A concept of software distribution that has seen wide acceptance amongst the IT industry in recent years is SaaS. SaaS, which stands for ‘Software as a Service’, is the distribution of software not as a one-time purchase (perpetual license), but on a subscription basis, which is usually monthly, quarterly or annual. SaaS has received mixed responses amongst consumers, but has really taken off amongst tech companies. The reduced burden of server maintenance, the flexibility of subscriptions, and constant updates have badged SaaS a place in the IT industry for a long time to come.
Understanding the Basics of SaaS
Let’s try to understand SaaS in a little more detail. For a long time, software was a one-time purchase. You would buy a package, install it on your system, and you own it for the rest of your life. This model generally works well, especially for the average consumer, but the IT industry needed to evolve to cater to the needs of the growing IT sphere. And it’s not just about businesses anymore. Even popular consumer software are now available on a subscription basis. For example. Microsoft Office 365 is now available on a subscription basis and same is true for Adobe Creative Suite products.
Tech companies and consumers can now simply rent out the software they need without having to bother with installing it across the entire network or setting up servers to maintain it. SaaS also ensures that your software remains up-to-date instead of being a one-off purchase that becomes obsolete in a year. It allows employees to work from home as SaaS software is available anywhere, anytime, using almost any device. Also, companies can end their subscriptions whenever the software isn’t needed anymore, potentially saving money in the long run. SaaS is also lucrative for software providers because it means they receive a steady flow of income that can be spent on further upgrades.
Types of SaaS
SaaS has evolved over time into different forms, mostly catering to IT companies and trends. Let’s look at some of the main types of SaaS software in the market today.
Horizontal SaaS: Horizontal SaaS has been around since SaaS first began to gain popularity. Horizontal SaaS refers to SaaS software that has been designed to facilitate a large part of the IT industry. This software tries to cover a broad range of functions, trying to appeal to as many clients as possible. The creation of horizontal SaaS requires a ton of initial investment into industry research and marketing to ensure the end product finds a large audience and is a financial success. QuickBooks, HubSpot and Salesforce CRM are some examples of horizontal SaaS. Most SaaS solutions currently available fall under this category.
Vertical SaaS: Vertical SaaS is a relatively newer concept and focuses on a particular niche. Though this means not nearly as many clients are interested in the software, less investment is needed in research and marketing and the end product is well polished and tailored for special needs. Vertical SaaS software can also adapt to changing customer demands much more quickly cna can be highly customized. Vertical SaaS software has the capability to dominate a specific niche if it is marketed properly, runs reliably and adapts quickly. Some examples of vertical SaaS include BioIQ (medical), Guidewire (insurance) and Texture (construction).
On Top SaaS: A newly emerging type of SaaS, on top SaaS takes existing SaaS software and integrates itself into it, adding new features. This means that the developer doesn’t have to create a SaaS from scratch, and can make use of already well established SaaS platforms and make it even better. This approach has led to the creation of PaaS (Platform as a Service), where software ecosystems come into play and multiple brands work together to provide the user a powerful and complete set of tools.
SaaS vs SaaS 2.0: SaaS focused on the delivery of software to clients. You paid a subscription and you were delivered a product. SaaS 2.0 recognized the gaps in efficiency this left and sought to change it. SaaS 2.0 is a form of SaaS that doesn’t focus solely on software delivery; it also takes into account the business side of things. SaaS 2.0 aims to become intimately acquainted with your business’s processes and, essentially, help manage everything. From dealing with clients to tailoring output to your business’s specific needs, SaaS 2.0 is the next evolutionary step in the SaaS industry.
Advantages of SaaS
So, what exactly does SaaS accomplish for IT companies that it exploded in popularity like this? Many reasons, including:
When IT companies use SaaS software, they aren’t locked into either buying software they will outgrow or expensive software they don’t necessarily need. With SaaS, scalability is the key. When starting out as a fledgling tech startup, you could opt for the cheapest subscription model of a SaaS software, enough to to get you started. As your company grows, you could start paying more and adding more storage and server space instead of having to buy them yourself at a much higher cost. And as your company eventually starts requiring more complex tools, you can simply upgrade your subscription plan and unlock more options.
Companies can save a large amount of money if they use SaaS software over traditional one-time purchase software. Most SaaS software offer different tiers of subscriptions, catering to more demanding needs as the cost goes up. If your company doesn’t need much of the offered tools, you can choose a less expensive subscription plan with fewer options. If your company only needs a specific software for a short time, it is almost always going to be cheaper to rent it for that time than to buy an equivalent product.
SaaS software providers have set up their own servers and storage, massively cutting down on installation and maintenance costs. SaaS software can be accessed from anywhere provided you have an internet connection, so your employees can work from home, saving you on on office costs. You also wouldn’t need to buy new software every year to remain up-to-date, as SaaS software is updated as part of the subscription service in most cases.
SaaS software developers keep accessibility in mind when designing their product, which is what SaaS thrives on. The beauty of SaaS is that you only need a computer and an internet connection to access it. And as SaaS software works on third party servers, you don’t need a beefy computer to use it. You can sit at home and use your laptop to get work done, which otherwise would have required you to be at an office using dedicated company servers.
Updates and Ease of Use
As we’ve mentioned above, SaaS software is routinely updated to meet customer demands and eliminate bugs. You don’t need to buy newer versions as your existing subscription covers software updates, and most updates will be invisible to the user as they don’t happen on client side. This hassle-free nature makes SaaS software a joy to use compared to traditional software, and you’ll find it hard to go back.
SaaS Use Cases
Let’s look at some common uses for SaaS software to better understand how useful it is for both small to large businesses as well as consumers.
CRM: Customer Relationship Management software is used to collect customer data, forecast sales, and automate tasks such as sending out emails to promote the product. Popular CRM solutions include Zendesk, Salesforce, HubSpot, Oracle and SAP.
ERP: Enterprise Resource Planning software is used to combine multiple enterprise tasks like accounting, budgeting, and risk management in one place. Examples of ERP systems include Oracle Cloud Enterprise, SAP ERP, Odoo and Dolibarr.
HRM: Human Resource Management software is used to help in hiring new employees, scheduling interviews, and tracking performance and productivity of current employees as well as other HR-related tasks. Bamboo HR, Oracle HCM Cloud, Workday HCM and SAP SUccessFactors are among the most reputed HRM solutions.
Accounting: Accounting software is used to carry out tasks such as creating invoices and bills, as well as automating your financial operations. There are plenty of accounting software designed for SMBs such as ZOHO Books and FreshBooks as well as solutions for enterprises including Sage Business Cloud, NetSuite and Workday Financial Management.
Many communication tools used by us today are also SaaS software, with many of them being free. Take email, for example. Emails and instant messaging apps are examples of SaaS software. Video conferencing software is another form of SaaS software, one that is widely used by companies worldwide. Companies also use tools to collaborate their work, set reminders and share resources. Slack, Trello, Zoom, Confluence and Canva are some examples of widely used communication and collaboration solutions.
Given that SaaS software is stored in the cloud and houses the data of millions of individuals, security is a major concern for SaaS software providers. It will only take one massive breach to ruin the lives of hundreds of thousands of people and possibly sink the company that made the compromised SaaS software.
Data is everything when it comes to SaaS. If a company wasn’t willing to entrust its data to another company, the concept of SaaS would have failed right in the beginning. Today, SaaS companies take robust measures to prevent cyber attacks and data breaches. All data is encrypted and backed up, and cybersecurity firms work hand in hand with SaaS firms to make sure SaaS clients can retain their privacy. SaaS companies also usually encourage their clients to practice safe internet usage and to keep strong passwords. Protocols and measures such as Single Sign-on, IP pattern detection, multi-factor authentication and 256-bit encryption and commonly used and enhance data security.
Naturally, to prevent unauthorized access to stored data, SaaS firms take a strict approach to user authentication before logging in. From requiring strong passwords to enabling two-step verification, SaaS firms do not mess around with authentication concerns. You may be aware of how Google notifies you whenever you sign in with a new device? That’s part of ensuring user authentication and keeping out unwanted intruders
Popular user authentication methods in use include hardware tokens, time-based OTPs, QR code authentication, and OAuth 2.0.
Third-Party Security and Compliance
SaaS firms often employ third parties to help secure their data. These mainly include cybersecurity firms specializing in digital security. Furthermore, all SaaS firms around the world are required by law to adhere to specific guidelines and restrictions imposed on them. These regulations vary by region and it is the firm’s duty to oblige. Many of these set frameworks work to reduce the chances of a data breach by ensuring that SaaS firms are handling user data in a responsible manner. Common compliance standards include GDPR, HIPAA, PCI-DSS and SOC-2.
Future of SaaS
As SaaS continues to gain popularity, new technologies utilizing it emerge every year. SaaS is already growing at an exponential rate, from a market value of 215 billion Dollars in 2021 to a projected market value of 883 billion Dollars in 2029, it seems SaaS is here to stay for good.
New trends are emerging making use of SaaS, for example artificial intelligence, Data as a Service (DaaS), and machine learning. With the recent advancements in artificial intelligence, SaaS firms might be able to utilize it in their products to automate monotonous tasks like data entry.
There’s also speculation that edge computing – a system where multiple networks and devices are close to the user – might be the next home of SaaS, called EaaS. SaaS might also be useful when serverless computing takes off. Serverless computing is a system where the acquisition of needed server space and processing power is automated, quickly acquired, and paid for by the hour. SaaS firms could shift to a pay-per-hour system instead, potentially lowering costs.
SaaS is a powerful concept that has taken over the IT world, and for good reasons. Companies are cutting down on costs because they no longer want to purchase and maintain software or server hardware. The flexible subscription plans and up-to-date software also means companies get the features they need and only pay for what they actually use. If you are looking to start a tech company, or already have one, you should definitely consider jumping the gun and embracing SaaS over traditional software. And if you’re a software dev designing a product, reevaluate it and decide whether it would do better as a SaaS product.