A SaaS company maintains servers, databases, and software that allow the application to be accessed over the internet — most likely by web browsers. Users can access the software from almost any device.
SaaS customers usually pay a subscription fee— often monthly — to access the application. Some subscriptions are based upon how much data needs to be stored, the number of users who will access the application, or the level of technical support desired.
What Is Software as a Service (SaaS)?
SaaS is a licensing model in which access to software is provided on a subscription basis. The software is located on external servers rather than on servers located in-house.
Software as a service is commonly accessed through a web browser with users logging into the system with a username and password. The user can access the program via the Internet rather than each user having to install the software on their computer.
Understanding Software as a Service (SaaS)
The rise of SaaS coincided with the rise of cloud-based computing. Cloud computing offers technology services through the Internet. This often includes access to data storage, networking, and servers.
Companies looking to update the software on their computers had to purchase compact discs before SaaS. The discs contained the updates and they then had to download them onto their systems. Updating software was a time-consuming endeavor for large organizations.
Users can log in through the Internet or a web browser and connect to the service provider’s network to access the particular service with SaaS. Technology companies, financial services companies, entertainment, and utilities have led the business world in adopting SaaS technology.
Examples of SaaS Companies
SaaS companies can handle just about every business function. Some of the more popular types of SaaS applications available include:
- Customer resource management or Customer Relationship Management (CRM) — These applications allow SaaS customers to manage customer information and track sales through their pipeline.
- Enterprise resource planning (ERP) — This is a system of many SaaS applications most suited for big organizations.
- Accounting and invoicing — Some SaaS companies focus on billing and invoicing services. Others offer a full range of financial tracking and reporting services.
- Project management — Software can help collaborators communicate and stay on track.
- Web hosting and ecommerce — Remote servers can handle everything a business needs in its online presence.
- Human resources — SaaS companies can offer tools to track employee hours, manage payroll, schedule and manage the hiring process.
- Data management — SaaS products can help analyze and secure a company’s data.
Many B2B companies offering software applications like marketing automation, Email marketing, social media marketing, sales automation, and more. These companies can also be divided into different categories of SaaS, such as multi-tenancy vs single-tenancy.
Benefits of SaaS Companies
- Cost savings — Most SaaS companies charge a subscription fee that helps spread out the cost of the application over time. SaaS customers have lower initial costs because they don’t need to invest in expensive hardware to host the applications as they offer cloud services.
- Low-effort updates — SaaS companies maintain the software and update it when needed. SaaS customers do not need to install any software or install patches and updates.
- Mobility — In theory, SaaS customers can access to their systems from any device or location. This is very useful for workforces that are not confined to a central location or office.
- IT expertise — SaaS companies invest in the IT needed to troubleshoot and maintain applications so their customers don’t have to. Also, SaaS companies have the resources to maintain system reliability and data security better than customers with limited IT budgets.
- Scalability — If a SaaS customer needs to expand capacity or add users, it doesn’t need to purchase new hardware or install new software. A SaaS company can increase capacity quickly with cloud technology and cloud storage, but it most likely will come at an increased subscription fee.
Risks of SaaS Companies
- Pricing — While system flexibility is a key feature of SaaS companies, their contracts may not be so flexible. Having SaaS services on demand can be costly. Scaling back to less expensive options or cancelling the contract may not be allowed. And upgrading capacity or access could come at a steep price increase.
- Downtime — Being able to use a SaaS application and accessing the data depends on the reliability of a third party. The SaaS company’s downtime could be your downtime.
- Security — Data security is in the hands of a third party. There are SaaS companies that don’t comply with security standards and aren’t transparent about security. Also consider that allowing users remote access with any device can increase convenience and vulnerability to unauthorized use.
- Solvency — A crucial aspect of the SaaS customer’s business depends on the SaaS company staying in business. If the vendor goes out of business, access to the SaaS service and data could be cut off. In the best-case scenario, the SaaS customer needs to find a new SaaS company and migrate the data.
- Aggressive Sales Team / Marketing Team – Depending on the company some SaaS software companies will have aggressive sales teams trying to upsell users.
- Customer Services – Again depending on the company some SaaS software providers will have limited customer service offerings.
FAQs
SaaS vs. IaaS vs. PaaS?
As a service” products fit into one of three main categories: SaaS, IaaS, and PaaS.
SaaS uses the Internet to deliver subscription software services that are managed by third-party vendors. Well-known SaaS examples include Dropbox, Google Workspace, and Salesforce.
Infrastructure as a service (IaaS) offers access to resources such as servers, storage, and memory. It allows organizations to purchase resources as necessary. Some common IaaS examples include Amazon Web Services (AWS), Microsoft Azure, and Rackspace.
Platform as a service (PaaS) provides a software development platform over the web. It allows developers to concentrate on software creation without concerning themselves with storage and infrastructure.
What Is B2B SaaS?
B2B SaaS simply refers to companies that sell software services to other businesses. These products help organizations optimize a wide variety of functions including marketing, sales, and customer service.