SaaS Software Explained: What Is It and How to Use It?



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⏱ Reading Time: 10 minutes

SaaS is a form of application usage where the application is not located on the user’s computer but somewhere far away in the cloud. The user only fills it with his or her data via the Internet. Facebook, Gmail, Trello, Google Analytics, Salesforce, Netsuite, Dropbox, Pipedrive, and Toggl are well-known examples of SaaS solutions.

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SaaS is very widespread today. It is more beneficial for the end-user and big companies to use SaaS than to install license software on computers. This type of software has changed the business sphere a lot and will definitely continue to do this. 

The Impact of SaaS on Enterprises

Company Computer Economics, engaged in research in the field of IT, surveyed dozens of U.S. companies with annual turnover from 50 to 500 million dollars. It turned out that using SaaS software helped companies save an average of 15 percent on IT costs. It reduced the cost of staff, software licenses, as well as hardware costs.

Startups also benefit from SaaS. This makes it easier for them to access the software market at a lower cost since it is enough to access the Internet. 

Traditional software vendors also feel the impact of SaaS, as software as a service has forced such companies to rethink their business model to remain competitive in a changing environment.

Saas software helps companies reduce costs

Picture 1. Cloud-based software helps companies reduce costs

SaaS Sector Will Continue to Grow Rapidly

According to the research company Gartner, the SaaS sector will continue to grow steadily. The turnover forecast for 2022 is 151.1 billion dollars. It is a big turnover compared with 10.75 billion dollars in 2010.

According to a study by Gartner, more than 1/3 of companies consider investment in SaaS one of their top priorities. As a result, Gartner estimates that demand for traditional software is declining and demand for SaaS software is growing.

Market research report by Technavio

Picture 2. Market research report by Technavio

The success of SaaS is visible in the BVP Nasdaq Emerging Cloud Index, which tracks the performance of various SaaS companies. This index has grown by 400% since its creation in 2013. Nasdaq Technology Index has grown by 120% over the same period, while the S&P 500 has grown by 75%.

High earnings in the past do not guarantee good earnings in the future, but the general trend shows that demand for SaaS software is growing, especially among companies that care about cost savings. In the digital world, IT costs are high and every euro or dollar must be spent as wisely as possible.

Read The Secrets of SaaS Business Model

What Is Necessary to Know About SaaS Software?

A distinctive feature of the model – the client does not buy the application, does not install it on the computer or smartphone. Instead, the customer rents the software. The client regularly pays for the use of the software and accesses it via the Internet.

SaaS users are both individuals and small and medium-sized businesses, as well as companies with a large network of offices.

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1. Why IS SaaS Software so Popular Over the World?

Small companies usually have no extra hands. But when small businesses buy an application, someone has to keep it running, update it, make backups, and so on. In the SaaS model, the service provider takes over these administrative tasks.

Another important thing – today the user is already used to the fact that his or her data is available from different devices: laptop, tablet, smartphone. They are constantly synchronized. Local software is not suitable for this. So, there must be a service accesible from anywhere. That’s what SaaS software gives you.

2.  How Did SaaS Software Help Reduce the Amount of Pirated Software?

Many people find it easier to use the subscription model and pay a small monthly amount than to buy expensive software at once. Previously, they installed a lot of pirated software, because the software was expensive. It is much more comfortable to pay small sums every month. Therefore, even a small company can legally use the right software.

Saas increases the amount of legally used software

Picture 4. SaaS increases the amount of legally used software

3. How Does SaaS Software Ensure the Security of User Data?

All serious SaaS platforms allow data to be exported. In case of migration from one service to another, it can be stored, deployed on your server, or filled in the SaaS of another provider. This feature removes the user’s fear of vendor lock-in.

Not everyone thinks about it at the initial stage of choosing a SaaS solution. If you can’t get the data out of the cloud, there are two choices: either to lose the data and go to the other provider or to continue paying the same provider, even if you are not satisfied with services.

This risk is not a consequence of the SaaS business model, but a lack of computer literacy about how to use clouds that are often safer than their own infrastructure.

Something being physically stored on a computer is understandable even to people who don’t know anything about computers. But the concept of the cloud is an abstraction that scares someone. A person who is far from IT is unlikely to understand how the cloud works: where the data centers are, why they say they are in the cloud. 

Read Gamification in Digital World and SaaS

4. The Duty of the SaaS Software Is to Make Predictions on Impersonal Data

SaaS service should predict, add, and enrich data that the clients can not monetize themselves. These capabilities arise from the fact that SaaS software aggregates the impersonal data of many users and knows how to work with them. The client, giving the data to the SaaS platform, monetizes it immediately. He or she gets additional predictive services that arise due to aggregation and comparison with other data.

An example of this is anti-spam. You can’t build it on the data of one mailbox or even on all the mailboxes of one company, but it’s easy to build it on the data of millions of mailboxes.

5. Why Is SaaS Technology Rapidly Evolving?

An important barrier to SaaS development was the Internet: its availability, reliability, speed, and some other parameters. Now everything is developing, there are 4G and 5G. There are several providers in almost any apartment. The Internet is becoming a thing of infrastructure, like electricity.

Therefore, many applications already load the user’s device minimally, the most loaded work takes place somewhere there: on the Internet or in the cloud.

Now we are used to opening a laptop, and in 10 years we will consider it strange to open something, carry or take out of your pocket. This will be redundant because there are more convenient types of access to information, for example, by voice or click.

SaaS has been evolving rapidly with the development of the internet

Picture 5. SaaS has been evolving rapidly with the development of the internet

7. Switching from SaaS to PaaS

PaaS – platform as a service. If SaaS software is applications in the cloud for users, then PaaS is “bricks” for creating applications, also in the cloud. They are needed by those who create applications – developers and IT departments. Typical PaaS are cloud databases, elements of AI, large data analysis. The value of PaaS for development is that there is no need to configure, administer, update these databases, and so on. Programmers can focus on the business logic of applications.

Platforms allow people to experiment quickly and a lot. When an idea for a new product or service comes up, programmers don’t need to spend a lot of time, effort, and money from scratch to get an MVP (Minimum Viable Product) or to build an online store – PaaS makes development easier.

8. What Are the Differences in the SaaS Industry?

If you think that problems of mastering and application of software solutions by clients are similar to the human factor, you are not mistaken. However, the human factor is not often used in the SaaS industry. There are three reasons for this:

  • Another model for purchasing software. In the past, it was based on the fact that clients purchased the software and installed it on servers on their premises. Examples of this are large ERP systems or accounting software. Usually, such purchases were carried out through the IT department which later supervised software introduction from the central office or project management department. The present software extends basically under a subscription, and the organizations can get a set of appendices, without resorting to the help of departments of management. Customers of such software are engaged in marketing, sales, engineering, customer support, and other application areas.
  • Other industries. Unlike major local software vendors such as Microsoft, which understand and practice change management, today’s SaaS companies are managed by developers who typically lack this expertise. Managers of IT companies are usually guided by the idea that a new and better product will always be able to attract customers who can easily master it and start using it. Some SaaS companies practice change management and achieve success, but their minority.
  • Other terminology. Among software developers, the term “change management” is often used, but usually in a different meaning. In their conversations, it means replacing a previous version of the program code with a later one (for example, when assembly 1.4.14 is replaced by assembly 1.4.15). In the area of information security, change management means replacing infrastructure, implementing new versions of software, or changing security policies according to ISO/IEC 27001 standards.
Saas in merchandising

SaaS Alternatives

Alternatives to SaaS software are the middle ground between a classic software installation and a cloud solution.

  1. S+S – operates according to the same scheme as SaaS, but it needs a special client instead of a browser.
  2. IaaS – infrastructure as a service. It provides access to servers, network, storage.
  3. Rental of applications. From a user’s point of view, there is no difference, but everyone gets a separate copy of the software, unlike SaaS, where everyone works in one program. It’s harder to administer and configure.
  4. PaaS – platform as a service. Developers use PaaS to develop and manage their applications.

Read Pros and Cons of Cloud Computing

Saas also has its alternatives

 Picture 7. SaaS also has its alternatives

Advantages of the SaaS

  • In the standard model, the buyer-supplier relationship most often ends immediately after the software is purchased. The only exceptions are the “giants” of Windows and Adobe level. When it comes to SaaS, the user can contact the supplier for support at any time. All customers of the service get regular updates.
  • For a large company, it is savings on software. You don’t have to purchase and install a program  separately on each computer so that it can work for several users. The main thing is to have access to the Internet, as well as a login and password.
  • Some services are simply not compatible with company’s servers. For example, complex products cannot exist as traditional software, but only as SaaS software. You can develop such a solution yourself if you want. But it requires significant resources.
SaaS advantages

Picture 8. SaaS advantages

Final Thoughts

Accountants, digital specialists, marketers, and many other professionals work with SaaS technology all the time. The number of such services continues to grow due to their popularity and ease of use. But progress does not stop there, offering more and more advanced and interesting ideas tailored to everyone’s needs.

Stacey Wonder is a content marketer who enjoys sharing best practices for self-development and careers with others. In her free time, Stacey is fond of contemporary dance and classic French movies.

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SaaS Software Explained: What Is It and How to Use It? was last modified: February 8th, 2021 by Martina Pranjic
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