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What is SaaS (software as a service)?

By Kinza Yasar

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) can 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 services, alongside infrastructure as a service (IaaS) and platform as a service (PaaS). A range of IT professionals, business users and personal consumers 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 business-to-business (B2B) and business-to-consumer (B2C) users.

With a SaaS offering, users only need to focus on utilizing the software, as maintenance and infrastructure management are typically handled by the provider.

How does software as a service work?

SaaS works through the cloud delivery model, where users can access software applications through the internet instead of installing them on their local devices. A software provider hosts the application and related data using its own servers, databases, networks and computing resources, or an ISV contracts a cloud provider to host the application in the provider's data center. The application is 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 option.

SaaS is closely related to the application service provider 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 can be stored locally, in the cloud, or both locally and in the cloud infrastructure.

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.

SaaS architecture

In a SaaS system, each customer is regarded as a tenant and accesses the platform by paying a subscription fee. SaaS architectures generally fall into the following two types.

Multi-tenant architecture

SaaS applications and services typically use a multi-tenant approach, which means a single instance of the SaaS application is running on the host servers and that single instance serves each subscribing customer or cloud tenant. The application runs on a single version and configuration across all customers, or tenants. Though different subscribing customers run on the same cloud instance with a common infrastructure and platform, the data from different customers is still segregated.

The typical multi-tenant architecture of SaaS applications means the cloud service provider (CSP) can manage maintenance, updates and bug fixes faster, easier and more efficiently. Rather than having to execute changes in multiple instances, engineers can make necessary changes for all customers by maintaining one shared instance. Furthermore, multi-tenancy enables a greater pool of resources to be available to a larger group of people without compromising important cloud characteristics and functions, such as security, speed and privacy.

Single-tenant architecture

In a single-tenant architecture, each customer has its own instance of the software. This instance operates on a separate server, while sharing a single infrastructure and database. This means resources are not shared between tenants and each customer's data is kept distinct.

While this setup offers greater control and customization options, it can be more costly for the provider to maintain as it requires it to manage multiple instances.

What are the advantages of SaaS?

SaaS removes the need for organizations to install and run applications on their computers or in their data centers. This eliminates the expense of hardware acquisition, provisioning and maintenance, as well as software licensing, installation and support.

Other benefits of the SaaS model include the following:

What are the challenges and risks of SaaS?

SaaS also poses some potential risks and challenges, as businesses must rely on outside vendors to provide the software, keep that software up and running, track and report accurate billing, and facilitate a secure environment for the business's data. Those risks and challenges include the following:

SaaS security and privacy

The cybersecurity risks associated with software as a service are different from those associated with traditional software. With traditional software, the software vendor is responsible for eliminating code-based vulnerabilities, while the user is responsible for running the software on a secure infrastructure and network. As a result, security is more the responsibility of the ISV and third-party cloud provider.

Despite the rapid adoption of cloud-based models for fully serviced software products, organizations still have certain reservations about SaaS products when it comes to security and privacy. These concerns include the following:

To keep SaaS secure, organizations should conduct the following best practices:

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SaaS vs. IaaS vs. PaaS

SaaS is one of the three major cloud service models, along with IaaS and PaaS. All three models involve cloud providers that deliver their own hosted data center resources to customers over the internet. Where the models differ is in the completeness of the product.

SaaS products are complete and fully managed applications. The application users do not have to download software, manage any existing IT infrastructure or deal with any aspect of software management. Vendors handle maintenance, upgrades, support, security and all other aspects of managing the software.

IaaS is used by companies that want to outsource their data center and computer resources to a cloud provider. IaaS providers host infrastructure components, such as servers, storage, networking hardware and virtualization resources. Customer organizations using IaaS services must still manage their data use, applications and operating systems (OSes).

PaaS provides a framework of resources and development tools for an organization's in-house developers. This hosted platform enables developers to create customized applications. The vendor manages the data center resources that support the tools. Customer organizations using PaaS services do not have to manage their OSes, but must manage applications and data use.

SaaS vendors and examples

The SaaS market includes a variety of software vendors and products that optimize operations across different sectors. Industry players include small, single-product vendors all the way up to cloud giants, such as Amazon Web Services (AWS) and Google Cloud.

SaaS apps and products are also diverse, ranging from video streaming services and messaging apps to IT business analytics tools. There are SaaS applications for fundamental business applications, such as email, sales management, customer relationship management, financial management, human resource management, billing and collaboration. Enterprise SaaS products for specific industries, such as insurance or medical, are known as vertical SaaS products.

SaaS products can be primarily marketed to B2B, B2C markets or both. Some commonly used examples of current SaaS products are the following:

SaaS pricing

Generally, using a SaaS product is more cost-effective than a traditional software license for enterprise software, as setup and installation onto hardware are not necessary. SaaS providers typically use one of many subscription-based pricing models for customers. By analyzing the available components and business models, companies can craft a pricing strategy that aligns with their goals and fulfills customer expectations.

Common SaaS pricing models include the following:

The future of SaaS

The SaaS market is expected to grow considerably, with one report suggesting that 70% of business applications in use today are SaaS-based. This number is projected to rise to 85% by 2025. Key trends shaping the future of SaaS include the following:

Discover key factors to consider when crafting a SaaS security policy. Look into attributes that focus on effective SaaS strategy, such as visibility, user experience and workflow, for enhanced protection.

27 Nov 2024

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