An Introduction to SaaS: Software as a Service

29 Jul, 2022 | Read in 6 minutes

Learn the basics of SaaS, from what it is and how this model grows, to the examples of its implementation.


Have you ever heard of SaaS? Or have you been thinking all the time and want to launch a similar product? Now is the time to do it! 

A report said that organisations use at least 80 SaaS apps in 2020. This number has increased 5X in 3 years and 10X since 2015. What a high number!

Unfortunately, there's also bad news. The SaaS market is becoming saturated fast. Newcomers will face many challenges as they compete with settled brands.

According to McKinsey & Company, if a new company achieves 60% growth, its odds of becoming a multibillion-dollar are no better than a coin flip. The SaaS market offers excellent opportunities, but it takes work to succeed in them – at least you understand the basics.

Luckily, you are in the right place because this article will discuss what SaaS is, how this model grows, and examples of its implementation.

So, what is saas?

Software as a Service (SaaS) is a software distribution and licensing model that users can access via the internet through a subscription—hosted by a third-party provider who updates and maintains software automatically. This way, you can easily access it from any device, anytime (as long as you have an internet connection). Without a doubt, SaaS bypasses the installation process on software distributions.

In the past, it was a hassle to introduce a new app to an enterprise. Starting from the process of buying, installing, and modifying it to suit your needs takes days. Through SaaS, all of these processes occur in days or less.

Companies don't need to involve IT specialists to keep products up to date. It's all taken care of with SaaS. It's called an out-of-the-box idea that changes how people use the software.

SaaS vs. PaaS vs. IaaS

When diving deep into this world, you will find other names, PaaS and IaaS. Don't worry, you'll know the difference in a minute.


Software that uses the internet to deliver applications managed by third-party vendors. Examples: Google Workspace, Dropbox, SalesForce, VirtualSpace, HubSpot.


Platform as a Service is hardware and software available over the internet. You can build software via the internet with this model. Users can freely build applications without worrying about the operating system and infrastructure. Examples: Google App Engine, Windows Azure, AWS Elastic Beanstalk.


Infrastructure as a Service is a self-service to access computers, networks, storage, and other services. This model allows businesses to purchase resources on-demand and as-needed instead of buying hardware outright. Examples: AWS, Google Compute Engine, Microsoft Azure.

SaaS Adoption is Growing

SaaS continues to grow, giving birth to innovations in cloud computing. However, there is a lull in growth between 2019 and 2020 because of pandemic impacts.

Lionel Sujay Vailshery in Statistics says that SaaS in 2023 will reach a value of 208 billion US dollars. Many companies are also beginning to plan to reduce commercially licensed software and switch to SaaS products. Even by the end of 2020, 67% of enterprise infrastructure was cloud-based.

Why should you consider moving to this model?

SaaS began because small businesses or startups could not afford software suites. However, compared to on-premise software, SaaS is more worthy because there is no need to install it on devices.

SaaS reduces the cost of excessive broadband upgrades in times of limited size and bandwidth. Finally, with cost-efficiency, ease of use, and maximum functionality, SaaS is the best choice.

1. Scalability

User growth is the first problem that SaaS can fix. Companies don't have to worry about providing new computer equipment when using this model.

Do you want to create a user? Just click and click. Easy.

The owner will provide additional capacity when more storage is needed. Therefore, these costs are much lower than upgrading their hardware.

2. Time to Launch

SaaS is pre-configured with the cloud. This advantage minimises common delays caused by incompatible devices. When development is complete, the software is ready to use. There is no need for additional time to install, resolve unexpected issues or adjust each user's computer.

3. Cost

SaaS also reduces the user's total cost of ownership compared to open source software. This model is like an “all-in-one” software because it includes hosting, storage, and maintenance.

4. Owners Side

From the owner's side, SaaS also brings many benefits. Here is the list:

  • Customer loyalty is increasing
  • Upselling and cross-selling increase through package options or additional features the user needs
  • Better metrics. Real-time metrics to understand how users behave when using the application

5. User Side

The selling point of software will increase when you tell the benefits of using SaaS to the users.

  • Budget flexibility: When users object to enormous initial costs, subscription fees can be an advantage of SaaS. The ability to switch or stop anytime without losing a vast upfront cost. Users can cut costs by lowering features if they want to save money.
  • Simplicity: The highly customised and designed old software to anticipate local requirements can be very complex. By focusing on key features, and needs, subscription software can be a friendlier option.
  • Data security: SaaS provides strict data security by complying with PCI.
  • Easy to use: The main advantage of the SaaS model is that there is no need to install, maintain, update and configure servers. You can call or chat with CS if you get stuck figuring out an integration.

Who fits this model?

We all understand that software models like project management tools or time management tools do not always suit people. But considering using these tools can give benefits, such as:

  • Lower expenses
  • Make your software easy to use
  • Expand the new market
  • Want a more stable and predictable business model

But you're not a good fit for SaaS if:

  • Need for upfront payments
  • Control of data
  • Lack of ongoing support

Types of SaaS Products

SaaS-type applications come in a variety of shapes, purposes, and sizes. However, most fall into the following three categories:

1. Packaged SaaS

Products that assist in managing a company include increasing marketing effectiveness, employee engagement, or strengthening employee relationships. For example, HubSpot.

2. Collaboration SaaS

A product that focuses on improving collaboration between teams and increasing productivity. The features available are usually in the form of real-time chat, video conferencing, and managing projects together. For example, VirtualSpace.

3. Technical SaaS

Applications offer tools to manage or enhance technical processes. Examples are Cloudsponge and Algolia.

SaaS Pricing Models

Cost is one of the crucial points in SaaS. Before attracting users, SaaS must decide how they will price. This point is vital because it affects two reasons:

  • Pricing affects users' willingness to consider the solution they are using
  • Pricing affects the growth rate of the company

So, let's learn the price mapping process of this product model:

  1. Freemium: This type of pricing offers some free features along with additional plans. Users can use most of the features for free.
  2. Tiered Pricing: By far, the most common pricing practice among SaaS brands is to deliver multiple packages.
  3. Flat Rate: This pricing type offers standard features at one flat rate. It doesn't matter how many projects there are and the users who use them, all you get is a flat rate.
  4. Users Pricing: SaaS also has a per-user pricing type. How much you pay depends on how many users are using the service.
  5. Usage-Based: Some SaaS products also use a price for every transaction.

Key Takeaways

Today's business needs require a connected software suite. This has become a challenge for software developers in creating SaaS-type applications to aid many businesses. Since the coming of the first simple application of SaaS in 1999, Salesforce (CRM), SaaS has turned into the root of the evolution of many businesses in the world.

Its transparency and flexibility give more freedom to companies to run the business the way they want, in the most effective way. It's also an easy solution for businesses starting to switch remotes.

When it comes to productivity, collaboration, business development, customer relation, and many more, more people realise the benefits of SaaS over open source. From costs, updates, maintenance, ease of use, and security, SaaS offers more than just a service.

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