What is SaaS? A Simple Breakdown of Software as a Service
What is SaaS?
What exactly is SaaS, or Software as a Service? This article will take a few minutes to break it down and make it super simple for you, so you can finally understand the constant buzz around SaaS. Why is it so exciting, and what does it mean for you?
To understand SaaS, it helps to know that people have been building software companies for over 25 years. It began with writing code for what was essentially ‘the Internet,’ building applications on top of it long before the term "SaaS" was coined. This background provides a deep understanding of how to start, grow, and manage software companies. The goal here is to teach you about SaaS so that when others suggest working on a SaaS idea, you'll know exactly what it is—and what it isn’t—and be able to explain it clearly to others.
Let's get into it.
1. Subscription-Based Model
First, SaaS is subscription-based. This means you pay a monthly fee to get access to the technology. Think about the various tools you might already pay for, like Spotify or Netflix. These are consumer versions of subscriptions. In the business world (B2B), these are the essential tools that companies use to run their operations.
This includes: - Accounting software - Merchant accounts - Project management software - Spreadsheet applications - Workflow tools - Email marketing platforms
All of these are applications that businesses pay for every month on a subscription basis.
2. Remotely Hosted
Second, SaaS is hosted remotely. For some, the question might be, "Where else would it be hosted?" But it wasn't always this way. In the past, software was deployed literally on CDs. You would take those CDs into a server room—often freezing because the computers ran better in the cold—and load the software onto the machines. Users would then access the software through terminal clients or other programs on their computers via the local network.
It wasn't hosted remotely in “the cloud,” as is common today. With SaaS, the software is not installed on your servers; it's installed on the company's servers, which are often hosted on platforms like Amazon Web Services (AWS). This model eliminates the need for a major investment in hardware to buy, deploy, and use the software.
3. Internet Accessibility
Third, SaaS is accessible through the Internet. Again, this might seem obvious now, but the truth is that software used to be accessed primarily through a local network. It was highly unusual for a business to host its sensitive information on another company's servers.
It wasn't until a pioneering company called Salesforce came along and, with a massive marketing budget, convinced the business community that it was safe and acceptable to upload sensitive customer information to their system. This allowed teams to access it through the Internet with a traditional username and password. Before that, access required VPNs, deep security protocols, and other complex measures. Businesses were simply unwilling to trust their proprietary customer data on someone else's system. Now, this is the standard. For almost every SaaS tool, you just log in with a username and password, and you're ready to go.
4. Scalability on Demand
Fourth, SaaS is scalable, which is one of its most powerful features. Scalability means it doesn’t matter if you start with a single account for just yourself or if you have 10,000 team members who decide to switch over. For instance, a company might decide to move all its project management from one system to a new SaaS tool. You can literally invite everyone through a link, they can all register, and they can start using the new product immediately.
All SaaS companies have an auto-scalable feature. Whether you have one user or 10,000, the system will automatically spin up the necessary servers, databases, and backend infrastructure to keep up with demand. This is a huge advantage because, prior to SaaS, scaling required buying a physical server, installing the software, adding it to the network, and configuring it for load balancing. Now, you don't have to think about any of that. You just send invites to your team and trust that the service will be available and fast when they sign up.
5. Seamless, Regular Updates
Fifth, SaaS provides regular updates. This is perhaps the most underrated benefit. Because the code is managed on someone else's server, you don't have to do anything when there are updates. New versions are released automatically. Often, you'll log in and see a small notification window.
Alert: New Software Update!
This message might inform you about several new features. You can take a quick tour or simply accept the changes, and the software just gets better.
Before hosted software, you had to get updates on a CD, spend more time in a cold server room updating the code, and then inform everyone how the changes would affect their workflow. It was a major process of change management. With SaaS, the software is updated seamlessly and the changes are clearly communicated. You don't have to worry about CDs or complex installations. The companies handle everything, so as the years go by, you continue to pay the same monthly fee while the developers keep improving the code. It's an incredible deal because you get new innovations and capabilities without having to pay extra—it's all part of the subscription.
The Power of SaaS
So there you have it—a brief breakdown of Software as a Service. SaaS makes it easy for businesses to pay a monthly fee for software that is hosted in the cloud, receives regular updates without any effort on their part, and is highly scalable. It's a powerful model for both building and consuming software, allowing you to access powerful tools and workflows without a large upfront investment.
