases, information systems, HR and resources. SaaS apps are also key to running the service desk, HR and customer relationship management software.

Enterprise software companies have built their success on being able to outsource IT maintenance to SaaS providers rather than let businesses take on the burden themselves. With the responsibility and costs of updating and upgrading hardware and software removed, businesses can focus on what they are best at – their own products and services. According to IT research and advisory experts Gartner, SaaS sales are in the billions of pounds each year, and increasing annually.

5 advantages of SaaS:

  1. Providers usually develop and manage their own software, cutting out the third party and allowing them to take a more proactive approach.
  2. An app can serve many businesses and users together, but separates the data of each, keeping them secure individually through multi-tenant architecture.
  3. SaaS generally requires only a web browser to use, unlike traditional client-server systems which require installation of software onto each PC.
  4. On-demand usage costs are usually lower than traditional software sold on a perpetual license (with an ongoing support fee).
  5. SaaS apps can be customised to reflect a business’s brand and particular interface. Although they have this in common with other types of software, SaaS apps are just as easily modified to the special configurations of each client, no matter how many different clients are using them at one time.

Why might businesses need it?

With companies seeking more flexible ways in which to work, it seems only natural that off-premises software should also be part of the plan. As cloud computing and smart devices find their place within the working week, SaaS too enjoys a place within this model – and indeed has been an indicator of the cloud concept all along, with an estimated 90 per cent of SaaS delivery revenue part of cloud services.

SaaS now versus 10 years ago

The first decade of SaaS has set the standard high. ‘After more than a decade of use, adoption of SaaS continues to grow and evolve within the enterprise application markets,’ says Tom Eid, Research Vice President at Gartner. ‘This is occurring as tighter capital budgets demand leaner alternatives, popularity and familiarity with the model increases, and interest in platform as a service and cloud computing grows.’ As technological developments close the gaps in security, availability and timescales, more and more organisations have signed up for SaaS. In turn these companies have been able to offer more services to vendors and customers.

What’s in store for the future?

Now that SaaS has become the popular option to replace on-premise systems, where will it lead (apart from into the cloud)?

SaaS is especially suited to small- and medium-sized businesses, so it’s easy to imagine its adoption may become widespread in the long-term. So long as application service providers (ASPs) remain a viable source of services, we’ll continue to see SaaS take over from the big names in software.

Smaller SaaS providers such as Employease and NetLedger will need to work hard to meet the more complex requirements and provide flexible solutions for large businesses in order to remain afloat, but they are doing very well with more modest clients. Netledger recently received £20.7m from Oracle and became Oracle E-Business Suite – a sure sign that the SaaS model itself shows little sign of flagging, and it’s garnering no shortage of attention from business clients and big tech companies.

See our other posts in the Tech 101 series

Tech 101: What is Software?

Tech 101: What is Open Source Software?

Tech 101: What is Programming?

Tech 101: What is .NET?

Tech 101: What is SQL?

Tech 101: What is Data Mining?

Tech 101: What is SaaS?

Tech 101: What is Hosted Software?

Tech 101: What is Bespoke Software?