Software as a Service (SaaS) is a software distribution model in which a cloud provider hosts applications and makes them available to end users over the internet. In this model, an independent software vendor (ISV) may contract a third-party cloud provider to host the application. Or, with larger companies, such as Microsoft, the cloud provider might also be the software vendor.

 

SaaS is one of three main categories of cloud computing, alongside infrastructure as a service (IaaS) and platform as a service (PaaS). A range of IT professionals, business users and personal users use SaaS applications. Products range from personal entertainment, such as Netflix, to advanced IT tools. Unlike IaaS and PaaS, SaaS products are frequently marketed to both B2B and B2C users.

 

According to a recent McKinsey & Company report, technology industry analysts predict further growth in the software as a service market, and expect to see the market for SaaS products near $200 billion by 2024.

How does software as a service work?

SaaS works through the cloud delivery model. A software provider will either host the application and related data using its own servers, databases, networking and computing resources, or it may be an ISV that contracts a cloud provider to host the application in the provider’s data center. The application will be accessible to any device with a network connection. SaaS applications are typically accessed via web browsers.

As a result, companies using SaaS applications are not tasked with the setup and maintenance of the software. Users simply pay a subscription fee to gain access to the software, which is a ready-made solution.

SaaS is closely related to the application service provider (ASP) and on-demand computing software delivery models where the provider hosts the customer’s software and delivers it to approved end users over the internet.

In the software-on-demand SaaS model, the provider gives customers network-based access to a single copy of an application that the provider created specifically for SaaS distribution. The application’s source code is the same for all customers, and when new features or functionalities are released, they are rolled out to all customers. Depending on the service-level agreement (SLA), the customer’s data for each model may be stored locally, in the cloud or both locally and in the cloud.

Organizations can integrate SaaS applications with other software using application programming interfaces (APIs). For example, a business can write its own software tools and use the SaaS provider’s APIs to integrate those tools with the SaaS offering.