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What is software as a service (SaaS)?

Learn about SaaS and explore the advantages of this cloud-based software delivery model

Scalable, cost-effective, and highly secure software delivery

SaaS provides people and businesses with cloud-based software accessible from anywhere. Its subscription pricing model helps organizations scale efficiently, reduce costs, and stay current with the latest features and security updates. 

Key takeaways

  • SaaS is a cloud-based software delivery model where people access applications over the internet, while the cloud service provider handles infrastructure, security, and updates.
  • SaaS operates on a subscription basis, eliminating the need for customers to install or maintain software locally.
  • SaaS applications are highly scalable, allowing customers to adjust their subscription levels as their needs evolve.
  • Multitenant architecture allows a single instance of SaaS software to serve multiple customers, optimizing resources and reducing costs. 
  • SaaS advantages include cost efficiency, ease of access, and workforce mobility by providing access to apps and data from any internet-connected device.
  • Common SaaS use cases span business management and operations, collaboration and communication, and data analytics and business intelligence. 
  • Future SaaS trends include greater AI adoption, the rise of low-code and no-code platforms, and stronger focus on security and compliance.

Software as a service definition

SaaS is a cloud-based software delivery model where individuals or organizations subscribe to applications rather than purchasing and installing them locally. Customers access software over the internet, typically through a web browser, while the cloud service provider manages the underlying infrastructure, security, maintenance, and updates.

How does SaaS work?

SaaS operates on a cloud-based model where software applications are hosted by a service provider and accessed over the internet. Instead of purchasing and installing software on local computers or servers, customers subscribe to the software and use it online. This approach offers several advantages, including ease of access, scalability, and reduced IT infrastructure needs.

When a customer subscribes to a SaaS application, they typically log in through a web browser. The application runs on the service provider's servers, which handle all the processing and data storage. This allows customers to access the software from any device with an internet connection, providing flexibility and mobility. The service provider manages software maintenance, including updates, security, and backups, so customers always have the latest features and security patches.

From a technical perspective, SaaS providers use multitenant architecture, meaning a single instance of the software serves multiple customers. This approach optimizes resources and reduces costs, as infrastructure and maintenance expenses are distributed across many customers. SaaS applications are also highly scalable, allowing customers to easily adjust their subscription levels based on their needs, whether that means adding features, increasing storage, or supporting more users.

Overall, SaaS simplifies software management for customers, providing a cost-effective and convenient way to access powerful applications without the complexities of traditional software deployment.

Comparing SaaS, PaaS, and MaaS
  • SaaS delivers software applications online, allowing users to access and use them without worrying about underlying infrastructure or maintenance. Examples include email services, customer relationship management (CRM) systems, and office productivity tools.
  • Platform as a service (PaaS) provides a complete cloud-based environment for developers to build, deploy, and manage applications—all without the need to manage infrastructure. PaaS also offers tools and services for application development, such as databases, middleware, and development frameworks.
  • Model as a service (MaaS), like SaaS and PaaS, uses a cloud-based delivery model but is specifically designed for machine learning models. While SaaS and PaaS cater to a wide range of applications, MaaS focuses on AI use cases. This specialization enables MaaS to provide highly efficient and optimized solutions for ML models, helping organizations quickly deploy AI-powered solutions that drive business outcomes.

Advantages of SaaS

SaaS offers several advantages that enhance efficiency, scalability, and cost-effectiveness for businesses of all sizes.
Access advanced applications
SaaS customers can access advanced software without purchasing, installing, updating, or maintaining hardware, middleware, or software. This makes enterprise applications like enterprise resource planning (ERP) and CRM more affordable to organizations with limited IT resources.

Pay only for what you use

Instead of high upfront costs, SaaS customers might have the option to pay only for what they use. Subscription models automatically scale up or down based on usage needs. This dynamic scaling prevents overpayment for unused resources during low-demand periods and makes the necessary capacity available during peak times—without manual adjustments or additional investments.

No need for local installation

Customers run most SaaS apps directly from their web browser without needing to download and install any software, although some apps require plugins. This means that customers don’t need to purchase and install special software.

Support for a mobile workforce

SaaS supports a mobile workforce by providing access to apps and data from any internet-connected computer or mobile device. Service providers handle compatibility across devices and manage security, so data is protected without additional in-house expertise.

Access app data from anywhere

Storing data in the could empowers SaaS customers to access their information from any internet-connected computer or mobile device. No data is lost if a user’s computer or device fails.
Use cases
Common SaaS scenarios
SaaS solutions help organizations in a range of industries streamline operations, enhance collaboration, and improve decision-making with cloud-based applications.

Business management and operations

Cloud-based tools for project management, CRM, accounting, and human resources provide real-time data access to enhance decision-making, streamline workflows, and improve overall efficiently across various departments.

Collaboration and communication

SaaS tools like Microsoft Teams support real-time messaging, video conferencing, file sharing, and project management, empowering teams to collaborate seamlessly from any location.
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Data analytics and business intelligence 

SaaS solutions provide real-time data processing, visualization, and reporting. They support predictive analytics, trend analysis, and decision-making to help businesses uncover insights, optimize operations, and drive growth. 
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Frequently asked questions

  • Software as a service (SaaS) is a way of delivering software over the internet. Instead of installing and maintaining software on your computer, you access it online through a subscription with a cloud service provider. This makes it easy to use, update, and scale according to your needs.
  • Azure AI services are an example of SaaS. These services help developers and organizations quickly build AI-powered applications without requiring them to manage the underlying infrastructure. They include natural language processing, search, monitoring, translation, speech, vision, and decision-making.
  • A SaaS company provides software on a subscription basis, hosting it in the cloud for customers to access via the internet without installation. These companies offer scalable solutions, allowing customers to adjust their plans as needed. They manage automatic updates, ensuring users always have the latest version. Most SaaS companies use a multitenancy model, where multiple customers share the same infrastructure while maintaining separate data and configurations.
  • SaaS is often offered on monthly subscription basis. Some providers also offer annual plans—often at a discounted rate.
  • Starting a SaaS business might be a strong opportunity. SaaS offers recurring revenue, scalability, and lower distribution costs. However, it also requires significant investment in development, marketing, and customer support. With a strong product idea and a solid execution plan, a SaaS business has the potential to be highly profitable.