What is SaaS (Software as a Service)?

Definition

SaaS (Software as a Service) is a software distribution model where a third-party provider hosts an application and makes it available to customers over the internet on a subscription basis. Instead of installing and maintaining software on individual computers, users access it through a web browser or mobile app. This model eliminates the need for organizations to handle the underlying infrastructure, maintenance, and updates.

Examples

• B2B SaaS: A sales team uses Salesforce (a CRM) by logging into their accounts online. They pay a monthly fee per user, and Salesforce manages all the software updates and server maintenance.
• B2C SaaS: A user subscribes to Netflix. They don’t own any software; they simply pay a monthly fee to stream movies and shows through the Netflix app or website.
• Productivity SaaS: A company uses Google Workspace. Employees access Gmail, Docs, and Sheets online without installing any software, and the company pays a recurring fee for the service.
• Other common examples: Slack, HubSpot, Dropbox, Zoom.

Advantages/Benefits

• Lower Upfront Costs: Eliminates the need for expensive hardware and software licenses, replacing them with a predictable, recurring subscription fee.
• Accessibility: Users can access the software from any device with an internet connection, anywhere in the world.
• Automatic Updates: The provider handles all updates and patches, ensuring users always have the latest version of the software without any effort.
• Scalability: It’s easy to add or remove users as a business grows or its needs change, providing great flexibility.

Related terms

• Cloud Computing
• Subscription Model
• PaaS (Platform as a Service)
• IaaS (Infrastructure as a Service)
• ARR (Annual Recurring Revenue)
• Cloud-Native