What Is Software as a Service? Definition and Examples

Software as a service (SaaS) describes using software online, such as through a website or mobile app. SaaS is a popular business model because it offers many benefits to users and the companies that produce and sell the software. Read on to explore what software as a service is, its advantages, and its uses to gain a better understanding of this essential technology. 

What is software as a service?

Software as a service allows you to access software virtually or through the cloud without downloading it directly to your local computer. It is a faster and more accessible process for using software that can often help a company save money on technology costs. 

Before software as a service existed, if you wanted to use a new piece of software, you’d have to download it onto your own device to access the program. Software as a service allows you to skip this step and use software that's hosted on a server far away on any computer connected to the internet.

For consumers, SaaS makes it easier to access software and usually involves low upfront costs. For software companies, it’s a business model that allows for more nuanced pricing and varied revenue streams. 

Software as a service examples

Chances are, you’re already familiar with software as a service and may even use it regularly. Some popular SaaS companies include: 

• Google Workspace

• Slack

• Docusign

• Salesforce

• Wix

• Dropbox

• Canva

• Shopify

If you want to start using any of these services, you simply have to log into your account on any device and get to work. The cloud hosts your data and the software itself. 

How does SaaS work, and what are the benefits? 

Software as a service leverages cloud technology to host a single copy of the software accessible to all users simultaneously. The software vendor maintains the software and is responsible for any hardware required to run it. 

The traditional software distribution method meant making a copy of the program for each user. Each user would then be responsible for maintaining the software, such as updating security patches. Users would also need a version of the software for every computer they wanted to run it on, making the software difficult to scale for very large networks. 

SaaS eliminates the need to store programs locally and makes it easier for users to start using the software right away. Other benefits of SaaS include low upfront cost, scalability, and speed. 

Low upfront costs

You can access SaaS for a lower upfront cost because the licensing is typically less expensive. Most SaaS models are subscription-based and offer pay-as-you-go solutions for companies. It can be attractive as you don’t have to make the long-term commitment of purchasing the software before trying it and deciding whether it works for your business needs. 

Scalable

SaaS is scalable for companies. As your business grows, you can update your SaaS subscription to accommodate more users, accounts, or storage. SaaS payment models also make it easier to scale back down if you need fewer services. This sort of customizability is hard to replicate with traditional software distribution. 

Speed

The fairly straightforward sign-up process of software as a service allows for a faster onboarding experience. New features and updates to the software are immediately available as all users interact with the same copy of the software. Upgrades do not affect the overall functionality of the software. 

Accessibility 

With SaaS, you can access software from anywhere you have internet access. Simply connect by logging into your account instead of downloading a unique copy of the software. SaaS's accessibility also encourages remote work and a global workforce. 

Who uses software as a service?

SaaS offers various uses for many different purposes, which is one of the reasons it appeals to a wide range of end users. You may already use SaaS in your personal life. For example, Gmail and Netflix are examples of software as a service. 

SaaS also offers a wide range of services for business professionals. Below are a few examples of professionals who use software as a service: 

• Accounting: Intuit QuickBooks, FreshBooks, and Zoho are all examples of accounting software as a service. 

• Sales: Salesforce is an example of software as a service used to manage leads and track sales activities. 

• Creative projects: SaaS like Canva or Jasper Art offer graphic design solutions.

• Customer support: Zendesk and Zoho provide solutions for managing customer questions and concerns. 

• Content management: WordPress, Wix, and Squarespace are examples of SaaS-based content management systems that help organize websites or other kinds of content in cloud-based storage. 

• Project management: SaaS like Monday.com or ClickUp help professionals plan and track project progress. 

Software as a service business model: Revenue streams 

As a service provider, you can capitalize on the SaaS business model by implementing flexible pricing strategies. You can also benefit from additional revenue streams stemming from on-demand services.

Subscription fees 

Software as a service typically offers pricing in tiered subscriptions. The number of features, the number of users, or the amount of storage are all examples of how SaaS offers different levels customized to organizational needs. Tiered subscriptions provide your customers with increased flexibility, allowing them to pay according to their needs. But over time, subscriptions benefit the vendor (your business) as customers continue to pay. Another benefit of subscription-based payment is that revenue is consistent or recurring.

Premium service and support fees 

The SaaS business model also allows vendors to open up additional revenue streams. For example, offering an API for an additional fee or enterprise-level packages can offer you more ways to profit. Higher-level packages can include services such as prioritized customer support or extra storage space. 

Challenges

Software as a service benefits users and vendors alike, but you should also be aware of the challenges associated with software as a service. 

• If your pricing models are not meticulously calibrated, the financial burden of hosting and maintaining SaaS platforms can quickly escalate. If left unchecked, these costs may outpace revenue generation. 

• Potential customers, whether individuals or businesses, may refrain from adopting SaaS to avoid the proliferation of shadow IT.

• SaaS companies tend to have a higher churn rate, or the rate at which customers cancel their subscriptions or fail to convert to paying customers. 

Planning ahead for these challenges can minimize their impacts on your SaaS campaign. 

Learn more about SaaS

A cloud-centric software delivery model, SaaS eliminates the need for installing, updating, or maintaining any hardware, middleware, or software, simplifying application management.

If you want to learn more about software as a service, consider an online course on Coursera to help you get started. If you want to learn more about a specific service, you may find a tutorial or certificate program to help you develop your skills. For example, Salesforce offers a Sales Operations Professional Certificate that can help you prepare for a career as a sales operations specialist in as little as four months. 

If you’re interested in learning more about cloud computing, consider Cloud Computing Primer: Software as a Service (SaaS) offered by Codio, also on Coursera. This course takes approximately six hours and is part of a three-course specialization.