With few exceptions, the IT business tools of the modern enterprise, whether a multinational conglomerate or a one-person operation, revolve around cloud computing and the “something-as-a-service” delivery method. Network infrastructure, platforms, application software and everything in between can all be accessed from anywhere, at any time, with nothing more than an internet connection.
While much of the cloud services available replace the need to purchase expensive hardware, Software as a Service (SaaS) supplants the need to physically purchase, install and deploy application software throughout an organization. In theory, SaaS transfers the costs associated with initial purchase, regular maintenance and security management to a third-party vendor, which allows the client to expend resources on other, possibly more productive, endeavors.
This Software as a Service cheat sheet explains what SaaS is, why it is important, who provides it and how you can get it.
SEE: Software as a Service (SaaS): A cheat sheet (free PDF) (TechRepublic)
What is SaaS?
Put simply, Software-as-a-Service is a licensing model in which access to an application is provided to the customer or client on a subscription basis. A third-party vendor controls access and takes responsibility for security, maintenance and feature upgrades. The software is located on external servers rather than on servers located in-house and is generally accessed with a web browser over the internet.
While the source code for the SaaS applications is owned and maintained by the vendor, the data going into, and being generated by SaaS applications, is generally the responsibility of the customer or client. The data may be stored locally, in the cloud or in some combination of both.
SaaS applications tend to fall into one of two categories:
- Vertical refers to SaaS applications built to serve a specific industry such as healthcare or financial institutions.
- Horizontal refers to SaaS applications built to serve a specific market such as office productivity or customer relationship management.
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When is SaaS useful?
A number of applications are well-suited to the SaaS distribution model, and in many cases the ability to access software that would otherwise be too expensive to obtain offers a substantial competitive advantage. SaaS levels the playing field for all businesses and gives access to important applications and tools like email, messaging, collaboration platforms, productivity suites, customer relationship management, billing, payroll, sales management, human resource management, content management and database management.
SMBs, professionals, consultants and individuals working as part of the gig economy can use SaaS to gain access to sophisticated software, applications and tools vital to the management of their respective businesses. Large enterprises can transfer some of the costs of software development and maintenance to third parties and concentrate resources on managing and securing data.
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What are the advantages of SaaS?
The most obvious and most-often cited advantage of the SaaS distribution model is the reduction in initial costs from the development, deployment and maintenance of software applications. Because the vendor handles those aspects, costs are supported by customers and their subscriptions. The more customers under contract with a vendor, the more funds are available for security, maintenance and feature upgrades.
SaaS allows more businesses to adopt the economic and strategic theory that suggests business growth can be achieved through the development of new technologies and improvement in production efficiency. Under this strategy, technological innovation is the engine that spurs and drives growth and access to more and better tools though SaaS can only accelerate innovation.
Supplementing this strategy is the ability of SaaS vendors to periodically deploy feature upgrades to customers. As innovations in big data, Internet of Things and artificial intelligence become more mainstream, tools and features designed to take advantage of them can be developed and deployed by vendors and subsequently used by customers—innovation spurring innovation.
Even before the global coronavirus pandemic, mobility, remote workers and telecommuting were increasingly important trends for the modern business — that trend has now greatly accelerated. Because SaaS applications can be accessed from anywhere with an internet connection, they are perfect tools for a mobile and remote workforce.
In general, modern SaaS applications and platforms may be modified to fit the needs of your business and often the needs of individual workers. Depending on the SaaS application, customization options may include features such as:
- Interfaces can be modified to fit certain job roles and situations;
- teams can create virtual collaborative workspaces with their own additional level of access control;
- dashboards and reports can be updated dynamically and generated for specific audiences; and
- SaaS applications can be integrated with other software using application programming interfaces (APIs).
In addition to reducing the initial costs of development, the costs associated with deploying software is also reduced significantly. Because the application itself is accessed via a web browser and internet connection, there is no need to install or deploy the software on each individual computer or mobile device. While there may still be certain performance requirements, most of the heavy lifting is done by the vendor’s cloud-computing hardware.
Cloud computing also accounts for another advantage of SaaS—scalability. If your business suddenly requires additional application access, a cloud-based SaaS application can ramp up to accommodate the activity. Just as importantly, the capacity could then automatically drop back to normal levels when activity decreases. Customers only pay for the SaaS capacity they use and not for idle capacity they may use in the future.
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What are the disadvantages of SaaS?
While the ability to connect to SaaS systems from anywhere there is an internet connection is considered an advantage, it is also the root of the system’s greatest and most common disadvantage. Without a reliable internet connection, the SaaS distribution system is practically useless.
A business relying on SaaS for vital business applications must consider the quality and reliability of their chosen internet service provider (ISP) carefully. Mere minutes of lost productivity because your ISP has an equipment outage could cost your company thousands, perhaps millions, of dollars.
Beyond reliability, and depending on the nature of your business applications, it is also vitally important to evaluate the capacity provided by your chosen ISP. Querying large databases or moving large media files will require more bandwidth than is typical for less-intense applications like email; however, even extremely large bandwidth may not be enough, if there are also latency issues.
There are similar reliability concerns when choosing the service provider for the SaaS applications themselves. Business organizations have to think about the longevity of their provider, their commitment to security, their willingness to customize applications and their plans for feature upgrades. SaaS requires a business to relinquish some control in order to reap the benefits of the distribution system.
Relinquishing control may also cause problems when the SaaS provider updates certain application features that the business does not want changed. Some feature upgrades will break existing use cases, especially if the business is using a customized version of the software. Some SaaS vendors have been known to eliminate aggregately under used features from their software, which causes problems for businesses that choose to adopt those features.
Choosing a SaaS provider often constrains a business to using that provider’s services — and only that provider’s services — for the foreseeable future. After committing to a SaaS provider, businesses may find it extremely difficult and costly to make a change in providers, regardless of the quality of service.
Relinquishing control may also be problematic in matters of security. Businesses using the SaaS system for applications must consider the security practices of both the ISP and the SaaS vendor. Data flowing from the business to SaaS facilities should be encrypted and strict access controls should be in place and followed at all times. Data protection, regardless of whether SaaS is used to process it, is the ultimate responsibility of the business.
Mitigating all these risk factors can be a full-time job. Before contracting with any SaaS or cloud services provider, businesses must conduct their due diligence and then acquire a comprehensive Service Level Agreement (SLA). The SLA should lay out in great detail what services are offered and what each party expects to receive.
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What are the major SaaS vendors?
There are thousands of SaaS and cloud service providers operating around the world — some are huge, well-known companies, and some are small startups offering boutique-level software. Cloud services like AWS and Microsoft Azure allow businesses both large and small to compete on the same playing field.
From a historical perspective, one of the most influential SaaS providers is Salesforce, which was formed specifically to provide a cloud-based, browser-accessed version of enterprise-level customer resource management software. Salesforce is now the market leader in the category.
Unlike Salesforce, Microsoft has had to adapt its business model toward SaaS distribution for its office productivity suite Microsoft 365 (formerly Office 365). By moving to a cloud-based offering, Microsoft has become more agile in rolling out features and applications that meet the ever-changing needs of its customers and the business environment.
Adobe Software is another company that has switched its business model to SaaS with great success, whereas companies like Alphabet have been able to parlay existing applications (Google Search) into full cloud offerings like Google Cloud Platform and G Suite.
Other major players in the SaaS space include:
- Oracle NetSuite
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How do you get SaaS, and how much does it cost?
Almost all SaaS software is available over the internet by visiting a vendor’s webpage. Many of the vendors offer free versions of their software for testing purposes, perhaps with some features disabled or modified to entice users to purchase the paid version. Some vendors opt to offer free trial periods for their software.
No business should make a major commitment of resources toward a SaaS application without first thoroughly vetting the vendor and the software. Major SaaS purchases should always be accompanied by a comprehensive SLA.
The price of a subscription varies from vendor to vendor and can range from inexpensive on a per user basis to considerably expensive. The subscription price of SaaS software does not always reflect the quality. Some of the best reviewed services have low costs.
As an example of a typical SaaS subscription price, consider the per user per month subscription cost of Microsoft 365 Business Standard at $12.50/user/month. On the other hand, the Microsoft 365 Business Basic version costs $6.00/user/month. Businesses can use the one-month free trial to determine which version serves it best.
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What is the future of SaaS, and why should we care?
New applications are being converted and/or invented for the SaaS distribution model every year. The lucrative nature of the business model has caught the eye of many innovative application developers and vendors. With the benefits of cloud-based computing, developers can innovate, create and deploy at a much faster pace than they could in the past.
New SaaS applications dealing with the processing of data collection, data visualization, IoT connections and artificial intelligence are on the market now. New applications for yet-to-be-discovered innovations are likely to follow. The SaaS model of software and application distribution is now a mainstay of business.
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